Financial Services

Activities for financial institutions: loans and deposits, foreign exchange, securities dealing, managing investments, letters of credit, trade finance

• By establishing an international financial business (IFB) in British Columbia, a company can receive a full refund of the British Columbia taxes paid on the net income of the IFB (75% refund for patent income). 
• Companies can register a business or part of a business in the International Financial Activity (IFA) program. For income to qualify for the refund, one side of the transaction must be with a non-resident.
• The International Financial Activity Act (IFAA), legislated by the Province of British Columbia in 2004, provides the legislative framework for the IFA program.

Qualifying Activities

Loans and Deposits

• Loans and deposits in any currency to or from a non-resident, including a non-resident affiliate
• Purchase and sale of debt and equity for non-resident affiliates
• Guaranteeing payment of a debt, if all borrowers are non-residents
• Using a non-resident broker, such as an investment banking affiliate, to underwrite Canadian issues to be sold to non-residents
• Using a non-resident broker, such as an investment bank affiliate, to underwrite non-resident issues to be sold to residents or non-residents

Securities Dealing (financial institutions and registered securities dealers)

• Dealing in securities as principal for the purpose of managing the financial risk of a non-resident
• Dealing in securities as agent for a resident for securities not listed on a Canadian exchange.
• Dealing in securities as agent for a non-resident

Foreign Exchange Dealing (financial institutions and corporations whose primary business is foreign exchange)

• This activity can be transacted for, or on behalf of, a resident or non-resident.

Letters of Credit (financial institutions only)

• Issuing and accepting letters of credit or handling documentary collections in respect of a transaction where not more than one party is resident in Canada

Trust Business (financial institutions only)

• Trustee of a non-resident trust, guardian of a non-resident minor, or executor of an estate of non-residents

Managing Currency Risk

• Managing foreign exchange activities of a non-resident

Managing an Investment Portfolio

• For a non-resident: Managing foreign or Canadian investments
• For a resident: Managing securities issued by a non-resident and not listed on a Canadian exchange

Factoring

• Accounts are receivable from a non-resident and purchased without recourse 

Accounts Receivable

• Collecting trade accounts receivable from non-residents, either affiliates or customers, for a non-resident

Administrative Services

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

Management Services

• Management services provided by the head office of a corporation and directly related to the business operations of a non-resident that are:
• Strategic management services
• Human resource services that are payroll, benefits management, recruitment and selection, and training and development

Benefits

• BC offers a favourable tax environment.
• British Columbia’s corporate tax rate was reduced to 10.5% in January 2010. The corporate tax rate will be reduced to 10% as of January 1, 2011.
• Canada will lower its corporate tax rate to 15% by 2012. The new rates are being phased in; the corporate tax rate is 18% as of January 1, 2010.
• The federal capital tax on large corporations was eliminated January 1, 2006—two years ahead of schedule.
• In 2010, British Columbia will become the 2nd province in Canada to offer financial institutions a location free of capital tax.
• One key factor differentiating Vancouver from Toronto and enhancing it as a location for investment is its low labour costs.  According to SalaryExpert.com (September 2009), the average compensation for a Financial Analyst in Toronto is $97,468 while in Vancouver the same position pays $74,570. (Salary Expert.com, ERI, September 2009)
• British Columbia’s west cost location makes travel to Asia easier, faster, and more economical.
• British Columbia can serve as an entry point to the US market, particularly in light of recent changes to the withholding tax structure between the US and Canada.
• Administrative support services related to a financial activity, are also eligible under the IFA program. 
• Individuals employed by a registered company (IFA Specialists) may also qualify for a refund of up to 75% provincial income taxes for the first five years of employment.
• The Canadian government does not impose exchange rate controls. Regulation in Canada provides a stable but not over-regulated environment for banks to thrive.

Registering an IFB

Further details on the IFA program can be found in Bulletin IFA 001, International Financial Activity Overview.

The IFA program is administered by the BC Ministry of Finance (formerly the BC Ministry of Small Business and Revenue). For more information regarding the legislation or provincial registration, please visit their website. The information on this website is provided for convenience and guidance only and is not a replacement for the legislation. Businesses considering accessing the benefits under the IFAA should consult with their professional advisors on the applicability of the IFAA legislation to their particular circumstance.

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