Set Up a Subsidiary in Canada

Updated on Monday 27th January 2020

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Many foreign companies are interested in expanding their operations in other countries once they’ve achieved maturity and their profits allow them. While some of them choose the European market, there are also those willing to venture into the American or Canadian markets.

Foreign companies seeking to expand their business activities in Canada can set up subsidiaries or branch offices. The main difference between these types of structures is the degree of independence of the Canadian company. Our company formation consultants in Canada can offer a clear definition of the subsidiary company.

Requirements to create a Canadian subsidiary company

The subsidiary company has a certain degree of independence in relation to the parent company, however, this independence is granted by the foreign company. When setting up a subsidiary company in Canada, a foreign entity must take into account the following requirements:
  1. the company must be registered under the federal or regional legislation depending on where its seat will be and the market it will address;
  2. the foreign company must choose the type of subsidiary it wants to create;
  3. the parent company must take into consideration the residency of the subsidiary directors;
  4. subsidiary companies are tax residents of Canada, therefore they will pay their taxes in this country.

With respect to the types of Canadian subsidiaries, these can be:

-  non-profit subsidiaries;
-  subsidiaries with a share capital;
-  statutory subsidiaries which apply in the case of foreign banks.

Our company registration agents in Canada can explain the requirements related to subsidiary directors. Subsidiaries are also required to register for VAT in Canada.

You can also read about the creation of a subsidiary in Canada in the scheme below:

​Registering a subsidiary in Canada

The most common type of structure for creating a Canadian subsidiary is the corporation. The next steps are required to complete the subsidiary registration procedure in Canada:
  • carry out a name search report in order to make sure the trade name is unique;
  • prepare the documents related to company registration, which include the articles of association and the bylaws;
  • filing the documents with the provincial or federal Trade Register;
  • obtaining a tax identification number from the same Companies Registrar;
  • obtain the necessary licenses and permits related to start operating.

Accounting requirements of the subsidiary in Canada

 The following accounting requisites must be considered by foreign companies opening subsidiaries in Canada:
  • it will be subject to the income tax applied at the federal and provincial level;
  • the taxation will be applied to the income generated at a global level;
  • the subsidiary company will be subject to the accounting and reporting requisites applied in Canada;
  • the subsidiary can benefit from tax credits against the taxes paid on the income generated in other countries than Canada;
  • the subsidiary company will benefit from the provisions of the Canadian double taxation agreements;
  • certain tax benefits are granted for the repatriation of capital gains.

FAQ on opening a subsidiary corporation in Canada

1.      Is it hard to register a subsidiary in Canada?
The company registration procedure of a Canadian subsidiary will be completed just as in the case of a corporation, therefore it is not complicated.

2.      Must a subsidiary be registered at federal or provincial level?
Foreign companies are allowed to register subsidiary companies at both federal and regional levels.

3.      Which one is best: federal or territorial incorporation of a subsidiary?
Both registration options are advantageous, however, it should be noted that certain provinces do not impose any residency requirements for company directors.  Among these are Quebec, British Colombia, and Nova Scotia.

4.      Are nominee directors allowed for Canadian subsidiaries?
Yes, nominee directors can be employed when opening a subsidiary in Canada.

5.      Are there any other business forms available for registering a subsidiary in Canada?
Yes, in certain provinces, such as Alberta, Nova Scotia, and British Colombia, subsidiaries can be registered as unlimited liability companies. In other provinces, these can be registered as trusts or partnerships.

The video below shows the main steps for opening a subsidiary in Canada:

Our company formation advisors in Canada can assist with the preparation of the documents needed to set up a subsidiary company in this country. Please feel free to contact us if you need information about the taxation of Canadian subsidiaries.


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