Advice needed for an e-commerce set up in Canada?
This textile firm has now launched their website and want to experiment with their online business in Canada. They don't have any employees in Canada nor do they have any permanent establishment as such. The owner of this Textile firm is a good friend of my fathers and he knew that i was now living in Canada and that we had a pretty big house with decent space.
They called me for a meeting and they told me that they want the online customers to pay for the products through Paypal but the problem they were having in opening a paypal account in Canada was that they needed a local Canadian address for this purpose. Naturally they will also need to open a local Canadian Bank Account as well for this purpose as well and they want that bank account to be linked to that Paypal Account. In the online business there is always a particular percentage of the products sold that are returned by the customer as every seller offers the customer the option to return their products within 14 days atleast if it doesn't meet their specifications or if they don't end up liking it and in order to return the product they will require a local Canadian Address as well and someone in Canada to retrieve the product and store it safely as well.
So basically they want me to help them set up a local paypal account for them, local business bank account for them in Canada with my home address listed and they also want me to monitor the paypal and bank accounts for them in Canada and to also handle any products that are returned by the customer and to store them. I may also be responsible for book keeping and monitoring transactions in the bank account. I in return will be compensated a particular percentage of the bank account or paypal account balance at the end of every month.
I talked about this proposition to a few contacts i knew in textile firm industry and they told me that this could in particular have tax implications. I have a friend who works in International Banking in a major accounting firm in Canada and these were his observations
- The textile firm does not need to incorporate in Canada but just need to set up a branch in Canada
- According to the tax treaty Canada has with my home country, any income earned in Canada will not be taxed in Canada as long as the Textile company does not have a permanent establishment in Canada but the company will be required to file a Treaty based tax return. But the company will naturally still have to file a business number with the CRA
- The textile company will have to charge GST/HST to their Canadian Customers and will have to file for a GST/HST return for e.g. if they are selling a product to a customer in Ontario they will charge an HST of 13% and if they are selling a product to a customer in Alberta they will charge a GST of 5%
- I should at best just be acting as an Agent of this textile firm and not be an actual employee
Basically my accounting friend was like it is best for these textile owners to take help from a major firm in Canada with respect to Corporate Tax planning and compliance and pay a slightly higher fee because International taxation involving foreign corporations in Canada is very complex and best to use the best firms.
I looked at the possibility of opening a Corporate Paypal Account in Canada and quickly saw that they require you to provide a Bank Account number, so i believe that the first step would be to open the Bank Account
My questions are
- Can anyone recommend a very good bank for opening a small business account for this purpose?
- If anyone has any concerns, observations, feedback to give with regards to this plan, please share it with me so that i can then in turn discuss this with them as well because this is also unchartered territory for them