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Name of country
- CANADA
Region
- Northern North America, bordering the North Atlantic Ocean on the east, North Pacific Ocean on the west, and the Arctic Ocean on the north, north of the conterminous US
Population
- 37,943,231 (July 2021 est.)
General Introduction
- Canada is frequently ranked as one of the best places to live in the world. It is well-known for its high living standards, clean environment, low crime rate, and excellent infrastructure.
Wifi Speed
- Good internet speed in Canada is 50Mbps download and 10Mbps upload
- Electrical outlet
For Canada there are two associated plug types, types A and B. Plug type A is the plug which has two flat parallel pins and plug type B is the plug which has two flat parallel pins and a grounding pin. Canada operates on a 120V supply voltage and 60Hz.
Per Capita GDP
Real GDP per capita
- $45,900 note: data are in 2017 dollars (2020 est.)
- $49,000 note: data are in 2017 dollars (2019 est.)
- $48,800 note: data are in 2017 dollars (2018 est.)
note: data are in 2010 dollars
Climate
- varies from temperate in south to subarctic and arctic in north
Residence-by-Investment
- The government offers several immigration programs for wealthy individuals and entrepreneurs in order to attract foreign investment and boost the economy. They encourage wealthy individuals to relocate to Canada and/or do business thereby providing tax and other advantages. Aside from financial support, the government hopes to attract foreign talent, experience, and innovation.
Quebec will use the investment funds to benefit all of its regions and to fund two business support programs, the Business Assistance—Immigrant Investor Program (BAIIP) and the Employment Integration Program for Immigrants and Visible Minorities (PRIIME).
Investment
- The Federal Immigrant Investor/Entrepreneur Programs were previously in operation, but they were recently discontinued. Other regional immigration programs for businesspeople include the Quebec Investor, Quebec Entrepreneur, and Quebec Self-Employed Worker programs.
Quebec Investor
- For a 5-year investment of C$1,200,000, an investment agreement must be signed with an approved financial intermediary. There is a quota on the number of signed agreements. The investment is guaranteed by the Quebec government. Brokers and trust companies provide applicants with financing options.
Quebec Entrepreneur
There are two components in the programme,
- Submitting a business project for the creation or acquisition of a business in Quebec.
- Acquisition of a business in Quebec.
A business must be of agricultural, industrial, or commercial nature. You must make a start-up deposit and a security deposit at a financial institution with an establishment in Québec with whom you have signed a deposit agreement. You must use the start-up deposit to set up your business. A start-up deposit for a business outside the Montréal Metropolitan Community (MMC) is CAD $200,000 or CAD $300,000 if the business is located in the MMC.
Quebec Self-Employed Worker
Candidates have been recently encouraged to settle outside metropolitan areas, including they are offered low-skill jobs validated by the state.
Main requirements
- You must come to Quebec to create your own job by practising a profession or business activities, alone or with other immigration candidates, with or without paid help (you must register with a regulatory body if your profession or trade is regulated in Quebec).
- You must make a start-up deposit at a financial institution in the region where you are going to work – C$25,000 if outside the Montreal Metropolitan Community (MMC) area or C$50,000 if inside the MMC area.
- Financial self-sufficiency with net assets of C$100,000 available to you alone or together with your spouse if they are accompanying you.
- Legal and lawful source of assets.
- At least 2-year professional experience as a self-employed worker in the field in which you wish to work in Quebec.
- Relevant education and degree.
Processing Time
- Between 4 to 5 months.
Key Benefits
The Canadian economy is a well-developed mixed economy. It provides a plethora of opportunities for foreign investors and businessmen in exchange for their contributions to the local economy.
- High ranking in civil liberties, quality of life and economic freedom
- High level of education and healthcare
- Cultural, religious and ethnic tolerance
- Low crime rates
- High living standards and affordable housing
- Open, dynamic economy that offers numerous opportunities
- Free and democratic pluralistic society
- Fiscal incentives and low operating costs for businesses
- Visa-free/visa on arrival/e-visa travel to around 160 counties
- Dual citizenship
Requirements
Quebec Investor Requirements
- A minimum of two years of management experience in the planning, management, and control of financial, human, or material resources is required. This must be obtained within the five years preceding the application.
- Net assets of at least C$2,000,000 acquired and available to you alone or with your accompanying or de facto spouse at least 6 months prior to the application.
- The main draw of this program is that your investment will be repaid to you in 5 years.
Quebec Entrepreneur Requirements
- You must demonstrate that you will manage it yourself or you will participate in it as a management and operations partner full-time on a daily basis (agricultural entrepreneur does not have to work full-time).
- You must control, alone or with your accompanying spouse or common-law spouse, at least 25% of the capital equity with a value of at least C$100,000.
- You cannot buy a business acquired by another entrepreneur under this programme in 5 years preceding your application.
Procedures and Time Frame
- An application must be submitted to the relevant government office in order to be considered for the residency programs. A file reference number is assigned at this point, allowing applicants to track the status of their applications. If you are from a non-visa-exempt country, you will be required to submit your passport to the local Canadian embassy or consulate, after which the permanent resident visa will be issued.
You will be granted permanent residence once you arrive in Canada with the visa. Application processing times vary depending on the category and where the application was submitted. The website of Immigration, Refugees, and Citizenship Canada provides a breakdown of expected processing times. It should be noted that in order to keep your permanent resident status, you must be physically present in Canada for two out of every five years.
*On March 31, 2021, the Ministry of Immigration, Francisation, and Integration announced that the Quebec Immigrant Investor
Natural Resources
- bauxite, iron ore, nickel, zinc, copper, gold, lead, uranium, rare earth elements, molybdenum, potash, diamonds, silver, fish, timber, wildlife, coal, petroleum, natural gas, hydropower
Ethnic Groups
- Canadian 32.3%, English 18.3%, Scottish 13.9%, French 13.6%, Irish 13.4%, German 9.6%, Chinese 5.1%, Italian 4.6%, North American Indian 4.4%, East Indian 4%, other 51.6% (2016 est.)
note: percentages add up to more than 100% because respondents were able to identify more than one ethnic origin
Languages
- English (official) 58.7%, French (official) 22%, Punjabi 1.4%, Italian 1.3%, Spanish 1.3%, German 1.3%, Cantonese 1.2%, Tagalog 1.2%, Arabic 1.1%, other 10.5% (2011 est.)
Religion
- Catholic 39% (includes Roman Catholic 38.8%, other Catholic .2%), Protestant 20.3% (includes United Church 6.1%, Anglican 5%, Baptist 1.9%, Lutheran 1.5%, Pentecostal 1.5%, Presbyterian 1.4%, other Protestant 2.9%), Orthodox 1.6%, other Christian 6.3%, Muslim 3.2%, Hindu 1.5%, Sikh 1.4%, Buddhist 1.1%, Jewish 1%, other 0.6%, none 23.9% (2011 est.)
Median Age
- total: 41.8 years
- male: 40.6 years
- female: 42.9 years (2020 est.)
Urbanization
- urban population: 81.7% of total population (2021)
- rate of urbanization: 0.95% annual rate of change (2020-25 est.)
Physician density
- 2.31 physicians/1,000 population (2016)
Government type
- federal parliamentary democracy (Parliament of Canada) under a constitutional monarchy; a Commonwealth realm; federal and state authorities and responsibilities regulated in constitution
Unemployment Rate
- 5.67% (2019 est.)
- 5.83% (2018 est.)
Taxes
Headline Personal Income Tax Rate (highest marginal tax rate)
- 44.5% (33% federal + 11.5% in Nunavut) to 54% (33% federal + 21% in Nova Scotia)
Headline Corporate Income Tax Rate (excluding dividend taxes)
- 26.5-31% (higher rate)
- 9-13% (lower rate)
Canada’s tax system is largely governed by the federal Income Tax Act and its regulations, as well by the sales tax, corporate tax and other laws of the provinces and territories. Residents of Canada are subject to tax on their worldwide income, while non-residents of Canada are generally subject to tax only on their income from Canadian sources.
Income earned by a non-resident that is not subject to ordinary income tax may still be subject to a withholding tax at a rate of 25% (unless reduced or eliminated by an applicable tax treaty) on certain Canadian source income.
Canada has entered into over 85 income tax treaties with other jurisdictions. These tax treaties generally provide that the business profits of a non-resident of Canada that is a resident of the other jurisdiction are not subject to tax under the Income Tax Act, except to the extent that such profits are attributable to a permanent establishment (i.e., a fixed place of business) of the non-resident in Canada. These tax treaties also usually reduce both the withholding tax rate imposed under the Income Tax Act and the branch-profits tax rate.
Pricing methods
Accepted methods
What transfer pricing methods are acceptable? What are the pros and cons of each method?
The transfer pricing methods used in Canada include:
- the traditional transaction-based methods, which include:
- the comparable uncontrolled price method, which requires a comparison of prices for similar goods or services between independent parties;
- the cost-plus method, which requires a comparison with profit markups applied by independent parties to the production costs of similar goods or services to obtain the arm’s-length sale price that should be charged by the taxpayer for the goods or services; and
- the resale price method, which requires a comparison with profit markups applied by independent parties on the sale of similar goods to obtain the arm’s-length purchasing price that should be paid by the taxpayer to a related party in respect of the goods subsequently being resold to third parties; and
- profit-based methods, which include:
- the transactional profit split method, which requires a determination of the division of profits that independent parties would have expected to realise – based on the functions performed, the assets used and the risks assumed – from engaging in transactions similar to those entered into between related parties; and
- the transactional net margin method, which requires a comparison of the net profit margin realised by a taxpayer from one or more transactions with related parties and compares it with the net profit margin realised by independent parties in similar circumstances.
Cost-sharing
Are cost-sharing arrangements permitted? Describe the acceptable cost-sharing pricing methods.
Canada has qualifying cost contribution arrangements (QCCA) where two or more participants share the costs and risks of producing, developing or acquiring any property or acquiring or performing any services, proportionate to the benefits that each participant is reasonably expected to derive from the property or services as a result of the arrangement.
A participant’s share of the overall contributions to the QCCA must be proportionate to the share of the overall benefits that it expects to derive from the arrangement. Where a participant’s contribution is inconsistent with its share of expected benefits, a balancing payment may be required between the participants to adjust their respective contributions (IC87-2R, cancelled as of 30 December 2019; see also TPM-09).
Participants in a QCCA that transfer all or part of their interests in the results of prior QCCA activities (eg, intangible property, work in progress or the knowledge obtained from past QCCA activities) to a new participant receive arm’s-length compensation from the new participant for that property (a buy-in payment). The amount of a buy-in payment is calculated based on the price that an arm’s-length party would have paid for the rights obtained by the new participant. This calculation takes into account the proportionate share of the overall expected benefit to be received from the QCCA (IC87-2R, cancelled as of 30 December 2019; see also TPM-09).
Similar issues arise when a participant to a QCCA disposes of all or part of its interest in the arrangement. The effective transfer of property interests should be compensated according to the arm’s-length principle (a buy-out payment) (IC87-2R, cancelled as of 30 December 2019).
Best method
What are the rules for selecting a transfer pricing method?
The Canada Revenue Agency (CRA) has officially endorsed the 2010 revisions to the OECD Guidelines, whereby the previous hierarchy of transfer pricing methodologies was replaced with an approach that seeks to apply the most appropriate method. However, the CRA qualified its endorsement by noting that ‘these changes do not firmly de-emphasise the natural hierarchy, but rather refocus the topic on what is truly relevant – the degree of comparability available under each of the methods and the availability and reliability of the data’ (TPM-14).
The CRA noted that it will be updating its policy documents (eg, TPM-14) in due course to address some of the transfer pricing issues identified and addressed in the 2017 OECD Transfer Pricing Guidelines.
Taxpayer-initiated adjustments
Can a taxpayer make transfer pricing adjustments?
Subsection 247(10) of the Income Tax Act (ITA) states that downward transfer pricing adjustments are subject to the discretion of the Minister of National Revenue.
New Information Circular IC71-17R6 advises taxpayers to first seek assistance from the Canadian competent authority before making transfer pricing adjustments, and warns that self-help solutions may lead to double taxation. This is consistent with Information Circular IC87-2R (cancelled as of 30 December 2019), which states that downward transfer pricing adjustments will likely be denied if the taxpayer’s request has been prompted by the actions of a foreign tax authority and the taxpayer has the right to request relief under the Mutual Agreement Procedure (MAP) article of the applicable treaty.
Information Circular 71-17R6 sets out the circumstances under which the CRA will accept a case for downward transfer pricing adjustment under the MAP article of the applicable treaty:
- the upward adjustment has been accepted for consideration by the other competent authority;
- the other competent authority takes steps to resolve the case under the MAP by reviewing the case, providing the Canadian competent authority with a detailed analysis as to why the other competent authority agrees with the adjustment and agrees to negotiate the case;
- the request for competent authority assistance is made within the time limits of the applicable treaty; and
- the issue is one that the Canadian competent authority has decided not to consider for policy reasons.
Information Circular IC87-2R directs readers to Circular IC-75-7R3 (under review) in respect of the CRA’s general policy regarding taxpayer-initiated adjustments that reduce the tax payable. The Circular enumerates the general conditions for the request to be accepted, including:
- that the taxpayer has sent a written request to this effect to the CRA;
- that the taxpayer has filed its tax return on time; and
- that the CRA is satisfied that the previous assessment or reassessment is wrong.
Downward adjustments with respect to non-treaty countries should also be directed to the competent authorities division of the CRA, and such requests will be reviewed in accordance with TPM-03.
Taxpayers may appeal decisions of the CRA made pursuant to subsection 247(10) of the ITA. As decided in Dow Chemical Canada ULC v The Queen (2020 TCC 139, under appeal), the appropriate venue for such an appeal is likely the Tax Court of Canada.
Safe harbours
Are special ‘safe harbour’ methods available for certain types of related-party transactions? What are these methods and what types of transactions do they apply to?
Except for certain downstream loan guarantees provided by a Canadian parent to its controlled foreign affiliate and certain loans described in section 17 of the ITA (subsections 247(7) and (7.1)), all transactions between a taxpayer and a non-resident person with whom the taxpayer does not deal at arm’s length are subject to the Canadian transfer pricing rules, and no legislative guidance or safe harbours exist to determine whether a non-arm’s length relationship exists.
As Canada generally follows the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, the safe harbours set out in these guidelines are generally instructive in assessing the manner in which the CRA will apply the Canadian transfer pricing rules.
