Friday, 1 March 2013

Penalties for Corporations Owning Real Estate/Business in Ontario

Foreign corporations should be mindful of licensing requirements when they conduct business or own real estate in Ontario. In addition to tax filing requirements any  corporation conducting business or owning real estate in Ontario should also register with the Ontario government and acquire what is called an extra-provincial license. The Ontario Extra Provincial Act describes what is, conducting business in Ontario and what is not.  See See Section 2 of Extra-Provincial Corporations ACT It is interesting as the Act also states:

"An extra-provincial corporation does not carry on its business in Ontario by reason only that,
(a) it takes orders for or buys or sells goods, wares and merchandise; or
(b) offers or sells services of any type,"

Subsection 2(a) of the Act more or less states that if a foreign corporation has a presence - similar to that  described as a permanent establishment by CRA  - it is conducting business in Ontario and must register. 

It also adds that if a foreign corporation holds interest in real property situated in Ontario it must also acquire an Extra-Provincial license.

You still must file tax returns, but may be exempt under a tax treaty.  Failure to register can result in penalties of up $2,000 for individuals and $25,000 for a corporation.

See paragraph 20(1)(c) of the  Extra-Provincial Corporations Act

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This blog is for general information only and cannot replace professional advice.
The reader is invited to contact the writer to discuss the contents of the newsletter.
Readers are advised to seek professional advice before acting on the material
in this newsletter


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