Corporate Director Residency Requirements

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Angela Hardbattle
Angela Hardbattle
Angela Hardbattle

Tax Question:

Which provinces and territories allow Canadian corporations to have 100% foreign directors? And 100% foreign owners/shareholders?

Facts:

In Canada a corporation must have at least one director but directors are not required to be shareholders. It must also have at least one shareholder. Therefore, a company incorporated in Canada does not have to have Canadian resident shareholders, but may have to have Canadian resident directors depending on the province or territory they incorporate in.

Discussion:

The provinces and territories that require at least 25% to be Canadian resident directors. Which effectively limits foreign ownership and control. Canadian directorship is based on residency not citizenship.

  • Alberta
  • Ontario
  • Saskatchewan
  • Newfoundland and Labrador
  • Manitoba
  • Federal

The provinces and territories that do not require Canadian directors. Thus, allowing full foreign ownership and control.

  • British Columbia
  • Prince Edward Island
  • Quebec
  • Yukon Territory
  • New Brunswick
  • Northwest Territories
  • Nova Scotia
  • Nunavut

A company incorporated in one province can easily do business in another province. Thus, incorporating in British Columbia allows doing business in Ontario and visa versa. It may be difficult to get Canadian residents to take on the responsibilities of a director because directors are held personally liable for paying any unremitted Canadian taxes (i.e. sales taxes and payroll deductions).

If you are incorporating in Canada without Canadian resident directors and you have a West coast business, British Columbia would be the best choice for the province of incorporation. However, even if you have a Central Canada business, you may still opt for British Columbia as Eastern Maritime provinces may be too far and Quebec may be too complex a registration process. Also, worth considering are the effective tax rates of provinces. Your head office in British Columbia might be a lower tax location than the alternatives.

Angela Hardbattle, Dipl. T (Hons), CPA, CA, Manager

Manager, Gilmour Group CPA’s
Email: faqs@gilmour.ca

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