IFC Montréal Canada
Author: Andrée Corriveau President and Chief Executive Officer - IFC Montréal
International Financial Centre of Montréal (IFC Montréal)
The International Financial Centre of Montréal (IFC Montréal) was established in 1986. Its aim is to bring financial corporations into Montreal, enabling them to take advantage of the benefits of doing business there, as well as to develop Montreal as an international financial centre. The Centre was created in a context of change, deregulation and globalization of financial services. At around the same time, models were emerging in Dublin, Ireland (International Financial Services Centres – 1987) and Brussels, Belgium (Centres de coordination – 1982). For the Québec partners behind this initiative, the global context and the accelerated transfer of banking activities from Montréal to Toronto were motivating factors for providing favourable taxation to help develop the financial sector. The International Financial Centre of Montréal was created for this purpose. The programme still receives strong support from the recently elected government and may well be expanded into the future.
Its activities include:
- Promoting the International Financial Centres (IFC) tax program internationally
- As a preferential intermediary between the various financial and public sector stakeholders, welcoming corporations to Montréal and facilitating the process of establishing an IFC
- Increasing Montréal’s visibility as an international financial centre
- Informing the international financial community of the advantages that Montréal’s business environment has to offer
- Advising the Minister of Finance on appropriate measures for developing the IFC concept
- Linking the mandate of the IFC Montréal with the specific needs of the industry, such as workforce training
Activity
However, the programme does not consist of passively waiting for businesses to discover Montreal, the team of ten targets corporations throughout the world who might be better off carrying out their business in Montreal, whether that be because of the preferential regulatory environment, overheads, or tax. Once identified, the team actively enters into dialogue with them to promote Montreal and facilitate their move. It is a partnership approach which Mrs. Corriveau describes as ‘aggressive’ and it has worked very well. In 2000, there were 70 international financial institutions operating out of Montreal. That number has now risen to 133 out of 400 financial institutions in total – a rise that in no small measure may be attributed to Mrs. Corriveau and her team’s efforts. Elsewhere in Canada the Province of Vancouver has a similar programme, although perhaps not followed as aggressively.
The main benefits of doing business in Montreal could be summarised as:
Cost: Montreal is clearly going to be a cheaper place to transact business in than, say, London, or Switzerland.
Legislation: the Government has implemented a favourable package of legislation to encourage international business.
Time: Montreal is on the same time zone as New York and acts as a gateway between the European and American economies.
Labour: The quality of the labour force is extremely high, and the Government has legislated to provide education in this sector, particularly for back-office operations.
Economy: It has one of the fastest growing economies in the world.
Technology: It possesses a highly developed technical infrastructure to support communications and modern business practices.
Multilingual: 80% are at least bi-lingual (French and English) and a growing number now speak Spanish as a third language, reflecting the cosmopolitanism of Montreal, which boasts two English and two French Universities.
Fiscal benefits
These are twofold: for companies and for employees.
International companies are exempt from taxes on revenue, capital and contributions to the healthcare system. Employees are treated differently according to whether or not they are Canadian citizens. If they are foreign specialists, they are exempt from 75% income tax for a period of five years, whereas Canadian residents are exempt from 37.5% indefinitely.
Qualifying criteria
In order to qualify companies have to do one or many of 25 categories of recognised financial activities. Basically, an IFC is defined through its operations. Recognised activities comprise a full range of international financial transactions that go beyond the traditional banking operations to which financial institutions wishing to acquire preferential status in other countries are usually limited. To be designated an IFC under the Act Respecting International Financial Centres, a company (or part of a company) must satisfy the following conditions:
- it must be operated by a corporation or a partnership;
- all of its activities must involve Qualified International Financial Transactions (QIFTs)
- QIFT activities carried on in the course of its operations must be managed within the territory of the City of Montréal
- its activities must be consolidated in one place within the territory of the City of Montréal
- it must maintain separate accounting of its operations attributable to its QIFTs it must hold a certificate of qualification issued by the Minister of Finance.
In order to operate an IFC must first obtain a certificate of qualification from the Minister of Finance in order to claim the tax benefits outlined above. To do so, the corporation must complete the Application for a certificate of qualification and enclose the following documents:
- A detailed description of planned activities
- A description of the duties of the employees assigned to such activities
- The incorporation documents of the corporation
- The latest financial statements or pro forma financial statements, as the case may be
- A corporate brochure of the business or its business plan, as the case may be
- A certificate of registration with the relevant regulatory agencies (for instance, the Commission des valeurs mobilières du Québec).
The IFC renews its certificate annually and encloses it with its income tax return, thus ensuring that the IFC continues to meet the requirements that qualified it for the initial certificate. A charge of $500 is levied for processing the application. The holder of an IFC certificate of qualification is also required to pay an annual contribution for the promotion of Montréal as a centre of international finance. The amount is currently $10,000 for the first contribution, and $3,000 for subsequent contributions. It is payable in a single instalment no later than the last day of February of the following calendar year.
An IFC is a certified corporation with the status of IFC as defined by the Act Respecting International Financial Centres, and therefore entitled to the tax benefits described in the Act.
Entry Filed under: Profile of IFCs