Fund Management Qualifying Activities

Managing investments, providing financial advice, managing foreign exchange, preparing financial research

Investment Fund Management

  • Managing an investment portfolio
  • Managing foreign or Canadian investments for a non-resident
  • Managing securities for a resident that are issued by a non-resident and not listed on a Canadian exchange
  • Dealing in short-term securities with a non-resident person or broker

Financial advice and research

  • Providing financial advice to a non-resident (this excludes legal, accounting or tax advice provided by a corporation in the business of providing that advice)
  • Preparing financial research for a non-resident (this excludes legal, accounting or tax research provided by a corporation in the business of providing that research)

Managing foreign exchange activities for a non-resident

  • Administrative support services directly related to a financial activity of a non-resident financial business

Case Study

  • Aco is incorporated in Canada with a fixed place of business in British Columbia. Aco is 100% owned by Parentco LLP, a limited partnership located in the Cayman Islands.
  • Aco is a hedge fund manager in the business of buying and selling investments such as shares, debt, and other financial instruments.
  • Parentco LLP transfers an executive to British Columbia to manage the hedge fund.

Illustration

Fund Manager Diagram

Analysis

    • Aco is eligible to apply for registration under the International Business Activity Act (IBAA) since it will be carrying on an “international financial business”, was incorporated in Canada and has a permanent establishment in British Columbia.
    • Aco will be required to become a member of AdvantageBC in order to remain registered.
    • Aco is carrying on an active business of managing foreign investments (consisting of securities not traded on a Canadian exchange) for Canadian and non-resident clients.
    • Aco is also managing Canadian investments for the benefit of its non-resident clients. Aco also provides financial advice to its non-resident clients.
    • These activities qualify as international financial activities.
    • The executive being transferred can qualify as an Executive Specialist once the company registers its qualifying activities of managing foreign investments and providing non-residents with investment advice.
    • Once registered, the Executive Specialist will be eligible to claim a refund of provincial income tax of 100% in Years 1 and 2; 75% in Year 3, 50% in Year 4; and 25% in Year 5.
    • Aco will be eligible to claim a refund of its provincial corporate income taxes paid in respect of its international financial business.
    • Aco may also be able to qualify for reduced taxation (50%) on capital gains, which may apply to realization of carried interest.

 

Did you know?

  • BC has some of the lowest corporate taxes in North America.
  • The IBA Program includes a personal income tax incentive for international employees.
  • BC has a lower tax rate than Hong Kong and Singapore.
  • British Columbia is one of the top two designated financial centres in Canada.
  • All five of Canada’s largest banks have significant operations in BC.