HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

The successful exploitation of its vast reserves of natural resources, notably oil, gold, diamonds, uranium, timber, fish and agriculture, has made Canada one of the world’s wealthiest countries, although today approximately 70 per cent of GDP is generated by the services sector, which employs 76 per cent of the country’s labour force. An open economy, Canada’s economic fortunes are synchronised with those of the wider global economy and in particular its NAFTA partners, the USA and Mexico (78 per cent of exports go to its NAFTA partners, two-thirds to the USA). As such, the country is vulnerable to the steel and aluminium trade tariffs imposed by the USA. Canada is the No 1 steel exporter to the USA, with 84 per cent of exports last year. Canada, which has proposed tariffs on CAD16.6 billion worth of US exports, plans to challenge the tariffs through NAFTA and the WTO. GDP expanded by 3.1 per cent in 2017, up from 1.4 per cent in 2016, its fastest pace since 2011. It grew at an annualised rate of 1.3 per cent in Q1 2018 – business investment, a key indicator of future economic growth potential, grew an annualised 11 per cent. The Bank of Canada forecasts GDP growth of 2 per cent for 2018 and 2.1 per cent for 2019.

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Legal and regulatory

  • Foreign exchange and domestic currency accounts (CAD) can be held by residents both domestically and abroad. Resident domestic currency accounts are convertible into foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are convertible into foreign currency
  • There are no central bank reporting requirements

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Taxation

  • Tax is imposed by both the federal and provincial governments
  • Resident companies are taxed on their worldwide income
  • A non-resident company is taxable in Canada if it conducts business in Canada or disposes of taxable Canadian property
  • General business income and manufacturing & processing business income are taxed federally at 15 per cent
  • Canada imposes a 25 per cent withholding tax on the gross Canadian sourced income paid or credited to non-residents. The withholding tax rules apply to interest, dividends, rental payments, royalties or similar payments, including guarantee fees and management fees

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Payment instruments and systems

  • Electronic credit transfers are used for both high-value corporate and low value retail transactions and account for over 90 per cent of the value of all cashless payments processed. In volume terms, payment cards account for over 77 per cent of all cashless payments. Cheque use is in terminal decline among retail users, although they are commonly used by small companies
  • Canada operates two main payment systems: LVTS, an RTGS system, and the ACSS

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Cash management

  • Notional pooling is permitted and may consist of either a CAD or USD account structure
  • Cash concentration is permitted between resident and non-resident accounts in CAD or USD. Interest paid to non-residents is subject to Canada’s thin capitalisation and transfer pricing rules
  • Cross-border physical cash pools are permitted between Canada and the USA

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Electronic banking

  • Electronic banking is available in Canada. There is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes. Approximately 83 per cent and 44 per cent of account holders engage in internet and mobile banking respectively
  • The Bulk Interac e-Transfer service, which requires only an email address or mobile for payments to be sent, is offered by five banks to their business customers
  • Mobile payment services are also available and increasingly popular

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Sources:

  • Bank of Canada
  • Canadian Bankers Association
  • Organisation for Economic Cooperation and Development
  • World Trade Organisation
  • Statistics Canada
  • Canadian Steel Producers Association

The materials contained on this page were assembled in August 2017 (unless otherwise dated).


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