Nevada Corporations And Revenue Canada – The Positives Of Being Offshore In Nevada

September 21, 2004
By Richard Smith

Without doubt, one of the greatest pluses of being a Nevada state incorporated corporation is the fact that you are not required to maintain a physical presence in the state in order to benefit from its zero-rate corporate income tax rate. As such, Nevada corporations and revenue Canada is a distinct possibility. Indeed, it merely equates to the concept of an offshore Canadian entity. So, what are the positives of such an offshore arrangement.

First off all, as is the case in the USA, Canada has two-tier corporate taxation; namely state tax (at various different rates) and federal tax. As mentioned, provided one maintain a registered agent in Nevada, a corporation need not maintain a physical presence in the state to benefit from its zero-rate taxation and privacy rules. Consequently, corporations generating revenue in Canada could be entitled to this tax privilege – provided they structure their affairs correctly.

One note of warning with such an arrangement is that the Canadian revenue department do adopt a concept known as the “permanent establishment” rule. Here, essentially what the Canadian revenue department determines is whether or not the corporation trying to benefit from the zero-rate Nevada corporate tax rate, but generating income in Canada, has a permanent establishment in Canada. “Permanent establishment” may be determined in a number of way; therefore, if you are seeking to benefit from Nevada’s zero-rate corporate income tax rate, you need to try and maintain that you do not have a permanent establishment in Canada. This is not the same as saying you must prove to the Canadian revenue department that you have a permanent establishment in Nevada, nor are you required to prove such to the Nevada Secretary of State, you merely need to show that you are not a permanent establishment in Canada (where your revenue is being earned). It is, therefore, possible to show permanent establishment status in New York state, be registered in Nevada and earn revenue in Canada. A classic example of how just such a business arrangement may exist in today’s world – doing business over the Internet!