Doing Business In Canada

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Investing into Canada

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6) Investing into Canada

An investor looking into investing in Canada faces many alternatives and decisions.  Each has different tax consequences.  Ignoring factors or making the wrong decision can result in unanticipated tax consequences and/or lost opportunities.  Some questions may be:

1) Should I buy the shares of an ongoing business or the underlying assets? What if the seller wants to utilize his capital gains exemption and sell shares - are hybrid deals possible?

2) If I buy the shares of an ongoing company, are there are restrictions on utilizing prior losses?

3) If I buy the assets of the business, do I get an increase in the basis of the assets?  Can I deduct purchased goodwill?

4) Should I operate as a branch in Canada or set up a Canadian subsidiary?

5) Am I expecting start up losses in Canada?

6) How do I get my profits out of Canada at a minimum tax cost?

7) Should I retain the profits in the Canadian company to further expand?

8) How should I fund the capital of the new Canadian operations - shares vs. debt?

9) How much interest can I charge on any intercompany loans?

10) Can I pay a management fee to the U.K. parent company?

11) Where should my Intellectual property ("IP") be located?  Can I make a deductible royalty payment?

11) Do I have to invest directly from the U.K or can I set up an offshore structure? What would the benefits be?

12) Will setting up an active company in Canada give me access to the U.S. market under the North American Free Trade Act (NAFTA)?

13) Should I move my R&D to Canada to take advantage of the Canadian Scientific Research and Experimental Development (SRED) credits?  How much are they worth?  How do I access these?

14) Would a Canadian Immigrant trust allow me to reduce Canadian taxes on an eventual sale of the business?  Does the trust need to be in Canada?

15) Would a trust structure assist in deferring the Canadian departure tax if I leave Canada?

Unique planning opportunities exist for each question.  There are, however, no one-size-fits-all answers to any of the above questions.  Cadesky and Associates LLP has prided itself on providing unique solutions tailored to a person's specific facts, objectives and goals.  We would welcome the opportunity to discuss your needs.



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