Canada
R&D rules
The federal Scientific Research and Experimental Development (SR&ED) program is a tax incentive program designed to encourage economic development and job creation in Canada. Under SR&ED, a 15% investment tax credit may be claimed in respect of qualifying scientific research activities. Any such tax credit claim will generally reduce the depreciable cost of the asset. Various provinces also have provincial tax credit programmes to encourage specific activities (including film and video productions).
Expatriate issues Income tax
Individuals resident in Canada are taxed on their worldwide income. There are two levels of taxation: federal and provincial. The rates are graduated based on income and vary depending on which province or territory the individual was resident in on 31 December of a particular year. The federal tax rate is applied on a progressive scale of 15% to 29%. 50% of capital gains are included in income. Dividends received by individuals from resident companies are included in the taxable income. However, a dividend tax credit is allowed. Social security contribution
The employer must contribute CAD 2.63 per CAD 100 of insurable earnings up to an annual maximum level of CAD 48,600 in insurable earnings per employee. For employers, the maximum per-employee annual contribution, for 2014, is CAD 1,279. Employees must contribute CAD 1.88 per CAD 100 of insurable earnings up to an annual maximum level of CAD 48,600 in insurable earnings per employee. For employees, the maximum annual contribution, for 2014, is CAD 914. Expatriate rules
Non-residents are taxable only on Canadian-source income. Expatriates taking up employment in Canada will be subject to comprehensive tax rules. Expatriates leaving Canada to take up employment in a foreign country will also be subject to comprehensive tax rules. All income earned from employment in Canada is taxed based on the employee’s province of residence on 31 December of the year, regardless of where in Canada the income was earned.
Overseas employment tax credit (OETC) is available to Canadian residents if they meet specific requirements. In particular, the individual must be working abroad for six consecutive months or longer in connection with a resource, construction, installation, agricultural or engineering project. The credit is in the process of being phased out and will be completely eliminated by 2016.
Corporate set up Corporate entity
Corporations are the most common form of business organisation. Although corporations may be created under either federal or provincial law, incorporation under provincial legislation is more common (under federal legislation, the public has greater access to financial information, which must be filed under federal statutes). All corporations may conduct business in any province. However, they must report income earned by province where they carry on business through a permanent establishment. Certain provinces require separate registration of a corporation incorporated outside their boundaries, whether provincial or federal. The share capital created by the articles requires no minimum sum or ceiling. Both federal and provincial corporations (with some exceptions) require that the board of directors has a majority of resident Canadians. Cost
Company set up costs start at around CAD 200 and takes a minimum of five days for setting up of the company in Canada. The cost stated is exclusive of a consultant’s cost who may be engaged for incorporating a company. For any further information please contact: Canada Tina Korovilas E tina.korovilas@ca.gt.com Canada – Quebec Eric Labelle E labelle.eric@rcgt.com
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