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W W W. M A I N E B I Z . B I Z 93 FA C T BO O K / D O I N G B U S I N E S S I N M A I N E B Y S T U A R T L Y O N S A s uncertainty grows within the United States, many companies are looking to our northern neigh- bors for growth opportunities. With business-friendly regulations and lower corporate tax rates, expanding operations into Canada is becom- ing increasingly popular among U.S. manufacturers and service providers. Before even thinking about exports, there are important Canadian and cross-border tax considerations. One of the biggest benefi ts of doing business in Canada is the lower corporate tax rates. Canada has been cutting its corporate tax rates to attract more inbound business investment year-over-year. e federal rate for 2017 is 15.0%, down from 18% several years ago. Most provinces have an add-on rate. Ontario has an 11.5% rate, which was increased from a 10.0% rate last year, resulting in an aggregate eff ective Canadian corporate tax rate of 26.5%. In New Brunswick, the combined fed- eral and provincial tax rate will be 29% in 2017. e average combined tax rate in Canada was 42.6% in 2000. Such low rates in Canada are striking in comparison to the current U.S. average combined eff ective federal and Maine state rate of just over 40%. Lower corporate tax rates means U.S. companies can reinvest the tax savings into the local business in Canada to fund expansion and growth in Canada. Tax law and your business Canadian tax law is fairly broad on just what it considers to be "carrying on a business" in Canada. Typically, "carrying on a business" includes normal activities such as producing, growing, manufacturing, constructing, fabricating and pack- ing. It also includes less tangible and more complex activities like render- ing services or off ering products for sale through an "agent or servant," whether the contract or transaction is to be completed inside or outside of Canada. As a rule, anyone who provides services in Canada will be subject to Canadian tax on the income earned from the performance of those services. ere are two provisions in the U.S.−Canada tax treaty that would trigger what's called a "permanent establishment" (or PE) in Canada if services are performed in Canada over a signifi cant period, typically 183 days or more in a 12-month period, where more than half of gross busi- ness revenue is derived from services rendered in Canada. Individual service providers can be deemed to have PE even in the absence of a fi xed offi ce or place of business in Canada. Companies with PE are required to fi le with the Canada Revenue Agency. Canadians who make payments to non-residents (other than employees) for income such as fees, commissions or other payments for services rendered in Canada are required to withhold a 15% tax on the gross amount paid to providers. is is true whether or not the services are performed by a com- pany or an individual, and whether or not the individual or business has a permanent establishment in Canada under the treaty. Tax structures for doing business in Canada inking about how to structure your business operations in Canada to take advantage of low corporate tax rates and other provisions is your next step. Here are three ideas: 1. Establishing branch offi ces: One of the least expensive and, in cer- tain cases, most effi cient structures is the branch-offi ce model. Any profi ts from a Canadian branch of a foreign-owned corporation are subject to income tax in Canada. 2. Limiting legal concerns: If you are concerned with limiting legal liability, incorporating in Canada may make sense. Having a separate legal entity in Canada also makes sense. 3. Leveraging LLCs: Limited liability corporations doing business in Canada are not allowed the same pass-through status they are in the United States. ey're taxed as a regular corporation in Canada. ere is no one size fi ts all tax structure, as the best structure will depend upon the type of business and the business owner, which is where a tax advisor comes in handy. S L i s a t a x p r i n c i pa l a n d i n te r n a t i o n a l p r a c t i c e l e a d e r a t B a k e r Ne w m a n Noye s i n Po r t l a n d. Knowing where you can dig around buried utilities is good safety and smart. When it comes to cutting concrete, the same applies. Knowing where you can cut concrete, and more importantly not cut concrete, is also smart and can cut concrete, is also smart and can save you thousands of dollars — and countless hours — on your next project. • Electronic Locating • Concrete Scanning • Ground Penetrating Radar WE KEEP WORK AREAS SAFE To learn more about who has the expertise and equipment to help you safely dig and cut, visit digsmartofmaine.com or call Glen at 207.749.7231 www.digsmartofmaine.com REBAR RADIANT HEAT PIPES CLEAR BULLSEYE FOR CORING Private Utility Locating We are properly positioned to offer our clients high-quality, holistic, end-to-end IT solutions VoIP Telephony | Data Networking | Cabling Infrastructure | Carrier Network Services Falmouth & Bangor, ME 800-298-1187 | www.cti-maine.com Do business in Canada H OW TO I N F R A S T R U C T U R E / D I S T R I B U T I O N

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