If my corporation enters Canada, are there any tax consequences?
A company is considered to have immigrated to Canada if the corporation’s central management and control has moved to Canada, regardless if initially incorporated in Canada or not. Therefore, when a business owner moves to Canada, so does the business.
When the company enters Canada, the company is deemed to have disposed of and reacquired all of the company’s assets and liabilities at their fair market value (FMV) right before coming to Canada. As the assets and liabilities of the company are being re-valued at the FMV, this is considered to be the company’s valuation date. There is an exception for ‘taxable Canadian property’ (i.e. real property, inventory of a business carried on in Canada, shares of a Canadian resident corporation). Taxable Canadian property is not valued at FMV, instead it transfers at original cost.
There are no resulting taxes owing in Canada due to the valuation date as the company was considered a non-resident at the time the assets and liabilities were deemed to be disposed of.
In addition to the valuation date, a new taxation year is deemed to start immediately after immigration with the assets and liabilities of the company valued at FMV.
Likewise a similar set of events and calculations happen when a company leaves Canada. See International FAQ #30 for further information.
Contact us to learn more about your corporate tax filing requirements when entering Canada.