A fiscal representative in Canada refers to the entity that can provide tax-related services to a company that does not have its seat registered in this country, but which develops commercial activities in Canada.
Foreign investors who want to open a company in Canada do not need to appoint a fiscal representative, as the company’s tax obligations will be conducted by its accountants. We invite you to address our consultants in company formation in Canada for more details about tax representation.
When is it recommended to appoint a fiscal representative in Canada?
Company incorporation in Canada implies setting up an office here, registering with the local authorities and comply with all company registration requirements. This can take time and a significant investment, which may not be the ideal solution for companies that deal mostly with imports and sale of goods on the local market.
In this case, the alternative of a foreign company that is not registered in Canada is to opt for fiscal representation, through which it can comply with all the tax obligations deriving from the import/sale of goods on the Canadian territory, this option being more cost-effective and simpler to complete, compared to actually set up a company in Canada.
However, this option has a set of responsibilities and obligations, therefore, when appointing a fiscal representative in Canada, you must select a tax specialist with in-depth experience in this field. Here, our CPA in Canada can be of service.
The Canadian tax system
This country has a complex tax system, therefore it is advisable to hire accounting/tax professionals even in the case you want to register a business in Canada. One of the main activities of a fiscal representative is to handle all tax formalities related to the payment of the value added tax (VAT).
VAT in Canada is known as the Goods and Services Tax (GST)/Harmonized Sales Tax (HST), charged at a national level (federal level). Canada also applies a regional type of VAT, known as the Provincial Sales Tax (PST) – the rates of the latter vary based on the Canadian province. In the list below, our team of specialists in company formation in Canada have prepared a short presentation on the current VAT system:
- starting with 1 January 2024, the GST is charged at a rate of 5%;
- GST payments are made on a quarterly basis, which means that a company must submit 4 annual reports;
- 5 Canadian provinces apply the HST, which includes the GST and the PST – these are New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Islands;
- the HST rate varies from 13% to 15%;
- in Quebec, the VAT is known as the QST, meaning the Quebec Sales Tax, which is comprised of the 5% GST and a local tax of 9.975%, resulting in a QST of 14.975%.
According to the Government of Canada, entities that are liable to the payment of these taxes can file the returns online. The tax formalities are conducted by the Canada Revenue Agency and, in the case of a foreign company, the procedure will be completed by the fiscal representative.
When is it mandatory to register for tax in Canada?
It is legally required to register for GST/HST when the entity is not considered a small supplier (a small supplier is a business that has a global yearly revenue of less than $30,000). Therefore, if the company’s revenue is above this threshold, and it makes taxable supplies in Canada, tax registration is mandatory.
The procedure will be completed by the fiscal representative in Canada. We invite you to find out more on other tax obligations. You can also refer to us if you are interested in other matters, such as the Owner Operator program in Canada, the Intra Company Transfer in Canada, immigration formalities, business licenses and others. Do not hesitate to contact our team.