A. Carrying on business in Canada
Non-residents are subject to Canadian income tax on income earned from carrying on business in Canada. A distinction is made between carrying on business “with” Canada and carrying on business “in” Canada. Only the latter attracts Canadian income tax and filing obligations.
Whether a non-resident carries on business “with” or “in” Canada depends on the level of activity performed in Canada by the non-resident. If, for example, this activity is limited to the delivery of goods to a customer in Canada, the non-resident will generally be considered to carry on business “with” Canada and so will not be taxable or subject to filing obligations. If, however, sales orders are procured through an agent in Canada then the non-resident may well be considered to carry on business “in” Canada and so be taxed accordingly.
Any further guidance as to where the threshold lies must be drawn by analogy from the federal sales tax context, discussed in the section entitled, When do I become subject to Canada’s federal sales tax (GST)?
Potential relief under Canada’s tax treaties is discussed under Treaty Relief.
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