Intra-Corporate Transfer for Office Startup in Canada

Business owners who run their own companies overseas often use the intra-corporate transfer program to obtain a Canadian work permit, allowing them to set up a branch office in Canada. For qualified business people and businesses, this is one of the best immigration options as it allows them to test the Canadian market without needing to obtain a Labour Market Impact Assessment. Thus, the owner of the overseas business can obtain a one-year work permit to set up a Canadian company. If successful, they can further extend the work permit for two more years, bring their family to Canada, and even obtain a Canadian permanent resident card to stay and run the business in Canada permanently without restrictions.

In this blog post, we discuss the nuances of transferring an executive, senior manager (often a business owner/founder of a foreign company) to Canada, including clarifying the pre-conditions for a business and transferee to meet to apply for this type of work permit.

Startup Company Definition in the Context of Intra-Corporate Transfer

As mentioned above, an intra-corporate transfer work permit does not require obtaining an assessment of the influence of the transfer of a foreign worker on the Canadian labour market.

A common scenario would be transferring a foreign national to the operational Canadian affiliate of a foreign corporation. There are situations when such a foreign corporation is willing to expand its business to Canada by opening a branch and needs to send an employee to establish the operations in Canada. The purpose of such a transfer would be to facilitate the setup of the new office in Canada and to make it operational. Since the Canadian company is not doing business yet, startup considerations come under review and need to be additionally addressed in the application. Since the new LMIA exemption code C61 was linked to transfers to a startup operation specifically, processing officers started scrutinizing certain startup aspects, which is why it has become even more important to cover those aspects in the application for a work permit, as discussed below in detail.

It may well be said that a startup is a business established less than a year ago in Canada. Annual reports and profit/loss statements are not yet available to prove regular and systematic operations. Practically, startup companies could not meet the requirement of "must be doing business [regularly, systematically, and continuously providing goods or services in Canada]."

Appreciating this reality, the efforts, expertise, and time required to expand the business and make it fully operational, Canada opens the Intra-Company Transfer Program for startups, subject to certain conditions discussed in detail below. General rules still apply to the foreign entity [parent, subsidiary, branch, or affiliate of the Canadian startup], which must remain operational and be actively doing business.

Requirements for a Canadian Startup in the Context of Intra-Corporate Transfer Work Permit

• Register a Canadian business affiliated with the foreign corporation.
• Prepare a business plan describing the planned operations in Canada, including a description of services or products to be sold in Canada, operational expenses, forecasted revenue, staff that will be hired in Canada, growth plan, and investment required and available to launch operations.
• Provide supporting documents demonstrating that the transferee is an executive, senior manager, or business owner who possesses the skill, knowledge, and expertise to launch the Canadian operations. The business owner must have been working for a foreign company for at least one year continuously and for remuneration right before the transfer to Canada. Documents that support the transferee's suitability for the role may include a resume, reference letters, employment contract, business ownership documents, and educational and professional development documents.
• Provide supporting documents demonstrating that the foreign business has been operational for at least a year and a half at the time they want to expand to Canada. This may include constituent documents, financial statements, a certificate of standing, or other relevant documents depending on the jurisdiction. The foreign business should be operational in any legally approved form based on the foreign country's laws, such as a corporation, partnership, or proprietorship.
• Provide supporting documents proving the funds available to invest in the Canadian startup company. The minimum amount should at least cover the operational expenses, including wages, rent, professional fees, marketing and sales, and other expenses based on the business need. We recommend showing the funds available for the first year of business launch in Canada irrespective of the projected revenue and profit. This includes the foreign company’s savings or those of business owners/shareholders, or cumulative. It must align with the financial projections of the business plan and, in many cases, would be about CAD 250,000.
• Submit an Online Offer of Employment through the Employer’s Portal specifying the job description, employment terms in Canada on which the transfer is made, the transferee's suitability for the job, and justify the requested exemption from the need to obtain a Labour Market Impact Assessment (LMIA) under C61 code (previously known as C12). Pay the Employer Compliance Fee of CAD 230.
• Submit a Work Visa / Permit Application, including the immigration application forms, visa processing fees and other documents as per the visa office checklist.

Intra-Corporate Transfer Process to Set Up a New Office in Canada: Details

Formally Open a Company in Canada

Suppose there was a decision to move a business to Canada and send the employee to establish Canada's office. In that case, certain steps must be completed before applying for a Canadian work permit as an intra-company transferee, which does not require a Labour Market Impact Assessment (LMIA).

A startup company can be constituted or organized under Canadian federal and applicable provincial laws. It can be established as a corporation, trust, partnership, sole proprietorship, joint venture, or another form, as long as it is related to the foreign business. For example, suppose the corporation in the U.S. has two owners [50/50 shareholders]. In that case, a Canadian startup company can be established as a federal corporation and be 100% owned by the U.S.-based corporation [subsidiary/parent relationship]. Alternatively, the same group [business owners/shareholders] can own a Canadian startup in a similar proportion [affiliated companies relationship].

In the case of a federal business corporation, it must extend registration to the Canadian province where it will start operations. A Canadian startup can be registered at the provincial level only. The place and form of company establishment are primarily determined by the type of business activities, as well as the tax implications.

A newly registered business in Canada will also require registration with the Canada Revenue Agency (CRA). In addition to a CRA Business Number, the Canadian startup company may need one or more other CRA accounts, such as Goods and Services Tax/Harmonized Sales Tax, Payroll, Corporate Income Tax, Import/Export, etc.

Organizing and structuring Canada's business must be done before applying for a transfer of an employee/business owner to Canada to establish and make it fully operational. Legally speaking, a Canadian company will employ a transferee contingent on a work permit issuance. Submitting an online job offer through the Employer Portal is one of the pre-conditions to apply for an ICT Work Permit that cannot be completed without having first registered a company and a CRA business number assigned to it. Otherwise, to explore the market without working in Canada, a business owner may apply for a Canadian business visa.

The first step of business registration in Canada does not require the business owners' presence and can be completed by the business immigration lawyers of Lerom Law Firm.

Employees Who Can Be Transferred to the Canadian Company to Set Up a New Office

The Intra-Company Transfer Work Permit generally exists for business owners, executives, senior/functional managers, and specialized knowledge employees. Middle-level managers or other staff are not eligible to apply under this category. In most cases, they would need a positive Labour Market Assessment (LMIA) to work for a Canadian company.

If an employee transfer is planned to the Canadian startup, there are additional considerations for each category. Transferring business owners, executives, or senior/functional managers will require demonstrating that Canadian operations will be large enough to support executive or management functions. Demonstrating the size of the planned business at the startup stage can be done via a viable business plan showcasing the market/industry overview, competitors analysis, sales and financial forecast, and a detailed hiring plan for the next five years. A strong business plan is particularly important for the startup option of Intra-Company Transfer. Yet without the regular and systematic sale of goods or services in Canada [full operation], the business largeness, which would require executives or managers present in Canada, is primarily substantiated by the business plan. The availability of financial resources and the foreign business size/performance in the previous years are also important considerations in startup scenarios.

Multinational corporations can also transfer specialized knowledge workers to Canadian startup operations. In that case, their work must be directed by management at the Canadian company. In other words, a specialized knowledge transferee should not be the only employee at the Canadian startup company. For example, if an executive has already been transferred to Canada or a senior manager hired amongst Canadians, then a specialized knowledge worker can apply for an Intra-Company Transfer visa.

At the time of transfer to the Canadian affiliate, they must have been working for a foreign entity continuously, full-time, in a similar position, for at least one year.

Examples of Preparatory Activities

Some activities can be completed at the startup stage, even before a transfer to the Canadian company - for example, job postings for Canadian support staff, contract negotiations, website development, etc.

When transferring senior managers or executives, it is acceptable that the physical premise/office has not yet been secured. For example, the company may use a virtual mailbox address. When a business owner or executive arrives in Canada on an Intra-Company Transfer Work Permit, they will lease or buy a premise. However, a specialized knowledge worker is supposed to have a workplace, i.e., an office lease would be required before transferring them to Canada.

A corporate business account for Canadian operations with sufficient startup capital is another strong indicator of the ability to succeed in the business establishment and expansion. Practically speaking, in most cases, either a Canadian director or business owner will be required to attend the Canadian Bank to open the account. In some cases, depending on the citizenship of the business owner/transferee, type of business activity, and the bank, a corporate business account can be opened remotely (not all Canadian banks offer this option though). If the Canadian bank agrees to open a business account remotely in a particular case, the identity of the business owner(s) would need to be identified and verified by the notary public in the foreign jurisdiction, as well as certain other steps completed.

The foreign affiliate or business owner(s) can then transfer startup funds (upfront investment, startup capital) to the business account in the Canadian bank to support the financial ability to commence and establish a business, compensate employees, and cover other operational expenses in the first year or until the business becomes self-generating. The amount of upfront investment must commensurate with the financial forecast provided in the business plan.

Intra-Company Transfer Work Permit Validity for Office Startup

An initial work permit can be issued for one year only. The ICT Work Permit for an office startup can be extended contingent on the following conditions: the foreign and Canadian companies still have a qualifying relationship, the new office has engaged in the continuous provision of goods or services in the past year, and has been staffed.

Collateral Benefits of Intra-Company Transfer for Office Startup

Apart from business expansion into one of the most developed world economies and, supposedly, proven profits from that, this may well be a pathway for gaining Canadian permanent residence. A Canadian company can extend a permanent job offer to business owners, executives, and senior managers who have been transferred and worked for the Canadian company for at least one year. A valid job offer may qualify a transferee for an additional 50 or 200 points in the Express Entry, and eventually, result in gaining permanent residence and Canadian citizenship.

A transferee can bring their family members: spouse/common-law partner and dependent children, who are qualified to obtain Canadian permits to work or study in Canada. Accompanying children of school age do not need to pay tuition fees, and the accompanying spouse may work for any employer in Canada. This is possible as long as the transferee is working in Canada.