Q&A on tax (VAT & CIT) regulations for Foreign Company with Non-Resident status in Canada

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NR-CA-110:
Can a foreign company with Non-Resident status apply for a VAT number in Canada? If can, is it necessary to pay for the corporate income tax?
Official website? Application form?
Answer:
According to BNA VAT Navigator 9.2 and 10.1, BNA Country Guides 2.2.2
Refer to Doing Business in Canada – GST/HST Information for Non-Residents
Yes, a foreign company can apply for a VAT number in Canada, which is known as a GST/HST number.
The company must have a significant presence or carry on business activity in Canada to be required to register for a GST/HST number.
You can be carrying on business in Canada even if you do not have a permanent establishment in Canada.
According to the Canada Revenue Agency (CRA), non-residents who carry on business in Canada must register for the GST/HST if they meet certain threshold requirements for sales or revenue.
If the foreign company do not meet the threshold requirements, it may still choose to voluntarily register in order to be able to claim input tax credits for GST/HST paid on its business expenses in Canada.
On the other hand, Nonresident E-commerce Service Suppliers that are required to register because of their e-commerce supplies of digital products and services must generally register under the simplified GST/HST registration process.

Nonresident corporations are taxable at normal Canadian corporate income tax rates on income derived from carrying on a business in Canada.
Canada’s domestic law does not require the existence of PE for a nonresident corporation to be taxed on Canadian source business income.
Instead, a nonresident corporation need only be “carrying on a business” in Canada to establish liability for tax in Canada.
In this case, the company may be subject to Canadian withholding tax on certain types of Canadian-source income, such as dividends, interest, royalties, and rent.

Foreign company must complete the Non-Resident Business Number and Account Registration Web Form. Alternatively, you may fill out Form RC1, Request for a business number and certain program accounts, the form can be submitted online or by mail.
Refer to the below link for submitted online.
Business Registration Online – What you can do

NR-CA-120:
If the foreign entity with Non-Resident status appoints an agent to applied for a VAT number in Canada:
What is the official name of the agent?
What qualifications does the agent need?
Is the agent jointly and severally liable to the Canada tax bureau?
Does the Non-Resident Entity need to pay for corporate income tax?
Official website?
Answer:
According to BNA VAT Navigator 9.2 and 10.4.
Refer to Responsibilities of authorized representatives
There is no requirement for nonresident suppliers to appoints a Canadian GST/HST representative, though the Canada Revenue Agency may require a security deposit.
Canadian GST/HST representative is authorized to act on behalf of the foreign entity and may be held liable and subject to third-party penalties for any non-compliance with Canadian tax laws.
There are no specific qualifications required to act as a GST/HST representative.
GST/HST representative can be an accountant, a bookkeeper, a friend, a lawyer, a power of attorney.

NR-CA-130:
What are the circumstances that a Non-Resident Company in Canada will not be consider as having permanent establishment (PE) in Canada? And what circumstances will be considered as having PE in Canada?
Answer:
According to BNA Country Guide 2.2.
Under most of Canada’s treaties, a nonresident providing services in Canada will generally only have a permanent establishment when they have a “fixed place of business” or a dependent agent with the authority to enter contracts in Canada.
However, payments made to a nonresident in respect of services provided in Canada may be subject to withholding tax.
For tax treaty purposes, the most recent Canada-United States Protocol introduced a provision that creates a services permanent establishment when a service provider is present in Canada for at least 183 days in any 12-month period and generates greater than 50% of the gross active business revenues of the company from those services during that period.
The CRA’s administrative position is that a website is intangible and therefore cannot be a permanent establishment. However, a server that is located in Canada can be a permanent establishment if the taxpayer owns or leases the server, the server is fixed in place and time, and business is carried on through the server.
The position of the CRA on cloud-based services is not yet clear.

NR-CA-210:
Does Canada have Free Trade Zone and bonded warehouse system? How do foreign businessmen use the Free Trade Zone to obtain tax concessions?
Answer:
Foreign Trade Zone
Canada does not have a Free Trade Zone system, but it does have a bonded warehouse system.
The bonded warehouse system allows businesses to store goods in a designated warehouse without paying duty or taxes until goods are released into the Canadian market.
Foreign businessmen can use the bonded warehouse system in Canada by obtaining a license from the Canada Border Services Agency (CBSA) and complying with the rules and regulations governing the system.
The following are some of the benefits of using a custom bonded warehouse:
1. You do not pay duties and taxes until the goods enter the Canadian marketplace.
2. If you export the goods from Canada, you do not pay duties and taxes.
3. You can import goods in bulk, store them in your warehouse and remove them as you need them. This reduces your up-front costs because you pay duties and taxes only on the goods that enter the Canadian market.
4. You can store the goods in your warehouse for up to 4 years, during which time you can handle them in a variety of ways, providing that you do not substantially alter the goods.

NR-CA-220:
Can a foreign company rent a bonded warehouse in Canada Free Trade Zone under the name of a foreign company?
Can a bonded warehouse held under the name of a foreign company as a holder of the import and export documents?
Or can it be held by a cargo agent?
Answer:
Yes, a foreign company can rent a bonded warehouse in a Canadian Free Trade Zone (FTZ) under the name of the foreign company.
In Canada, bonded warehouses can be held under the name of a foreign company as a holder of the import and export documents.
The holder of the warehouse license is responsible for complying with all Canadian customs and import regulations and ensuring that all duties and taxes are paid when goods are removed from the warehouse.
A cargo agent can also be involved in the operation of a bonded warehouse in Canada.
For example, a cargo agent can act as a customs broker to handle the clearance of goods through CBSA, or they can act as a logistics provider to handle the transportation of goods to and from the warehouse.
For steps by steps of importing commercial goods into Canada, refer to the below link.
https://www.cbsa-asfc.gc.ca/import/guide-eng.html

NR-CA-230:
Are there any similar roles as IOR (Importer Record in Germany), Tax Agent (Germany), Fiscal Representative (Canada), Registered Agent (USA Texas), ACP (Canada)?
How to avoid situation where the VAT cannot be deducted as input tax?
Answer:
In Canada, there are similar roles as IOR who the party is responsible for ensuring that all customs regulations and requirements are met when importing goods into a country.
The first is the Customs Broker, licensed by the Canada Border Services Agency (CBSA) to act as a representative for importers, exporters, and carriers in dealing with the CBSA. They provide services related to the importation and exportation of goods, such as handling documentation, customs clearance, and payment of duties and taxes.
Another similar role in Canada is the Non-Resident Importer (NRI). An NRI is a foreign company that registers with the Canadian government to act as the Importer of Record for goods being sold in Canada.
This allows the foreign company to have greater control over the import process and to collect Canadian taxes from Canadian customers.
To become an NRI, the foreign company must have a Canadian address, a Canadian tax number, and comply with all Canadian regulations.
IOR can generally claim GST/HST paid on imported goods as input tax credits.
IOR must registered for GST/HST with the Canada Revenue Agency (CRA). If the IOR is not registered, they will not be able to claim any input tax credits.
IOR must also ensure that the goods purchased for consumption, use, or supply in the course of a commercial activity.
There are several examples on input tax credit entitlement for Tax on Imported Goods.
Input Tax Credit Entitlement for Tax on Imported Goods

NR-CA-240:
What are the ways of dealing with custom duties and VAT when a foreign company sells to domestic customers in Canada from a warehouse in the bonded area in Canada?
What are the differences when paying for the CIT in Canada?
Answer:
They are several options available such as:
1. Foreign company pay duties and taxes at the time of importation. Goods would then store in the bonded warehouse, and when they are sold to domestic customers, the applicable VAT would be charged and collected at the time of sale.
2. Use a Non-Resident Importer (NRI) Program where it allows foreign companies to register for a Canadian GST/HST account and act as the IOR for goods sold in Canada. This would allow the foreign company to charge Canadian customers the applicable GST/HST at the time of sale, rather than paying duties and taxes at the time of importation.
3. Use a custom broker to handle the customs clearance process for foreign company and ensure that any applicable duties and taxes are paid at the time of importation. This would allow the foreign company to store the goods in the bonded warehouse and charge Canadian customers the applicable VAT at the time of sale.
For more information on non-residents and GST/HST registration, refer to the below link.
GST/HST on imports and exports

NR-CA-250:
Foreign companies rent warehouses from bonded warehouses in bonded areas in Canada, and then sell the items to domestic customers in Canada. Will this make foreign companies Non-PE into PE and need to keep accounts and pay income tax?
Answer:
When a foreign company sells to domestic customers in Canada from a bonded warehouse, the treatment of Corporate Income Tax (CIT) in Canada will depend on various factor, including the structure of the foreign company’s business and the nature of the sales.
If the foreign company has a permanent establishment (PE) in Canada, such as an office or a warehouse, then the company may be subject to CIT on the income earned from sales made to Canadian customers.
If the foreign company does not have a PE in Canada, then the company may still be subject to Canadian tax law, income is earned from a Canadian source if it is earned in connection with a business carried on in Canada.
See the below link for permanent establishment.
Permanent establishment

NR-CA-310:
For Amazon and other e-commerce B2C, the Canada government stipulates that natural persons should declare customs duties and VAT when importing. How they deal with it?
Answer:
Refer to https://www.amazon.ca/gp/help/customer/display.html?nodeId=G26L6NHEDGERVR8W
When importing goods into Canada, individuals are generally required to declare any applicable custom duties and GST/HST to the CBSA at the time of importation. This requirement applies to all types of goods, including those purchased from e-commerce B2C platforms like Amazon.
To deal with this requirement, Amazon and other e-commerce B2C platforms may provide information and support to their customers to help them understand their obligations and complete the necessary customs declaration forms.
This may include providing estimates of customs duties and taxes, as well as instructions on how to complete the declaration forms.
In some cases, Amazon and other e-commerce B2C platforms may also offer a service to handle customs clearance on behalf of their customers, which can simplify the process and help to ensure that all customs duties are paid correctly.  

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