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Questions and Answers
What type of transaction is characterized by starting and completing in the foreign host country?
What type of transaction is characterized by starting and completing in the foreign host country?
- Transactions that begin and end within the host country (correct)
- Transactions that originate in one country and conclude in a second country
- Transactions encompassing both income and expenses
- Transactions initiated by foreign shareholders
How is income typically determined for transactions that originate and conclude in different countries?
How is income typically determined for transactions that originate and conclude in different countries?
- On a gross basis, considering total revenue only (correct)
- On a standard basis, using averages across industries
- On a net basis, from revenue minus expenses incurred
- On a collaborative basis, factoring in adjustments
Which scenario represents a transaction that originates in Canada and concludes with a foreign entity?
Which scenario represents a transaction that originates in Canada and concludes with a foreign entity?
- A Canadian resident purchasing goods from a local supplier
- A Canadian corporation sending dividends to a foreign shareholder (correct)
- A foreign corporation paying taxes on its earnings in Canada
- A foreign enterprise selling goods directly in Canada
Which of the following options accurately reflects a characteristic of income in transactions completed within the foreign host country?
Which of the following options accurately reflects a characteristic of income in transactions completed within the foreign host country?
What is the primary focus of taxation for international transactions according to the provided information?
What is the primary focus of taxation for international transactions according to the provided information?
Flashcards
Non-resident taxation
Non-resident taxation
Individuals and corporations outside Canada are taxed only on Canadian activities, not worldwide income.
International business transactions
International business transactions
Two main types: completed in host country and those concluded in another country.
Payment of dividends
Payment of dividends
Occurs when a Canadian corporation pays a dividend to a foreign shareholder; originates in Canada, completed abroad.
Net income calculation
Net income calculation
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Tax selective basis
Tax selective basis
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Study Notes
Non-Resident Taxation in Canada
- Non-residents (individuals and corporations) are generally not taxed on global income in Canada.
- However, they may be taxed on specific activities within Canada.
- Canada treats foreign entities similarly to how other countries treat Canadian entities.
- Understanding this is crucial for Canadian entities engaging in international business.
International Business Transaction Categories
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Category 1: Transactions initiated and completed entirely within the foreign host country.
- Example: Foreign enterprise selling merchandise in Canada through a branch warehouse and sales office (each sale originates and concludes in Canada).
- Income determined on a net basis (revenue minus expenses).
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Category 2: Transactions originating in one country and concluding in a second country.
- Example: Canadian resident corporation paying a dividend to a foreign shareholder (originates in Canada, completed when dividend is received).
- Example: Canadian resident purchasing a product from a foreign supplier (originates in a foreign country, completed in Canada).
- Taxation in Canada focuses solely on the revenue component.
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Both transaction types are subject to selective taxation in Canada.
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