Your Company Is Incorporated: What Comes Next?

The Minute Book (the corporate records book) is the company's equivalent of a household register in China. It holds the by-laws, the first directors' and shareholders' resolutions, the shares issued to the parent company, the register of shareholders, the register of directors and the register of individuals with significant control. You will be asked for it when you open a bank account, and later when you raise financing, sell the company or are audited by the CRA.

Tax accounts. A new corporation usually gets a CRA Business Number (BN) automatically, but HST, Payroll and import-export accounts have to be opened separately, as needed. Whether you need to register for HST starts with small supplier status: if the combined worldwide taxable sales of the company and all its associates (including the foreign parent company) exceed C$30,000, the subsidiary may no longer be a small supplier. Next, look at whether it carries on business in Canada and makes taxable supplies there; the registration rules then set the date from which it must register (see "Do You Need to Register for GST/HST?" in this series). If you are under the threshold, you can also register voluntarily.

Before you hire. Open a Payroll account first. In Ontario, employers in industries where coverage is mandatory must register with the WSIB (workplace injury insurance) within 10 days after the first employee starts work.

Doing business in another province. You need an extra-provincial registration in that province. A federal corporation operating in Ontario must also file with Ontario.

Three more things to check before you open. A foreign investor establishing a new business in Canada generally has to file a notification under the Investment Canada Act within 30 days after starting (some sectors and larger investments are subject to review). Some industries need a separate licence or permit. And arrange commercial insurance before you lease premises or hire staff.

Fixed dates every year

Item	When	What to watch
Bookkeeping	Monthly	Keep books to Canadian requirements and retain supporting records (generally for at least 6 years)
HST returns	Each reporting period	Monthly, quarterly or annual, depending on your sales and your choice
Payroll source deductions	At the remitting frequency the CRA assigns (usually monthly)	Withhold CPP, EI and income tax and remit them on time; issue T4s at year-end
Corporate tax payments	Within 2 months after year-end; within 3 months for an eligible CCPC	A foreign-controlled subsidiary is generally not a CCPC, so the 2-month deadline applies. Instalments: generally not required for the first tax year after incorporation; also generally not required if the tax for either the current year or the previous year is $3,000 or less; otherwise instalments are required — usually monthly for a foreign-controlled non-CCPC; only an eligible small CCPC can pay quarterly
T2 corporate income tax return	Within 6 months after year-end	Required even if there is no income in the first year; the filing deadline is later than the payment deadline, so don't wait until you file to pay
T106, T1135	Within 6 months after year-end (same as the T2)	T106: transactions with non-arm's-length non-residents total more than $1 million; T1135: the total cost of "specified foreign property" held at any time in the year is more than $100,000 (with separate exclusions, such as property used in an active business and shares of foreign affiliates); late-filing penalties are charged per day
T1134	Within 10 months after year-end (tax years beginning after 2020, i.e. from 2021 on)	Required only if the Canadian corporation held a foreign affiliate as defined during the year (controlled or not; generally, it owns at least 1% itself and at least 10% together with related persons); having a parent company abroad does not, on its own, mean the subsidiary has to file
Annual return	Ontario: within 6 months after year-end · Federal: within 60 days after the anniversary of incorporation	Ontario corporations file online through the Ontario Business Registry; federal corporations report their individuals with significant control with the annual return
Changes to corporate information	Within 15 days of the change	Update promptly when directors, the address or other details change
Dealings with the parent company	Every year	Price at arm's length; keep the agreements and documentation

The three most common problems

First: thinking tax is due when you file. The T2 is filed within 6 months after year-end, but the tax must be paid in full within 2 months after year-end (a foreign-owned subsidiary generally doesn't get the 3 months a CCPC has). Interest runs on any late amount from the payment due date.

Second: not filing the T2 and annual return on time. Many new companies think, "We had no business in the first year, so we don't need to file." That's wrong. The T2 and the annual return must be filed every year: a late T2 brings a penalty based on any tax owing (and it must be filed on time even when no tax is owing); if annual returns go unfiled for a long time, the government can dissolve the company.

Third: no paperwork for dealings with the parent company. Expenses the parent pays on the subsidiary's behalf, management fees it charges and intercompany loans all need an agreement and a basis for the pricing, and above the threshold you also have to file a T106. Putting the paperwork together only when the CRA asks is often too late.

How Sheng Qian CPA can help you stay on top of this

For our full range of services and prices, see "What Sheng Qian CPA Can Do for Foreign Companies" in this series.