All questions

Tax residence and fiscal domicile

i Corporate residence

A corporation will be resident in Canada if it is incorporated in a Canadian jurisdiction. However, a corporation incorporated outside Canada may be resident in Canada if its central mind and management is exercised in Canada. Directors of such corporations should not hold meetings in Canada. Tiebreaker rules in Canada's treaties may determine in which of two jurisdictions a corporation is resident if it is otherwise unclear. For example, under the Canada–US treaty, a corporation otherwise resident in both Canada and the US will be deemed resident in the jurisdiction of incorporation; otherwise the competent authorities must decide. Under the Canada–UK treaty, the competent authorities must decide. Other treaties may default to place of management.

ii Branch or permanent establishment

Under Canada's tax legislation, a non-resident who carries on business in Canada will be liable to income tax on its taxable income earned in Canada regardless of whether it has a PE in Canada. Certain activities are deemed to be carrying on business in Canada (including soliciting orders or offering anything for sale in Canada regardless of where the contract is completed). However, in its treaties, Canada has generally agreed not to impose tax on business income except where the non-resident carries on business through a PE in Canada.

As a proxy for dividend withholding tax, Canada imposes a 25 per cent branch profits tax on non-residents that carry on business through a PE to the extent funds are not reinvested in the branch business. The rate is generally reduced to 5 per cent under Canada's treaties, and some treaties provide for an exemption (e.g., under the Canada–US treaty, the first C$500,000 of branch profits is exempt).