Canada LLP
Non-Resident LLP in Canada
Key Features

A Full Tax-Exempt Entity

Since:
Partners not resident in Canada
Place of Business and Management not based in Canada
Income generated Overseas

Yes, a Canadian Limited Liability Partnership (LLP) can be owned and managed exclusively by non-resident individuals or corporate entities, but the specifics depend on the province in which the LLP is registered and the nature of the business. Here’s a detailed breakdown of how this works:

Non-Resident Ownership

There is generally no restriction on non-resident individuals or corporate entities being partners in a Canadian LLP. Non-residents, whether individuals or corporations, can own and manage an LLP in Canada, subject to the provincial laws under which the LLP is formed.

Many Canadian provinces allow non-residents to form and own LLPs as long as the LLP complies with local registration and filing requirements.

Provincial Differences

The rules for forming LLPs vary slightly across Canadian provinces, but generally, LLPs can be owned and managed by non-residents. However, some provinces may have additional requirements or restrictions depending on the profession or the type of business activity being carried out.

British Columbia and Ontario, for example, allow non-residents to register LLPs. However, in Ontario, LLPs are usually restricted to professional services like law firms and accounting firms, and these professions may have specific requirements on who can be partners (e.g., licensing requirements). Non-professional businesses may not use the LLP structure in Ontario.

Alberta and Nova Scotia are more flexible, allowing more types of businesses to use the LLP structure.

Management by Non-Residents

Non-resident individuals or corporate entities can manage an LLP, meaning they can actively participate in the daily operations and decision-making of the partnership, just as resident partners would.

There are no general Canadian restrictions on the residency of the managing partners for an LLP. This makes it possible for non-residents to fully control the business, provided they comply with other legal and regulatory requirements.

Business Presence and Tax Implications

While non-residents can own and manage an LLP, the tax implications can differ based on whether the LLP is seen as having a business presence or a permanent establishment in Canada.

If the LLP does not conduct any business activities in Canada, has no permanent establishment, and generates no Canadian-source income, the non-resident partners may not be subject to Canadian income tax on the LLP’s profits. However, they may still have to report the income in their country of residence.

If the LLP generates Canadian-source income, non-resident partners may be subject to Canadian taxes on that income. Additionally, non-resident partners may have to file non-resident tax returns and comply with Canadian tax regulations.

Reporting and Regulatory Requirements

Regardless of the residency of its partners, a Canadian LLP must meet certain reporting requirements, including filing a T5013 Partnership Information Return with the Canada Revenue Agency (CRA) to report its income and how it’s distributed to the partners.

Depending on the province, LLPs may need to have a registered office or a representative within Canada, even if the partners are non-residents.

Professional Regulations

In some provinces, LLPs are limited to certain professional services (such as lawyers, accountants, or architects), and professional licensing requirements may apply. Non-residents would need to comply with any licensing or registration rules applicable to the profession.

For non-professional businesses, provinces like British Columbia and Nova Scotia are more flexible, and you could set up an LLP even if all partners are non-residents.

Tax Treaties and Withholding Taxes

Non-resident partners may benefit from tax treaties that Canada has with other countries, which can reduce withholding taxes on Canadian-source income and prevent double taxation.

If the LLP distributes Canadian-source income (such as rent, interest, or dividends) to non-resident partners, there may be withholding tax obligations for the LLP under Canadian law. The standard withholding tax is 25%, but this can be reduced based on tax treaties.

Key Considerations for Non-Resident Ownership of a Canadian LLP

Provincial Laws: Check the specific provincial rules in the jurisdiction where you plan to register the LLP. Some provinces, like Ontario, may limit LLPs to certain professional groups, while others, like British Columbia and Nova Scotia, are more open.

Business Activities: Non-residents can own and manage an LLP that does not conduct business in Canada, but if the LLP has business activities or generates income in Canada, the partners may be subject to Canadian taxes.

Tax Implications: Non-resident partners need to be aware of their Canadian tax obligations, especially if the LLP has Canadian-source income. They may also need to file tax returns in their home countries, depending on local tax laws and any tax treaties with Canada.

Permanent Establishment: If the LLP is deemed to have a permanent establishment in Canada (e.g., an office or employees in Canada), this could trigger tax liability for the LLP and its non-resident partners on Canadian-source income.

Professional Restrictions: For LLPs in fields like law, accounting, or engineering, non-residents may need to meet licensing requirements set by provincial regulatory bodies.

Conclusion

A Canadian LLP can indeed be owned and managed exclusively by non-resident individuals or corporate entities, depending on the province and the nature of the business. However, tax considerations, professional licensing requirements, and provincial regulations must be carefully reviewed to ensure compliance. If the LLP has no business operations in Canada, the non-resident partners may be exempt from Canadian taxes, but they will still need to comply with filing and reporting requirements.