Doing International Business In British Columbia: The Competitive Advantage October 2006

  • Published on
    18-Dec-2015

  • View
    219

  • Download
    0

Embed Size (px)

Transcript

<ul><li> Slide 1 </li> <li> Doing International Business In British Columbia: The Competitive Advantage October 2006 </li> <li> Slide 2 </li> <li> Slide #2 Robert Fairweather, President Chris Gimpel, Associate Partner </li> <li> Slide 3 </li> <li> October 2006Slide #3 Overview And History Eligible Activities What British Columbia Offers Starting An International Financial Business </li> <li> Slide 4 </li> <li> October 2006Slide #4 What Are The Tax Benefits? Corporations carrying on a registered International Financial Business are eligible for a refund of up to 100% of their provincial corporate income tax. Consider a company with $750,000 in qualifying income Pr/StateTaxFederal Tax Total Tax Effective Rate British Columbia (IFC) 0165,900165,90022.12% Alberta75,000165,900240,90032.12% Quebec74,250165,900240,15032.02% Ontario105,000165,900270,90036.12% Oregon49,500238,170287,67038.36% California66,300232,460298,76039.83% OVERVIEW AND HISTORY </li> <li> Slide 5 </li> <li> October 2006Slide #5 The International Financial Activities Act (IFA Act) The IFA Act, administered through the International Financial Activities program, provides eligible corporations with a refund of British Columbia corporate taxes paid on income derived from a qualifying international financial business. In general, qualifying activities are financially based and one side of the transaction is with a non-resident of Canada. On January 1, 2006, the IFA Act was amended to include refunds on British Columbia corporate taxes paid on income derived from life science patents. OVERVIEW AND HISTORY </li> <li> Slide 6 </li> <li> October 2006Slide #6 Fund and asset management Financial research Factoring Leasing Export and import financing Administrative support for financial activities Foreign exchange Life Science Patents (new) Loans and deposits Trade finance Trust business Dealing in securities Insurance coverage of non- residents Financial advice Underwriting foreign securities Film distribution Data back up What Activities Are Eligible? In general, qualifying activities are financially based and one part of the transaction is with a non-resident. OVERVIEW AND HISTORY </li> <li> Slide 7 </li> <li> October 2006Slide #7 History Of The International Financial Centre BC Provincial British Columbia passed legislation to allow profits from international financial businesses to be eligible for a refund from provincial taxes. In 1986, an amendment to the Income Tax Act of Canada allowed for the establishment of international banking centres in Canada. Federal International Financial Centres OVERVIEW AND HISTORY </li> <li> Slide 8 </li> <li> October 2006Slide #8 Provincial Initiatives OVERVIEW AND HISTORY International Financial Centre Vancouver International Financial Business Act (1988) International Business (Tax Refund) Act (1988) </li> <li> Slide 9 </li> <li> October 2006Slide #9 Early Issues 2. Allow non-arms-length transactions. 1. Expand the opportunity to the entire corporate community, not only financial institutions. 3. Extend locations to the entire province, not only Vancouver. It became evident that certain restrictions had to be lifted. OVERVIEW AND HISTORY </li> <li> Slide 10 </li> <li> October 2006Slide #10 Pressing For Change OVERVIEW AND HISTORY Business Council of BC MLAsCorporations Vancouver Board of Trade Investment Dealers Association Vancouver Economic Development Council Changes to the Legislation Changes to the Legislation </li> <li> Slide 11 </li> <li> October 2006Slide #11 All companies are eligible. The financial institution requirement was eliminated and eligibility based on qualifying activities. The International Financial Activities Act of 2004 Non-arms length transactions are allowed. Companies benefit from qualifying activities with affiliates and related parties. Companies located anywhere in the Province can register. There are no restrictions on where a company can locate in British Columbia. OVERVIEW AND HISTORY </li> <li> Slide 12 </li> <li> October 2006Slide #12 Treasury Operations Trade Finance Foreign Exchange Captive Insurance Administrative Support Back Office Data Storage &amp; Back up Administrative Support Back Office Data Storage &amp; Back up Life Science Patents Financial Activities Film Distribution OVERVIEW AND HISTORY The International Financial Activities Act of 2004 Eligible Activities </li> <li> Slide 13 </li> <li> October 2006Slide #13 The International Financial Centre BC has existed through three different governments, four leaders, and five elections. Stable Through Various Governments May-05LiberalGordon CampbellCentre-right May-01LiberalGordon CampbellCentre-right Oct-96New DemocraticGlen ClarkLeft Oct-91New DemocraticMike HarcourtLeft Oct-86Social CreditBill Vander ZalmConservative PartyLeaderPolicies OVERVIEW AND HISTORY </li> <li> Slide 14 </li> <li> October 2006Slide #14 Overview And History Eligible Activities What British Columbia Offers Starting An International Financial Business </li> <li> Slide 15 </li> <li> October 2006Slide #15 Loans and deposits to non-residents. Cash management. Certain hedging transactions. Managing foreign exchange activities of non-resident persons. Managing investments for non-resident persons. Treasury Operations ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 16 </li> <li> October 2006Slide #16 Factoring Receivables Collecting trade accounts receivable. Must be receivable from a non-resident person. Must be purchased outright and without recourse from the seller. ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 17 </li> <li> October 2006Slide #17 Administrative support services directly related to a financial activity of a non-resident financial business. Excludes call centres, marketing, and advertising. Internal support, such as a computer help-desk. Back-up office services, equipment, and premises to continue the business operations of a non-resident in case their primary business becomes temporarily unusable qualifies. Administrative Support Services ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 18 </li> <li> October 2006Slide #18 Making loans in any currency. Borrowing in any currency. Guaranteeing the payment of debts where non-resident debtors and creditors. Accepting deposits or making deposits with a non-resident or prescribed business. Loans and Deposits ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 19 </li> <li> October 2006Slide #19 Providing financial advice to non-resident persons (except prescribed financial advice). Managing investments for a non-resident for a fee or commission. Managing investments in securities for resident Canadians where the issuer is a non-resident and securities are not listed on Canadian stock exchange. Eligible activities include: Asset Management ELIGIBLE ACTIVITIES </li> <li> Slide 20 </li> <li> October 2006Slide #20 Selling, assigning, or licensing rights to distribute a film or television production outside Canada; To exploit outside Canada anything related to a production. Film Distribution ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 21 </li> <li> October 2006Slide #21 On January 1, 2006, the IFA Act was expanded to include activity related to certain Life Science patents. Activities are eligible for a refund of Provincial tax for up to 75% of net income to a maximum of $8 million. Eligibility is defined according to the IPC patent class and includes patents for: Certain medical treatment and diagnostic processes Drugs and pharmaceuticals Certain agricultural products Biological treatments of water and sewage Medical devices. Life Science Patents ELIGIBLE ACTIVITIES </li> <li> Slide 22 </li> <li> October 2006Slide #22 Selling, assigning, or licensing a prescribed patent to a non-resident. The sale of a good or service derived from an invention for which a prescribed life sciences patent is owned by the corporation. The sale must be to a non-resident. The non-resident may be at arms length or non arms length. Life Science Patents ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 23 </li> <li> October 2006Slide #23 Insurance and reinsurance qualifies. Must be prescribed risk of a non-resident. Arms-length rule applies except for a captive insurance company. Captive Insurance ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 24 </li> <li> October 2006Slide #24 Leasing property to non-residents by way of a direct financing lease. Any other prescribed financial activity conducted exclusively for non- residents, where the corporation earns a fee or commission income. Other International Financial Activities ELIGIBLE ACTIVITIES Eligible activities include: </li> <li> Slide 25 </li> <li> October 2006Slide #25 How Does an IFC Operate? ELIGIBLE ACTIVITIES </li> <li> Slide 26 </li> <li> October 2006Slide #26 Profits are eligible For Provincial tax refund Profits are eligible For Provincial tax refund $ Remitted to Parent $ Remitted to Parent Treasury Multinational Inc. Provides Treasury Services Asian Subsidiary US Subsidiary European Subsidiary IFC BC Multinational, Inc. Treasury Operation Located in BC Registered under the IFA Act IFC BC Multinational, Inc. Treasury Operation Located in BC Registered under the IFA Act Fees ELIGIBLE ACTIVITIES </li> <li> Slide 27 </li> <li> October 2006Slide #27 Profits are eligible For Provincial tax refund Profits are eligible For Provincial tax refund $ Remitted to Parent $ Remitted to Parent Factoring Receivables Multinational Inc. Payment Sales to Unrelated Companies Asian Company Inc. US Company Inc. European Company Inc. ELIGIBLE ACTIVITIES Sells Receivables to IFC Co. IFC BC Factoring Company, Inc. Located in BC Registered under the IFA Act IFC BC Factoring Company, Inc. Located in BC Registered under the IFA Act Payment for Receivables </li> <li> Slide 28 </li> <li> October 2006Slide #28 Specialists are entitled to receive up to 75% refund of BC tax on IFA eligible employment income for a maximum of five years. At least 70% of time must be devoted to qualifying activities. The individual must be a non-resident immediately before commencing employment. A written contract with the registered corporation must exist to govern the terms of the contract. The individual must be resident of BC on last day of taxation year. Individuals Can Qualify as Specialists ELIGIBLE ACTIVITIES A registered corporation can apply to register an employee as an IFA Specialist. </li> <li> Slide 29 </li> <li> October 2006Slide #29 Overview And History Eligible Activities What British Columbia Offers Starting An International Financial Business </li> <li> Slide 30 </li> <li> October 2006Slide #30 Source: Institute of Chartered Accountants, 2005; Ministry of Finance, Government of BC, 2006; Statistics Canada 2006. The BC Government is committed to balancing the budget on an ongoing basis. The 2005/06 surplus was $3.1 billion, $1.8 billion higher than originally estimated. A surplus of $600 million is expected in 2006/07. Once again, Standard &amp; Poors boosted British Columbias credit rating to AA+ from AA as a result of sound fiscal management. WHAT BC CAN OFFER Responsible Fiscal Management </li> <li> Slide 31 </li> <li> October 2006Slide #31 The World Bank ranked Canada 4 th out of 175 countries for ease of doing business. The corporate surtax will be eliminated for all corporations, effective January 1, 2008. The federal capital tax on the taxable capital employed in Canada by large corporations is zero, effective January 1, 2006two years ahead of schedule. For corporations, the net tax rate of 22.12% will be reduced to 19% by 2010. The GST was reduced by 1% in 2006. Source: Department of Finance, Canada 2006, CBC News 2006 A Supportive Federal Government WHAT BC CAN OFFER </li> <li> Slide 32 </li> <li> October 2006Slide #32 Since 2001, BC has made dramatic changes designed to strengthen the economy and make it the best place to invest in North America. Implementing 31 provincial tax relief measures, including a 20 per cent cut in the corporate income tax rate, elimination of the general capital tax, and a 25 per cent cut in personal income tax rates; New or enhanced tax credits and exemptions for software development, manufacturing, mining, oil and gas, film and TV production, new media, and international financial activities. Source: Government of BC A Supportive Provincial Government WHAT BC CAN OFFER </li> <li> Slide 33 </li> <li> October 2006Slide #33 Real GDP Per Capita in BC has outperformed Canada. Source: Statistics BC A Strong Economy WHAT BC CAN OFFER </li> <li> Slide 34 </li> <li> October 2006Slide #34Source: Government of BC, sourced from 2001 Census, Statistics Canada Languages Spoken in British Columbia A Multi-Lingual Environment Chinese16.93% French12.22% Punjabi6.43% German5.37% Spanish3.48% Hindi2.87% Tagalog (Filipino)2.37% Italian1.93% Dutch1.46% Japanese1.41% Vietnamese1.34% WHAT BC CAN OFFER </li> <li> Slide 35 </li> <li> October 2006Slide #35 25,000 new student spaces at colleges, university-colleges, universities, and institutes. $90 million for a new tax credit program to expand training opportunities in trades. $39 million to increase apprenticeship training. $50 million to support economic development and diversification through research in sciences and engineering through grants and fellowships. Source: Government of BC British Columbias Commitment to the Future WHAT BC CAN OFFER </li> <li> Slide 36 </li> <li> October 2006Slide #36 The Mercer Groups 2006 Quality of Life Survey ranks Vancouver third worldwide--first in North America. Mercers 2006 Cost of Living Survey shows Vancouver ranks behind 55 other cities. A study by New Media found that the top reason for locating in BC was the desirable west coast lifestyle. 152 companies ranked lifestyle as extremely important, compared to the large talent pool, which was ranked as extremely important by 107 companies. British Columbia is a magnet for skilled and creative people. Source: Mercer Report 2006, New Media, 2003 The Ability to Attract Talent WHAT BC CAN OFFER </li> <li> Slide 37 </li> <li> October 2006Slide #37Figures are for Average Compensation. Source: WSJ.com, Salary Expert.com, Dow Jones and Company, 2006. SalaryBenefitsTotal Compensation Vancouver, BC38,6665.9%45,238 Seattle, WA64,70814.1%80,979 Newark, NJ62,14513.1%77,152 San Diego, CA55,21215.3%69,758 Portland, OR57,87414.7%72,775 Annual Salary: Accounts Receivable Manager (US$) Low Labour Costs WHAT BC CAN OFFER </li> <li> Slide 38 </li> <li> October 2006Slide #38 UtilitiesFacility Lease Vancouver, BC 448460 Newark, NJ 510608 San Diego, CA 551702 Seattle, WA 429450 Portland, OR 445394 Source: 2006 KPMG Competitive Alternatives. (C$1.174) Average Annual Costs (US$000) for 145 Employees in a Back Office/Administration Facility 22,500 sq.ft (2,090 sq.m) facility Monthly Consumption 125,000 kWh Low Energy &amp; Property Costs WHAT BC CAN OFFER </li> <li> Slide 39 </li> <li> October 2006Slide...</li></ul>