Who this is for
- Founders living in mainland China who want to own a Canadian corporation
- Canadian corporations whose sole or controlling owner is resident in China
Not covered here
- Forming a company in China, China's outbound investment and foreign-exchange approvals, and China-side tax
- Immigration status and permission to work in Canada
- Owners who lived in Canada and later moved to China
- Each incorporation filing step by step
Can a non-resident living in China own a Canadian company?
Yes. A founder living in mainland China can own all the shares of a Canadian corporation; the residency rules apply to directors, not shareholders. One person can be the sole shareholder, director and officer where the director rule is met (Corporations Canada).
Living in China changes the rest of the picture:
| Question | Short answer for a founder resident in China |
|---|---|
| Who can be director? | A federal corporation needs a resident Canadian director; Ontario and British Columbia do not |
| Small business rate? | Generally not: a company controlled by a non-resident is not a CCPC |
| Where is the company resident? | In Canada, by incorporation; running it from China can make China claim it too |
| Tax on dividends to you | 25% withheld, or 15% under the treaty with proof |
| Salary for work done in China | No Canadian income tax withheld |
| Money in from China | Shares or a recorded shareholder loan; China's own approvals apply |
| Government notice | An Investment Canada Act notification when the business starts |
| Yearly filings | T2, annual return, NR4 slips for payments to you, more with payroll or GST/HST |
Three early choices are hard to undo: the incorporating law (it sets the director rule), where the board actually makes decisions (it sets corporate residence), and how money goes in (it sets how it can come back out). Settle them before filing the articles or sending the first wire.
A founder who is neither a Canadian citizen nor a permanent resident is generally a "non-Canadian" under the Investment Canada Act, so establishing a new Canadian business needs a notification, given before the business starts or within 30 days after implementation, implementation being the start (Investment Canada Act, sections 11 and 12). Any such investment can also be reviewed on national-security grounds (section 25.1); how likely that is depends on the business.
Gather: the founder's passport, Chinese home address and Chinese tax identification number (it goes on the NR4 slip), the planned province and a local registered office, who the director will be, a short plan of where customers, staff and decisions will be, and the amount and source of the starting funds. A founder resident in Hong Kong or Macau should confirm separately which treaty, if any, applies.
Who can be the director if I live in China?
It depends on the law the company is incorporated under. A federal corporation needs at least 25% of its directors to be resident Canadians, and at least one when the board has fewer than four (CBCA, section 105). Ontario repealed its resident-director rule (Ontario Business Corporations Act, section 118), and British Columbia's registry says its Act has no director residency requirement (BC Corporate Registry).
So a founder in China can be the sole director of an Ontario or BC corporation, but not of a federal one. A resident Canadian added only to meet the federal rule becomes a real director with real duties, including personal liability for tax the company fails to withhold (below); the seat does not give that person shares. Office addresses, director duties and the filing steps are in incorporating in Canada from abroad and incorporating as a newcomer or non-resident.
Is the company a CCPC if its only owner lives in China?
Generally no. A Canadian-controlled private corporation (CCPC) must not be controlled, directly or indirectly, by one or more non-resident persons (CRA: Type of corporation). A founder resident in China who holds the votes controls the company, so:
- No small business deduction. Business income earned in a province is taxed at the federal general rate of 15% instead of 9%, plus that province's general rate, for example 11.5% in Ontario or 12% in British Columbia (CRA: Corporation tax rates). Income is earned in a province through a permanent establishment there, such as an office. Income allocated to a permanent establishment outside Canada, which the founder's base in China may create, pays no provincial tax but a higher federal rate, because the federal abatement covers only income earned in a province (Income Tax Act, section 124(1); Income Tax Regulations, section 400).
- Earlier tax payment. The balance is due 2 months after year-end, not the 3 months some CCPCs get (CRA: T2 guide).
Adding a Canadian director does not change this. Control here includes control in fact, and all shares owned by non-residents are counted together (Income Tax Act, section 125(7); section 256(5.1)). The status changes only if non-residents no longer control the company in votes or in fact, for example when a spouse living in Canada holds the controlling votes and in fact runs the company. Test it before shares are issued; the full test is in CCPC status for a new corporation.
Where is the company tax resident if I run it from China?
In Canada, at least. A corporation incorporated in Canada is deemed resident in Canada throughout each year (Income Tax Act, section 250(4)). The CRA also notes the common-law rule: a company is resident where its central management and control is exercised, usually where the board meets (CRA: Residency of a corporation). If the founder makes the real decisions from China, China may also claim the company as its resident.
The Canada–China agreement has no fixed tie-breaker for a company resident in both countries: under Article 4(3), the two tax authorities try to settle it by mutual agreement (Canada–China agreement). If a treaty makes a company resident only in the other country, Canada deems it non-resident (section 250(5)), which has its own tax cost; see corporation residency after the owner moves abroad.
This is unsettled ground that turns on facts. Decide where the board meets and where decisions are made before trading starts, keep minutes that show it, and get advice if most decisions will be made in China.
How much Canadian tax is withheld on dividends paid to me in China?
A Canadian corporation withholds non-resident tax (Part XIII tax) of 25% of each dividend it pays or credits to a non-resident (Income Tax Act, section 212(2)). The Canada–China agreement caps that tax when the recipient is the beneficial owner, meaning the person who keeps the dividend rather than holding it for someone else (Article 10(2)):
| Who receives the dividend | Canadian tax withheld |
|---|---|
| Founder in China with no treaty proof on file | 25% |
| Individual resident in China who is the beneficial owner | 15% |
| Company resident in China owning at least 10% of the voting stock | 10% |
Before paying at a treaty rate, get Form NR301 or equivalent information from the founder and keep it on file (CRA: T4061). Crediting a dividend to the founder's loan account counts as paying it. If 25% was withheld for lack of proof, the founder can claim the excess back on Form NR7-R within 2 years after the end of the year it was remitted (section 227(6)).
A corporation that fails to withhold owes the tax itself (section 215(6)) and can face a penalty of 10% of the amount not withheld (section 227(8)). Its directors at the time, including a founder who is the sole director, are personally liable with it for non-resident and payroll tax it fails to withhold or remit, with interest and penalties, once the CRA cannot collect from the company, unless they took reasonable care to prevent the failure; the CRA has 2 years after a person stops being a director to start recovery (section 227.1). The same applies to unremitted GST/HST (Excise Tax Act, section 323). Deadlines are in the filings table below; treaty forms and slip details are in non-resident owners of a Canadian corporation.
Can the company pay me a salary, director's fees or management fees in China?
Yes, for real work, and where the work is done decides the Canadian tax. Keep a dated record of where each day's work happened.
| Payment | Work done in China | Work done in Canada |
|---|---|---|
| Salary | No Canadian income tax withheld: a non-resident is taxed on employment income only for duties performed in Canada (Income Tax Act, section 115(1); Regulation 104(2)) | Payroll withholding on the pay for those days, reported on a T4 (CRA: Non-resident employees) |
| Director's fees | Not taxable in Canada when the director attends from outside Canada by electronic means (CRA: Directors' fees) | Withhold on the part of the fee for meetings or duties in Canada; report on a T4 |
| Management or administration fees | Generally 25% non-resident tax, because the founder does not deal with the company as an unrelated party (section 212(1)(a) and (4)); the treaty may remove it (below) | 15% withheld on fees for services done in Canada (Regulation 105), and the non-resident tax may also apply |
The treaty does not remove Canadian tax on pay for work done in Canada: Article 16 lets Canada tax a director's fees and a top manager's salary from a Canadian company, and Article 15(2)'s short-visit exemption needs an employer not resident in Canada, which a Canadian company is not. For an individual's independent services, Article 14 generally leaves the income taxable only in China unless the founder has a fixed base in Canada or stays more than 183 days in the calendar year (Canada–China agreement). Whether a management fee falls under Article 14 or Article 16 is a judgment call; have it reviewed before the first payment. Canada Pension Plan, Employment Insurance and permission to work in Canada each follow their own rules.
Salary for real work is deductible by the company to the extent it is reasonable (section 67); a dividend is paid from profit already taxed. Which mix costs less depends on China's tax too; the general comparison is in salary or dividends.
Should money from China go in as shares or a shareholder loan?
Either works; the label decides how the money can come back. The company can issue shares for part of the money and record the rest as a loan from the founder.
| Share capital | Shareholder loan | |
|---|---|---|
| Record it with | A resolution issuing shares and the share register | Written loan terms or a resolution, booked as an amount due to the shareholder |
| Getting it back | By a reduction of capital or a share redemption, each a corporate-law step; anything paid back above the amount put in for the shares (paid-up capital) is treated as a dividend (section 84(3) and (4)) | Repaying principal is neither a dividend nor interest, so no non-resident tax applies to it |
| Interest | None | If charged, non-resident tax applies, capped at 10% by Article 11 (section 212(1)(b)); once debt owed to the founder passes a 1.5:1 debt-to-equity ratio, interest on the excess is not deductible and is treated as a dividend (section 18(4); section 214(16)) |
The reverse can cost tax: a loan from the company to the founder, or the founder's personal costs paid by the company, can be treated as a dividend to a non-resident, with tax withheld and an NR4 (section 214(3)(a)). Exceptions and refunds are in shareholder loans to a non-resident owner.
A Canadian bank reports each incoming international transfer of $10,000 or more to FINTRAC (FINTRAC), so keep proof of where the money came from. Book every transfer from China on the day it arrives, matched to the wire record and the resolution. An unlabelled deposit can be booked as sales and later taxed as income. If reportable transactions with the founder and other non-residents not at arm's length (such as the founder's company in China) total more than $1,000,000 in a year, the company also files Form T106 (CRA: T2 guide, Chapter 2). The bookkeeping is in the shareholder loan account.
Sending money out of China falls under China's outbound investment (ODI) and foreign-exchange (SAFE) rules; which steps apply to an individual founder is a China-side question, so get China-side advice before the first wire.
What does the company file in Canada each year?
Every corporation files a T2 return for every tax year, even with no tax payable, within six months after its year-end (CRA: T2 guide). The rest depends on what it pays and sells.
| Filing | When it applies | Deadline |
|---|---|---|
| T2 return, with Schedule 50 (shareholders) and Schedule 19 (non-resident shareholder with a voting share) | Every year (CRA: T2 guide, Chapter 2) | six months after year-end; tax due 2 months after year-end |
| Corporate annual return | Every year | Federal: within 60 days after the anniversary date (Corporations Canada); a provincial corporation follows its province's rule |
| Non-resident tax remittances and NR4 slips (not T5) | Any year dividends, interest or management fees are paid or credited to the founder | Remit by the 15th day of the following month; NR4 by the last day of March after the payment year |
| T4A-NR slips | Fees for services the founder performs in Canada, with 15% withheld (CRA) | last day of February after the payment year |
| T4 slips and payroll remittances | A T4 for any salary over $500 in the year, including pay for work done in China with nothing withheld (Income Tax Regulations, section 200; CRA: RC4120); remittances on salary or director's fees taxable in Canada | T4 slips by the last day of February following the calendar year to which the slips apply; remittances on the CRA payroll schedule |
| Form T106 | Reportable transactions with the founder and other non-arm's-length non-residents over $1,000,000 | 6 months after year-end |
| GST/HST returns | Once registered; registration is required above the $30,000 small-supplier limit (CRA) | Each reporting period |
Which CRA accounts to open first is in after you incorporate; government fees are in cost to incorporate in Canada.
Do I have to file a Canadian tax return myself?
Generally not for dividends. When the correct Part XIII tax is withheld, it is the non-resident's final Canadian tax on that income, and the CRA says not to file a return to report it unless electing under specific rules (CRA: Non-residents of Canada).
Salary for days worked in Canada is different: a non-resident may have to file a Canadian return for employment income earned in Canada, even if tax was withheld; it is due April 30 of the following year (CRA: Non-residents of Canada). How China taxes the founder's Canadian dividends, salary or the company's profits is a China-side question that needs its own advice.
Example
Illustrative amounts in Canadian dollars; they ignore other adjustments and credits.
Founder in Shanghai, Ontario corporation
A founder in Shanghai owns all the shares of an Ontario corporation, is its sole director, and hires a manager in Toronto. The company earns C$100,000 of business income, all through its Toronto office. It is not a CCPC, so it pays federal tax at 15% (C$15,000) and Ontario tax at 11.5% (C$11,500): C$26,500 in all. A CCPC with the same income would pay 9% federal tax plus Ontario's small business rate (3.2%, cut to 2.2% from July 1), C$12,200 or less, so non-resident control costs over C$14,000 here.
It then pays the founder a C$40,000 dividend. With a signed NR301 on file, it withholds 15% (C$6,000), sends C$34,000 to Shanghai, remits C$6,000 by the 15th of the next month and issues an NR4. Without the NR301, it withholds 25% (C$10,000), and the founder can claim the extra C$4,000 back on Form NR7-R. The founder sets strategy from Shanghai, so China may also treat the company as its resident; the C$26,500 is Canadian tax only, and the residence question needs review before the first T2.
Founder in Shenzhen funds the start
A founder in Shenzhen wires C$50,000. The company issues 100 shares for C$100 and records C$49,900 as an interest-free shareholder loan; with so little share capital, interest on it would run into the debt-to-equity limit. Two years later it repays C$20,000 of the loan: no withholding and no NR4, because principal is neither a dividend nor interest. Had all C$50,000 gone into shares, getting it back would need a reduction of capital or a share redemption, not a simple repayment.
Three months working in Vancouver
The same founder is paid a salary of C$10,000 a month and spends three months working in Vancouver. The C$30,000 for those months goes through Canadian payroll with tax withheld and a T4. The C$90,000 for the nine months worked in China has no Canadian withholding but still goes on the T4. The founder may have to file a Canadian non-resident return for the C$30,000, and checks first that the trip allows work in Canada.
Different for you?
- You have not incorporated yet: follow incorporating in Canada from abroad, and bring the founder's details, province, director and funding plan to cross-border tax help before filing the articles.
- You are about to pay the first dividend, or paid one without withholding or an NR301: get cross-border tax help with the dividend record and the founder's residence proof.
- Board decisions will be made in China, or the first T2 is coming up: bring the minutes and books for cross-border tax help.
- A spouse or relative living in Canada will own shares: test control with cross-border tax help before the shares are issued.
- Money moved with no share resolution, loan record or withholding: bring the wire records and bank statements to cross-border tax help before the first T2.
- You lived in Canada and moved to China later: see non-resident owners of a Canadian corporation.
- A company in China will own the Canadian company: see Canadian subsidiary of a foreign company.
- You plan to move to Canada or are waiting for PR: see incorporating as a newcomer or non-resident.
- You are weighing a US company instead: see US company for a China-resident founder.
- The company has never filed: see non-resident-owned corporation that never filed.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| Statutory Part XIII withholding on dividends to non-residents Before an applicable treaty reduction; applies to dividends paid or credited by a corporation resident in Canada | 25% | Income Tax Act, subsection 212(2) Checked |
| Canada-China treaty dividend rate for an individual beneficial owner Article 10(2)(b), subject to treaty eligibility and its exceptions | 15% | Canada-China income tax agreement, Article 10(2)(b) Checked |
| Investment Canada Act notification timing after implementation A notification of an investment to acquire control of a Canadian business may be given at any time before implementation of the investment or within this period after it, in the manner and with the information prescribed; an amendment requiring earlier filing for prescribed business activities (S.C. 2024, c. 4, s. 3) is listed as not in force. | Within 30 days after implementation | Justice Laws: Investment Canada Act, section 12 Checked |
| Ordinary minimum share of federal corporate directors who must be resident Canadians With fewer than four directors, at least one must be a resident Canadian. Certain restricted businesses generally need a majority, but one of one or two directors must qualify | 25% | Canada Business Corporations Act, section 105 Checked |
| Canadian federal net corporate tax rate after the general tax reduction Basic rate 38%, 28% after the federal abatement, 15% after the general tax reduction; not indexed | 15% | CRA: Corporation tax rates Checked |
| Canadian federal net corporate tax rate with the small business deduction For CCPCs claiming the small business deduction on active business income up to the business limit; not indexed | 9% | CRA: Corporation tax rates Checked |
| Ontario higher corporate tax rate Provincial or territorial general corporate income tax rate | 11.5% Tax year 2026 | CRA: Corporation tax rates Checked |
| British Columbia higher corporate tax rate Provincial or territorial general corporate income tax rate | 12% Tax year 2026 | CRA: Corporation tax rates Checked |
| General corporate tax balance due date After the corporate tax year-end, for most income tax balances | 2 months | CRA: Due dates for corporate income tax payments Checked |
| Eligible CCPC tax balance due date After the corporate tax year-end, if the CRA's CCPC conditions are met | 3 months | CRA: Due dates for corporate income tax payments Checked |
| Canada-China treaty voting-stock threshold for company dividend rate Company beneficial owner must own at least this share of the payer's voting stock under Article 10(2)(a) | 10% | Canada-China income tax agreement, Article 10(2)(a) Checked |
| Canada-China treaty dividend rate for a qualifying company Article 10(2)(a), for a beneficial-owner company meeting the voting-stock condition | 10% | Canada-China income tax agreement, Article 10(2)(a) Checked |
| Part XIII overwithholding refund claim window Written claim after the calendar year in which the tax was paid to CRA; Form NR7-R | 2 years | Income Tax Act subsection 227(6) Checked |
| Penalty for failing to deduct required Part XIII tax Of the Part XIII tax not deducted; CRA may also assess the unpaid tax and interest | 10% | CRA: NR4 withholding, remitting and reporting Checked |
| Director liability limit after leaving office Income-tax recovery proceeding and, by statutory cross-reference, CPP and EI recovery proceedings; GST/HST director assessment has the same period under Excise Tax Act section 323(5) | 2 years | Income Tax Act: Director liability Checked |
| Part XIII tax on a management or administration fee paid to a non-resident Income Tax Act 212(1)(a); 212(4) excludes fees for services in the ordinary course of the non-resident's business only when the two deal at arm's length; a tax treaty can reduce or remove it | 25% | Income Tax Act, section 212 Checked |
| Regulation 105 withholding on non-resident service fees Gross payment for services rendered in Canada by a non-resident, subject to a CRA waiver or reduction and statutory exceptions | 15% | Income Tax Regulations, section 105(1) Checked |
| Canada-China treaty cap on source-country tax on interest Article 11(2): applies when the recipient is the beneficial owner of the interest; percentage of the gross amount of the interest | 10% | Canada-China income tax agreement, Article 11(2) Checked |
| Canadian thin-capitalization statutory debt-to-equity ratio Applies to statutory outstanding debts to specified non-residents and equity amount, using the definitions and averaging rules in section 18. | 1.5:1 | Justice Laws: Income Tax Act, section 18(4) Checked |
| FINTRAC international electronic funds transfer report threshold Financial entities report an international electronic funds transfer they initiate or finally receive of this amount or more in a single transaction, in Canadian dollars; the 24-hour rule aggregates smaller transfers | $10,000 | FINTRAC: Reporting electronic funds transfers Checked |
| Form T106 filing threshold Total fair market value of reportable transactions with all non-arm's-length non-residents in the year; filing is required when the total is more than this | $1,000,000 | Income Tax Act, s. 233.1(4) Checked |
| Canadian corporation income tax return filing period After the corporation's taxation year end under paragraph 150(1)(a) | Six months | Income Tax Act, paragraph 150(1)(a) Checked |
| Federal business corporation annual return deadline After the corporation's incorporation, amalgamation or continuation anniversary date; filed with Corporations Canada, separate from the T2 | 60 days | Corporations Canada: Annual return for business corporations Checked |
| Part XIII withholding remittance deadline CRA must receive withholding after the month an amount was paid or credited to a non-resident | 15th day of the following month | CRA: NR4 non-resident withholding, remitting, and reporting Checked |
| NR4 slip and return deadline (all payers) Payers give recipients their NR4 slips and file the NR4 return by this date; an estate or trust has 90 days after the end of its tax year | The last day of March after the payment year | CRA: T4061 NR4 – Non-Resident Tax Withholding, Remitting, and Reporting Checked |
| T4A-NR slip and return deadline After the payment calendar year; moves to the next business day if it falls on a weekend | Last day of February | CRA: T4A-NR payments to non-residents for services provided in Canada Checked |
| T4 remuneration reporting threshold A T4 is required if remuneration is more than this amount; other T4 triggers can apply below it | $500 | CRA: Employers' Guide – Filing the T4 Slip and Summary Checked |
| T4 filing deadline T4 slips must be given to employees and the T4 return filed by this date; the next-business-day rule applies when the date falls on a weekend or recognized holiday | The last day of February following the calendar year to which the slips apply | CRA: Employers' Guide – Filing the T4 Slip and Summary Checked |
| Form T106 filing period for a corporation After the end of the reporting corporation's tax year | 6 months | CRA: T2 guide, Chapter 2 (Form T106) Checked |
| GST/HST small supplier threshold Worldwide taxable sales, including zero-rated supplies, with associates, in one calendar quarter or over the last four consecutive calendar quarters; excludes financial services, sales of capital property and goodwill | $30,000 | CRA: When to register for and start charging the GST/HST Checked |
| Usual Canadian individual return filing date The following April 30, subject to the self-employed and other exceptions in section 150 | April 30 | Income Tax Act, paragraph 150(1)(d)(i) Checked |
Primary sources
- Corporations Canada: Directors and officers
- Canada Business Corporations Act, section 105
- Ontario: Business Corporations Act
- BC Corporate Registry: Incorporation application
- Investment Canada Act, section 11
- Investment Canada Act, section 12
- Investment Canada Act, section 25.1
- CRA: Type of corporation
- Income Tax Act, section 125
- Income Tax Act, section 256
- CRA: Corporation tax rates
- CRA: T2 guide, before you start
- CRA: T2 guide, Chapter 2
- CRA: Residency of a corporation
- Income Tax Act, section 250
- Department of Finance: Canada–China income tax agreement
- Income Tax Act, section 212
- CRA: T4061 NR4 non-resident tax withholding, remitting and reporting
- CRA: Form NR301
- Income Tax Act, section 215
- Income Tax Act, section 227
- Income Tax Act, section 115
- Income Tax Regulations, section 104
- Income Tax Regulations, section 105
- CRA: Non-resident employees who perform services in Canada
- CRA: Directors' fees
- Income Tax Act, section 67
- Income Tax Act, section 84
- Income Tax Act, section 18
- Income Tax Act, section 214
- FINTRAC: Reporting electronic funds transfers
- Corporations Canada: Annual return for business corporations
- CRA: When to register for and start charging the GST/HST
- CRA: Non-residents of Canada
- Income Tax Act, section 227.1
- Excise Tax Act, section 323
- Income Tax Act, section 124
- Income Tax Regulations, section 400
- Income Tax Regulations, section 200
- CRA: RC4120 Employers' guide, filing the T4 slip and summary
- CRA: Tax treatment of non-residents who perform services in Canada
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.