Questions? Call 416-367-4222

Published: April 17, 2020

Last Updated: May 21, 2020

Non- Resident Carrying on Business in Canada Through Agents and Shareholders – A Canadian Tax Lawyer Analysis

In our previous article we discussed the definition of business and analysed the tests for, and the consequences of, carrying on business in Canada. While the standard test for carrying on business in Canada generally contemplates the actions of the non-resident person and the surrounding circumstances, a non-resident person can also be found to be carrying on business in Canada through an intermediary. This is particularly a concern where a non-resident person is found to have an agent acting on his behalf in Canada. It is also possible, though rare, for a shareholder or non-resident parent corporation of a Canadian subsidiary to be found to be carrying on business in Canada.


It is possible to conduct a business in Canada without personally engaging in the business activities. A non-resident person can still be considered to be carrying on business in Canada where the person has an agent in Canada acting on his behalf. However, in order for this to be the case, the non-resident person must be found to have significant control over the agent such that the agent can be considered to be providing dependent services. For example, this requirement can be met where a real estate broker acting in the normal course of business sells various real properties for a non-resident person. In that situation, the real estate broker can be considered to be acting as the non-resident person’s agent. However, it is important to consider the degree of influence the non-resident person has over the Canadian broker. In the Pullman case, a non-resident person had an agreement with a Canadian broker where the Canadian broker would offer the non-resident person participation in various Canadian mortgages that the broker made. The non-resident person was free to accept or reject any of the offers for participation and the broker had no general ability to contractually bind the non-resident. In that case, the court found that there was no overall exclusive agency and thus that the non-resident person was not carrying on business in Canada. It is often not obvious whether a particular arrangement meets the requirements for agency and the consequences of getting the determination wrong can be severe. Call our top Canadian tax law firm to learn more about agency as it applies to non-resident persons.


There may also be some concern that a non-resident shareholder of a Canadian corporation or the non-resident corporate parent of a Canadian subsidiary might be considered to be carrying on business in Canada. In normal circumstances, this is not a concern as the legal form and relationship between a Canadian subsidiary and its shareholders is one that would not result in the shareholders being considered to be carrying on business in Canada. That is to say, a non-resident shareholder of a Canadian corporation would not be found to be carrying on business in Canada solely by virtue of being a shareholder of that Canadian corporation. Furthermore, even where a shareholder has significant or even complete control of a corporation, that would not be sufficient to draw the conclusion that the corporation’s business was actually the shareholder’s. However, the exception to this is where the Canadian corporation is essentially a sham or façade. For example, in Gurd’s Products Co, a US corporation negotiated sales, took orders, and made contracts with Iraqi purchasers, but the product was produced and shipped and payment was received by the US corporation’s Canadian subsidiary in order to circumvent US-Iraq trade sanctions. In that situation, the court found that the US corporation was essentially operating all aspects of the business except for the production of the product and thus the US corporation was found to be carrying on business in Canada.

Tax Tips – Non Resident Business Operations

A non-resident person can still be considered to be carrying on business in Canada even if he does not personally engage in any activities in Canada. It is crucial for non-residents who have economic activities in Canada and do not want to be classified as carrying on business in Canada to carefully consider how those economic activities are being carried out. More specifically, a non-resident should ensure that they have not established principal-agent relationships with anyone related to the economic activities. Where a non-resident is a shareholder of a Canadian corporation, there is typically minimal risk of being considered carrying on business in Canada so long as the Canadian corporation is not simply a sham or façade. If there is any question of whether one is carrying on business in Canada or not, contact one of our experienced Canadian tax lawyers for tax help.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

Get your CRA tax issue solved

Address: Rotfleisch & Samulovitch P.C.
2822 Danforth Avenue Toronto, Ontario M4C 1M1