What is a T1134 Information Return Relating to Foreign Affiliates?
What is a T1134 Information Return Relating to Foreign Affiliates? March 24, 2022 Tax Question: What is a T1134 information return relating to controlled and
March 24, 2022
Tax Question:
Which provinces and territories allow Canadian corporations to have 100%, foreign directors? And 100% foreign owners/shareholders?
Facts:
In Canada, a corporation must have at least one director but directors are not required to be shareholders. It must also have at least one shareholder. Therefore a company incorporated in Canada does not have to have Canadian resident shareholders but may have to have Canadian resident directors depending on the province or territory they incorporate in.
The provinces and territories require at least 25% to be Canadian resident directors. Which effectively limits foreign ownership and control. Canadian directorship is based on residency, not citizenship.
The provinces and territories that do not require Canadian directors. Thus allowing full foreign ownership and control.
A company incorporated in one province can easily do business in another province. Thus incorporating in British Columbia allows doing business in Ontario and visa versa. As discussed in International FAQ #27, it may be difficult to get Canadian residents to take on the responsibilities of a director because directors are held personally liable for paying any unremitted Canadian taxes (i.e. sales taxes and payroll deductions). If you are incorporating in Canada without Canadian resident directors and you have a West coast business, British Columbia would be the best choice for the province of incorporation. However, even if you have a Central Canada business, you may still opt for British Columbia as Eastern Maritime provinces may be too far and Quebec may be too complex a registration process. Also worth considering are the effective tax rates of provinces. Your head office in British Columbia might be a lower tax location than the alternatives.
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Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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