Factoring Qualifying Activities
Receivables must be purchased without recourse
Factoring qualifies for favourable tax treatment as long as the receivables have been purchased outright from a non-resident and without recourse.
Collecting trade accounts receivable from non-resident for a non-resident affiliate or customer.
- A Parent Co sells its receivables to A Co (BC IBA Co) on a non-recourse basis.
- A Co registers in the International Business Activity (IBA) program.
- A Co carries on the business of collecting A Parent Co’s receivables. The income earned on collecting receivables from non-residents is eligible for a provincial tax refund. (In 2015, B.C.’s corporate tax rate is 11%.)
- A Co is eligible to apply for registration since it will be carrying on an “international business”.
- A Co will be required to become a member of AdvantageBC in order to remain registered.
- A Co’s business activities qualify as an international business because it is collecting trade accounts from non-resident persons which have been acquired on a non-recourse basis.