Introduction
Canada is home to a significant Romanian diaspora, with concentration in Ontario and other provinces. Many Romanian-born professionals and entrepreneurs bring significant skills, capital, and ambition to their Canadian ventures — and face the same corporate tax system as any other incorporated Canadian business owner, with some additional complexity around their international background and connections.
This article is for Romanian entrepreneurs who are setting up or have recently set up a Canadian corporation, and want to understand how the Canadian tax system works for their business.
Residency: The Foundation of Canadian Tax Obligations
The starting point for any Canadian tax conversation is residency. In Canada, individuals are taxed on their worldwide income if they are Canadian tax residents. A person who immigrates to Canada and establishes a settled life here — home, family, social ties — is typically a Canadian resident for tax purposes from the time of immigration.
A person who lives part of the year in Romania and part in Canada may be a resident of one or both countries, depending on the specific facts and the Canada-Romania tax treaty. The treaty determines which country has primary taxing rights in cases of dual residency.
For an entrepreneur who has settled permanently in Ontario, the residency question is usually straightforward: they are a Canadian resident, their worldwide income is subject to Canadian tax, and any Romanian-source income must be reported on their Canadian personal return (though credit is given for taxes paid in Romania to prevent double taxation).
Incorporating in Canada
A Canadian corporation is a separate legal entity with its own tax obligations. A corporation formed in Ontario under the Ontario Business Corporations Act (OBCA) or federally under the Canada Business Corporations Act (CBCA) files T2 corporate tax returns, registers for HST (if taxable supplies exceed $30,000), and operates under the same corporate tax rules as any other Canadian corporation.
The nationality of the founder does not affect these obligations. A Romanian-born entrepreneur who incorporates in Ontario and carries on business in Canada is subject to all of the same rules as a Canadian-born incorporated business owner.
The key to accessing the small business deduction (and its lower corporate tax rate) is that the corporation must be a Canadian-controlled private corporation (CCPC). A corporation controlled by Canadian residents — regardless of their country of birth — qualifies as a CCPC.
Romanian-Source Income: Reporting in Canada
A Canadian-resident entrepreneur who also earns income from Romania — from a business in Romania, rental properties, employment income from a Romanian employer, or investment income — must report that income on their Canadian T1 personal return as worldwide income.
Canada has a tax treaty with Romania (the Canada-Romania Income Tax Convention). The treaty generally provides that:
Income from Romanian-source employment is taxable in Romania; Canada gives credit for Romanian tax paid.
Business profits of a Canadian resident from a Romanian business are generally taxable in Canada, unless the business has a permanent establishment in Romania, in which case Romania may also tax the profits attributable to the PE.
Dividends, interest, and royalties paid from Romania to a Canadian resident are subject to limited withholding tax in Romania (typically 5–15% depending on the type).
The credit mechanism prevents double taxation: taxes paid in Romania are credited against Canadian tax on the same income.
Foreign Asset Reporting: The T1135
A Canadian resident who holds foreign property (including property in Romania) with a total cost exceeding $100,000 Canadian at any point in the year must file a T1135 — the Foreign Income Verification Statement. This is an information return, not a tax return — it does not create additional tax, but the failure to file carries penalties that can be substantial (up to $2,500 per year for late filing, and more for gross negligence).
Foreign property includes bank accounts in Romanian banks, shares in Romanian companies, real estate in Romania held personally (not for personal use exceeding 50%), and Romanian bonds or investment funds.
Banking and Moving Money Between Romania and Canada
There are no restrictions under Canadian law on moving money into Canada from Romania, subject to standard anti-money laundering reporting for large amounts (amounts over CAD $10,000 must be reported to FINTRAC by financial institutions). Bringing personal savings or business capital from Romania to Canada is not a taxable event — the money arrives as a capital transfer, not as income.
However, the cost basis of assets transferred to Canada may need to be established at the time of immigration — this is the "immigration basis step-up," which sets the ACB of foreign assets at their fair market value on the date Canadian residency is established.
When to Speak With a CPA
Romanian entrepreneurs navigating the intersection of Romanian assets, Canadian business income, and potential dual residency benefit significantly from CPA advice in the first year of settlement and business establishment. The initial setup — residency determination, T1135 filing, immigration basis step-up, and corporate structure — is where the foundational decisions are made that affect all subsequent years.