Definitions
What is a joint venture?
The term "joint venture" describes any arrangement whereby two or more persons agree to contribute goods, services, or capital to a common commercial enterprise. It is generally regarded as a temporary relationship that is more informal than a partnership. Each co-venturer maintains the ownership of the property and is not held under joint tenancy and tenancy in common. Co-venturers do not act as agents for each other. Each co-venturer receives a share of the gross profits and shares only in the expenses related to the specific project; therefore, they do not operate a "business in common". The profits of the joint venture flow through to the co-venturers and are taxed according to its business structure.
A joint venture has different tax rules from a partnership, for example:
- Unlike partnerships, joint ventures are not subject to at risk rules
- Capital Cost Allowance (CCA) treatment- A partnership calculates CCA at the partnership level. In a joint venture, co-venturers may claim as little or as much as suits their situation
- Unlike partnerships, joint ventures do not have to file information returns
Taxation
How do you determine if you are non-resident or resident of Canada for tax purposes?
The Canadian tax system uses residency as the basis for taxation. For information on determining residency status:
What are the tax liabilities?
The amount of tax payable depends on many factors, including the type of taxpayer you are (i.e., individual, corporation, trust, etc.) and your residency status.
Individuals Resident in Canada
Non-residents
Corporations
Individuals resident in Canada
Residents of Canada are responsible for verifying their income tax status each year and for making sure the correct amount of tax has been paid. A resident of Canada may claim all deductions, non-refundable tax credits, and refundable federal, provincial, or territorial credits that apply.
Immigrants and emigrants are considered part-year residents. They are generally subject to tax on their world income from the date of entry into or departure from Canada.
For more information on individual tax rates, refer to What are the income tax rates in Canada?.
Non-residents
If the individual or entity is a non-resident, only the income earned in Canada is subject to Canadian income tax. This includes:
- income from employment in Canada
- business income earned in Canada
- earnings on disposal of taxable Canadian property
- passive income such as rental income, royalties, pensions, interest and dividends from Canada
The type of tax payable and the requirement to file an income tax return depend on the type of income received. Generally, Canadian income received by a non-resident is subject to tax under Part I tax or Part XIII tax.
For more information, see:
Corporations
Every corporation that carries on business in Canada or disposes of taxable Canadian property has to file a T2 corporate income tax return each year. This includes:
- Non-profit organizations
- Tax-exempt corporations
- Inactive corporations
Quebec, Ontario, and Alberta administer their own corporate income tax systems. Corporations that earn income in these provinces have to file separate provincial and federal corporate income tax returns. The CRA administers corporate income tax for all other provinces and territories.
For more information, see Income tax information for non-resident corporations and Carrying on a business in Canada.
What is branch tax?
For companies that carry on business in Canada without setting up a separate legal entity incorporated in Canada, a branch tax of 25% (unless reduced by a tax treaty) is charged in addition to the federal and provincial taxes. The branch tax is intended to put the branch in the same position as a Canadian subsidiary that must withhold tax on dividends paid to its foreign parent.
For more information, see IT37R3 - Additional tax on certain corporations carrying on business in Canada and IT137R3SR - Additional tax on certain corporations carrying on business in Canada.
Government incentives
Are there any federal tax incentives?
The Canadian Government offers several tax incentives and programs. For a general list of tax incentives, see below.
SR&ED - Scientific Research and Experimental Development Tax Incentive Program
Canadian Manufacturing and Processing Profits - Reduced Rate of Corporate Tax
Film or Video Production Services Tax Credit
Investment Tax Credit
Flow-through Share (FTS) Program
Mining Tax Regimes
Canadian-controlled private corporation (CCPC)
Federal Corporate Tax Rate Reductions
What are the provincial and territorial tax incentives for investment in Canada?
Quebec, Ontario, and Albert administer their own corporate income tax systems. Corporations that earn income in these provinces have to file separate provincial corporate income tax returns.
All other provinces and territories legislate their corporate income tax provisions, but the CRA administers them. The T4012 T2 Corporation - Income Tax Guide contains some information regarding these tax incentive programs.
For more information on provincial or territorial tax incentive programs, see the appropriate province or territory.
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland and Labrador
Northwest Territories
Nova Scotia
Nunavut
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon
