Entrepreneurship & Small Business

Advice needed for an e-commerce set up in Canada?

  • Last Updated:
  • Nov 18th, 2017 1:46 am
[OP]
Jr. Member
Aug 12, 2016
138 posts
17 upvotes

Advice needed for an e-commerce set up in Canada?

I have been approached by a major textile firm in my home country to help them out with a major e-commerce business plan in Canada. This textile firm has plenty of Export sales in the US, Canada and Europe and South Asia where they predominantly used to sell their products to the major retailers in clothing, garments, computer and professional accessories. But the world is now gradually shifting towards websites and e-commerce and many major retail businesses are now going out of business.

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
10 replies
Deal Guru
Aug 2, 2010
10949 posts
2175 upvotes
No need for a Canadian Paypal account. A Paypal account openend in their own country can process credit cards from any country. The only downside is foreign credit cards incur a 0.80% cross-border fee, but that likely offsets the extra costs and administration of a local Paypal account.

Your friends observations appear to be correct so I don't know why he is also advising seeking help from a 'major firm' regarding corporate tax planning etc. His answers negate that need.
Member
User avatar
Jun 18, 2017
202 posts
64 upvotes
Vancouver
Yeah, the Canadian account isn't necessary unless you are doing Amazon/other marketplaces, which will also definitely require a Canadian return address. The situation as described seems mostly correct tax-wise with GST/PST/HST and not requiring incorporation in Canada. What might introduce a wrinkle is actually you yourself; to retain you as an employee in Canada they'd need to have some kind of presence here, issue T4s, CPP/EI contributions, etc. You should figure out how that relationship is going to work tax-wise for yourself, my guess would be you might have to be a contractor or have a self-owned corporation that bills the parent organization.
That's my name...
[OP]
Jr. Member
Aug 12, 2016
138 posts
17 upvotes
PuddinTame wrote:
Oct 30th, 2017 4:42 pm
Yeah, the Canadian account isn't necessary unless you are doing Amazon/other marketplaces, which will also definitely require a Canadian return address. The situation as described seems mostly correct tax-wise with GST/PST/HST and not requiring incorporation in Canada. What might introduce a wrinkle is actually you yourself; to retain you as an employee in Canada they'd need to have some kind of presence here, issue T4s, CPP/EI contributions, etc. You should figure out how that relationship is going to work tax-wise for yourself, my guess would be you might have to be a contractor or have a self-owned corporation that bills the parent organization.
My Accountant friend basically says that being an employee will be an additional headache for the employer outside Canada where they will have to issue T4's, deduct CPP, EI, taxes and remit to the CRA every month. He feels i should just be a contractor to them and should report my income on the T2125.

He mentioned that if they wish to open their Bank Accounts in the company name in Canada, it will be a headache because then they will need to physically come to Canada, to the branch and sign all the documents, forms themselves as they are the Directors/Owners. He says the other option would be for me to just open a Personal Paypal account in my name, a personal bank account in my name, do all the transactions for the company in them and then just remmit the money to them in their corporate bank accounts in their home country in exchange for a fee.
[OP]
Jr. Member
Aug 12, 2016
138 posts
17 upvotes
Ok, so just called the Paypal Canada number and asked them how can the company set up and established outside Canada can open a Corporate Paypal Account. They are like the Foreign company will need to have their business established in Canada, with a local address and be present in Canada otherwise they cannot open a Canadian Paypal Account. I believe these guys are targetting to sell their products on Amazon and other websites which is why they want to set up the Paypal account feature.

Now if this can't be done then how can i do this. Should i then use my own personal paypal account and bank account for this purpose then?
Member
User avatar
Jun 18, 2017
202 posts
64 upvotes
Vancouver
Savak2015 wrote:
Oct 31st, 2017 3:40 pm
My Accountant friend basically says that being an employee will be an additional headache for the employer outside Canada where they will have to issue T4's, deduct CPP, EI, taxes and remit to the CRA every month. He feels i should just be a contractor to them and should report my income on the T2125.

He mentioned that if they wish to open their Bank Accounts in the company name in Canada, it will be a headache because then they will need to physically come to Canada, to the branch and sign all the documents, forms themselves as they are the Directors/Owners. He says the other option would be for me to just open a Personal Paypal account in my name, a personal bank account in my name, do all the transactions for the company in them and then just remmit the money to them in their corporate bank accounts in their home country in exchange for a fee.
Yeah exactly; the accounts you use (initially at least) don't really matter if the parent company is avoiding nexus because all that isn't "owned" by them. You will have to set up the contractorship, probably as a sole proprietorship, which has its own tax implications, but they are fairly straightforward and can be handled by any small business consultancy. If you're handling the import of the product I can PM you a clearing agency, one in Vancouver and one in Toronto depending where you're at. Where I used to work did this before, but in reverse (Canadian company operating in the USA for ecommerce).
That's my name...
[OP]
Jr. Member
Aug 12, 2016
138 posts
17 upvotes
PuddinTame wrote:
Oct 31st, 2017 3:59 pm
Yeah exactly; the accounts you use (initially at least) don't really matter if the parent company is avoiding nexus because all that isn't "owned" by them. You will have to set up the contractorship, probably as a sole proprietorship, which has its own tax implications, but they are fairly straightforward and can be handled by any small business consultancy. If you're handling the import of the product I can PM you a clearing agency, one in Vancouver and one in Toronto depending where you're at. Where I used to work did this before, but in reverse (Canadian company operating in the USA for ecommerce).
Basically when i met them they told me my role will mostly be limited to

- Monitoring the Paypal and Bank Accounts, doing the book keeping via the bank account and help them draft financials

- Any products that are returned by the customers to my Canadian Address, i will have to receive by the courier company, store them

- They will deal with all the transportation, logistics, sales and marketing of the products themselves so that isn't my headache

Obviously i wish i knew more about this whole business operation so i can advise them better.
Deal Guru
Aug 2, 2010
10949 posts
2175 upvotes
Savak2015 wrote:
Oct 31st, 2017 3:56 pm
Ok, so just called the Paypal Canada number and asked them how can the company set up and established outside Canada can open a Corporate Paypal Account. They are like the Foreign company will need to have their business established in Canada, with a local address and be present in Canada otherwise they cannot open a Canadian Paypal Account. I believe these guys are targetting to sell their products on Amazon and other websites which is why they want to set up the Paypal account feature.

Now if this can't be done then how can i do this. Should i then use my own personal paypal account and bank account for this purpose then?
Um, as I said, you don't need a Canadian Paypal account!
[OP]
Jr. Member
Aug 12, 2016
138 posts
17 upvotes
So i met with them yesterday and basically got a better idea of what they want me to do.

They basically want me to set up my own Corporation or Sole Proprietorship in Canada and basically i will be providing them the services through my corporation. Then i will open a Corporate Bank Account in Canada and will then also open a Corporate Paypal Account in Canada based on my company.

The problem they had been facing is that they have created their own Corporate Paypal and Stripes account in my home country outside Canada but unfortunately Amazon and a few other websites, whenever they discover that the Paypal link is from outside Canada or the US, they end up blocking the paypal link. So they want me to send them my paypal link, stripes link to them and then they will use that link for their online websites.

They will be the ones handling the websites from my home country, uploading photographs, stocks, marketing and reaching out to customers in Canada, shipping the product directly from my home country to Canadian customers.

Let's say they sell a jacket to a Canadian Customer for $20, the Canadian Customer will pay by Paypal (Through his CC) and my Corporate Bank Account will show a deposit of $20, the textile company in my home country will then invoice me $19 for the same Jacket and i will then have to transfer them $19 and i will get to keep the difference. They will work out an arrangement where they will allow me to keep 10% as commission while they will be keeping the rest of the revenue and i will transfer them the net amount every month to their bank account in their home country.

And yes, i will have to send them my bank statements every month and they will do all the reconciling back in the home country and i will be responsible for dealing, storing and shipping any products that are returned by a customer in Canada.

My goal is to learn and get as much experience doing this and then once i get the hang of this, i want to offer the same services to other companies in my home country or any other country looking to export and sell their products online in Canada.
Newbie
Dec 11, 2010
1 posts
2 upvotes
Savak2015 wrote:
Nov 2nd, 2017 3:47 am
So i met with them yesterday and basically got a better idea of what they want me to do.

They basically want me to set up my own Corporation or Sole Proprietorship in Canada and basically i will be providing them the services through my corporation. Then i will open a Corporate Bank Account in Canada and will then also open a Corporate Paypal Account in Canada based on my company.

The problem they had been facing is that they have created their own Corporate Paypal and Stripes account in my home country outside Canada but unfortunately Amazon and a few other websites, whenever they discover that the Paypal link is from outside Canada or the US, they end up blocking the paypal link. So they want me to send them my paypal link, stripes link to them and then they will use that link for their online websites.

They will be the ones handling the websites from my home country, uploading photographs, stocks, marketing and reaching out to customers in Canada, shipping the product directly from my home country to Canadian customers.

Let's say they sell a jacket to a Canadian Customer for $20, the Canadian Customer will pay by Paypal (Through his CC) and my Corporate Bank Account will show a deposit of $20, the textile company in my home country will then invoice me $19 for the same Jacket and i will then have to transfer them $19 and i will get to keep the difference. They will work out an arrangement where they will allow me to keep 10% as commission while they will be keeping the rest of the revenue and i will transfer them the net amount every month to their bank account in their home country.

And yes, i will have to send them my bank statements every month and they will do all the reconciling back in the home country and i will be responsible for dealing, storing and shipping any products that are returned by a customer in Canada.

My goal is to learn and get as much experience doing this and then once i get the hang of this, i want to offer the same services to other companies in my home country or any other country looking to export and sell their products online in Canada.
I would be careful of this. This is a common scam.

Want proof, ask them to use a different service other than PayPal, say Stripe for example, and you'll notice that PayPal is a non-negotiable.

So here's what happens.

You set all of this up for them.

They start sending out invoices using PayPal to fake credit cards they own or even their own cards/family members/relatives/friends whomever they're working with.

Then, after a little while, chargeback all of it through PayPal or their credit cards.

Who's left holding the bag?

You. Because the PayPal account is in your name.

Don't be that guy.

I've lurked for a VERY long time, and I made an account just to warn you. Please heed my advice and tread carefully.
Deal Guru
Aug 2, 2010
10949 posts
2175 upvotes
I thought the whole thing was fishy myself because they don't need a Canadian Paypal account as I mentioned before.

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