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How to Open a Branch Office in Canada?

Prabhat Nigam

| Updated: Jun 01, 2022 | Category: Global Registration

How to Open a Branch Office in Canada?

Foreign businesses that are willing to expand their business in the Canadian market have several options, which include the opening of subsidiaries or branch offices in Canada. Out of these two structures, the foreign parent company has the option to choose from any of these two business vehicles depending on various factors such as taxation, independence of the company registered overseas etc. This piece of writing touches on all the aspects of opening a branch office in Canada.   

What Is A Branch Office In Canada?  

When foreign corporations want to do business in the Canadian market, they take the route of establishing a business entity in Canada in the form of a branch office. Branch offices are only an extension of the foreign parent company in the Canadian jurisdiction. The branch office is not legally distinct from the parent company, and the parent company can be exposed to debts, liabilities and obligations of the branch office. This is the reason why they are not considered a separate legal entity. Branch offices have become popular among foreign jurisdictions because of the tax advantages offered by Canada.  

Characteristics of a Branch Office in Canada  

Some of the characteristics of a branch office in Canada are:

  1. Since a branch office is merely an extension of the foreign parent company, it is completely dependent on the parent company. This is the reason why a branch office, also referred to as a satellite company, is dependent on the parent company.
  2. It has no separate legal entity making the foreign parent company completely liable for all its actions in Canada.
  3. It bears the same name as the parent company and appoints a legal representative in Canada to carry out the operations in Canada.
  4. Registration requirements of a branch office are simpler in the case of a subsidiary company.
  5. Tax on the branch office shall be levied on the income derived by the parent company in Canada.

Procedure for Opening a Branch Office in Canada   

Registration requirements for opening a branch office

A foreign corporation can do business in Canada through a branch office after obtaining the necessary licenses and registering itself in the jurisdiction where the parent company wishes to carry out its business. If the parent company wishes to operate in multiple jurisdictions, then it needs to register the branch office in every province.

Following are some of the important documents to be filed for opening a branch office in Canada:

  1. Certificate of incorporation of the foreign parent company and some particulars of the parent company
  2. Incorporation documents of the branch office
  3. A declaration along with the signs and names of the branch directors and the secretary  
  4. Information about the local representative of the parent company in the branch office

The parent company has the option to hire a local agent or engage the services of professionals in carrying out the registration of branch offices in Canada.

It must be remembered that the above-mentioned documents need to be signed and notarized by a public notary in Canada in order to be accepted for opening a branch office in Canada.

Registration of branch office at the federal level

Where the parent company decides to open a branch office at the federal level, the parent company needs to register itself with the Companies’ Registrar. This registration requires submission of the required documents at the Federal Trade Register. 

Opening of a bank account in the branch office name

Though only a branch office is being opened, it requires the opening of a bank account in the branch office name. This bank account will be opened with a local bank. Thereafter, the share capital will be deposited in the bank.

Registration with the GST and Tax authorities

A branch office also needs to register itself with the Tax and GST[1] authorities, who will then issue a unique tax number and Goods and Services Tax (GST) number to the branch office. These numbers are issued by the Revenue Agency in Canada.

Provincial registration of Branch office 

There is a possibility that the foreign company wants to carry out its operations in a particular jurisdiction of Canada only. In that case, the branch office needs to be registered with the trade registrar of a particular province or territory. At the same time, it has the option to register itself at the federal level.  

Scope of Activities Undertaken By the Branch Office      

Keeping in mind the fact that the branch office is only an extension of the parent company in Canada, the branch office can only undertake those activities in which the parent company is involved in its home country. This is the reason why most of the branch offices in Canada are involved in the financial sector, the banking sector to be precise. However, this must not be seen as a restriction. A branch office can enter into a number of other activities provided the parent company has been authorized to engage in such kinds of activities.

Another option that is sought by the foreign companies is entering the Canadian market with a non-resident company which comparatively offers a greater independence to the entity. However, the process of its registration is more cumbersome than opening of a branch office in Canada.   

Information about the Parent Company for Registering the Branch Office        

The fact that only the branch office of parent company will be operating in Canada, the parent company is also supposed to disclose certain information about it. Once the branch office is incorporated, the documents issued by it must contain the following information about the parent company:

  • Country of origin of the parent company
  • Registration number of the parent company
  • Business vehicle/ structure of the parent company and its registered address
  • Place of the registration of the branch office
  • Branch office’s registration

The parent company must be very particular about registration of the branch office in all the jurisdictions in Canada where it wants to operate its business after following all the local rules and procedures.   

Appointment of a Registered Agent in Canada      

It has been discusses time and again in the above discussion that the branch office will act as an extra provincial corporation of the foreign parent company and therefore there is a requirement of appointment of a registered agent who will take care of the incorporation procedure of the branch office with the Trade Registrar and other tax authorities in the chosen Canadian province and territory. There are cases, where the registered agent offers other kinds of service such as registered address services.

Some of the registered agents also offer the services of providing a virtual official address for the registration purpose before the branch office finally decides the actual address for correspondence.  

Requirements to Be Met By Branch Offices before Operating In Canada  

All the branch offices of the foreign parent companies operating in Canada need to ensure that all their official documents reflect the following details:

  • Information about the parent company such as its registered address in its country of origin
  • Registration number assigned to the Branch Office assigned by the Canadian authorities
  • Registered Office of the Branch Office in Canada
  • Name of the parent company should reflect on all the necessary documents by the Canadian branch.

Conclusion 

The cost of opening a branch office in Canada is very low which makes it a viable option for those businesses that do not have much investment for the project. Representative Office is also an option to establish presence. However, the drawback with the representative offices is that they are not allowed to carry out any sales. This is the reason why more than 5 thousand Branch Offices operate in Canada.

Read Our Article: How to Start Small Business in Canada

Prabhat Nigam

Prabhat has done his BA LLB (Hons) and has been writing research papers since his law school days. His interest in content writing made him pursue a career in legal research and content writing. His core areas of interest are indirect taxes, finance and real estate.

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