FEDERAL INCORPORATION FEES REDUCED

The fees to incorporate and maintain a federal corporation have been substantially reduced. Yes, you read that correctly: the fees were cut in half, effective April 1, 2001. For example, the federal incorporation fee has been reduced from $500 to, depending on the method of incorporation, $200 to $250.

According to a regulatory impact analysis done by the federal Corporations Directorate, the fees from incorporations and annual returns generated over 80% of the Corporation Directorate’s revenues. In its most recent fiscal year, the revenues from fees collected by the Corporations Directorate exceeded the costs of administration by over $4 million.

This surplus situation is contrary to federal government policy, which policy is due in large part to a 1998 decision of the Supreme Court of Canada regarding probate fees. In that case, the Supreme Court of Canada held that it was unconstitutional to impose a tax by regulation, since taxes must be approved by Parliament or the legislature. While fees can be set by regulation, the court held that probate fees were not a fee but a tax because there was no link between the amount of the fee and the cost of the service provided. (Both Ontario and B.C. subsequently introduced probate tax legislation to comply with the decision.)

Under the Corporation Directorate’s new fee schedule, the fees will more closely match the cost of the service provided.

The vast majority of B.C. companies are incorporated under provincial jurisdiction, in part because of previously lower provincial fees. Now that federal fees are lower, we expect that federally incorporated companies will become more popular in B.C. If you are considering incorporating, and want to know more about the pros and cons of each jurisdiction, give us a call.