Why Canada Can Be The Simplest Option For Your Offshore Merchant Account
Offshore merchant accounts in Canada is an excellent way to target US and Canadian customers

Why Canada Can Be The Simplest Option For Your Offshore Merchant Account

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More high-risk businesses in Europe, Asia, Latin America and the US are considering the benefits of an offshore merchant account. Canada is the perfect market welcoming businesses of many varieties at this time; yes, even high-risk merchants! Heres a look at why we’re seeing an uptick in foreign businesses considering Canada and how you can be part of it.

 

Canada’s world profile has risen over the last few years

Canada’s world profile has risen sharply because of the government’s efforts to make the country more progressive and open the door even wider to trade. Consequently, this makes Canada a desirable trading partner. Initiatives like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are an example of the openness toward economic development and investment.

Moreover, many foreigners are considering setting up business in Canada. E-commerce, in particular, is one of the more popular business avenues. Private companies like Shopify and Lightspeed POS were all founded on Canada’s territory. Therefore, the country is extremely e-commerce friendly. It is also a tech hub and a great region for leading entrepreneurs wanting to expand. Even a small headquarters with a shared office will do enough to solidify your Canadian presence.

 

Favorable business laws & bills

Reflective of the mentality of the entire country, Canada decriminalized and legalized cannabis. While not the first country to make this move, it certainly has helped remove any lingering stigma. While banks have moved slowly and covertly toward the cannabis industry, high-risk merchants are now increasingly benefiting from this federal regulation.

The government is positioning itself favorable for the growth of cryptocurrencies like Bitcoin. Additionally, the country is engaging in a slew of other futuristic fiscal activities that make it ripe for advancements in the digital marketplace.

Canada’s current tax system is favorable toward small private business. Canada’s corporate tax rate for small businesses is 9 percent (with certain conditions). Provinces and territories also have lower tax rates. Alberta recently introduced Bill 3. If passed this summer, the bill will see the province’s 12 percent corporate rate cut by one percentage point. If successful, this rate will be the lowest in Canada.

Finally, the country has an upcoming federal election slated this year. Depending on who is elected, new leadership could bring more opportunity and additional laws that provide a path to business for both residential and foreign vendors registered with the country.

 

High-risk advantage with offshore merchant account in Canada

Is your business prohibited or restricted, with processing history and monthly revenue upwards of $25,000 or more? Well, you are considered high risk, which means conventional payment processing companies will be opposed to working with you. You own a high-risk business if you operate in an industry with a controversial reputation and propensity for elevated financial risk. When one or more of these conditions apply, merchant accounts and industry expertise are required to navigate finding a payment processor.

Canada is quite familiar with and open to high-risk businesses. Some industries that are flourishing include nutraceuticals, fitness, biz-op, health, and subscription model entities. As one of the first countries to legalize the distribution of CBD products, it’s safe to say that Canada is a business-friendly climate for many areas.

Canadian merchant accounts are a wonderful option for businesses fitting these descriptions. It’s especially good for Europe-based vendors wanting to penetrate North America without actually being in the US. Canada converts US transactions more than any other foreign jurisdiction given their proximity and daily trade volumes. If low conversions in the US are a frustration, but you don’t want to incorporate in the US, then a Canadian merchant account is a good option.

Also, Canadian banks are well regarded internationally for their stability. This helps with conversions in many other countries. When your customer’s bank sees a transaction originating in Canada, it is more likely to be approved.

 

Launching a business is simple:

It’s not always easy to launch a business in a foreign country. As for Canada, however, the country has worked hard to make their business formation process as streamlined as possible. Right now, here are a few of the big steps you need to account for when launching your Canadian business:

  • Director: A director should be able to provide valid identification such as a passport as well proof of residential address (does not have to be Canadian)
  • Processing history: It is recommended that your company have processing history to start doing business in Canada. Your processing history can be from your main company headquarters.
  • Bank account: A Canadian bank account for your business along with a healthy account balance is beneficial for a starting business in Canada.
  • GST/HST: GST is a 5% tax on the supply of most goods and services in Canada. In provinces that still have sales taxes on goods and services, GST is charged in addition to retail taxes. Consequently, it’s something you will want to register when founding the businessWhen selling to Canadian customers, it is important to charge and remit appropriate federal and provincial taxes.
  • Merchant account: Pre-approval is required for a Canadian merchant account. If you operate a high-risk business get the go-ahead from a payment provider first beforehand. DirectPayNet can help you in this area!

 

High-risk businesses that would do well in Canada include nutraceutical, SaaS, subscription, financial and other business service, and adult entertainment categories. Keep in mind though, that CBD is still a touchy area in the country and does not fall under the same legal recreational scope that other marijuana products do, since purchasing may still requires a prescription and a provincial license to sell. Also, CBD products sold in Canada must come from licensed local manufacturers, so if you plan on selling a product, make sure your supplier is Canadian.

 

A quick checklist before you apply for a Canadian merchant account

The above is just some insight into why more foreign business owners have approached us about setting up their e-commerce company in Canada. Now we offer you a quick checklist for what you need to secure a merchant account in this country. If you’re ready to apply for a Canadian merchant account, you will want to note the items below:

  1. Ensure your online e-commerce site is suitable and secure (PCI compliant) for both Canadian and US markets. Your shopping cart allow applicable taxes and other terms for purchase. If you intend to grow your business in a foreign jurisdiction, your platform should be flexible to accommodate that.
  2. Connect with a reputable payment services provider like DirectPayNet. Entrepreneurs can be desperate to start processing. We often see merchants who fall into a restricted business category using low risk payment solutions or just signing with any partner. This lack of proper due diligence results in suspended accounts and declined payment opportunities. Unfortunately, this delays revenue-generating opportunities, because merchants don’t know the intricacies of landing the right payment provider.
  3. Familiarize yourself with the corporate tax rates in Canada. You do not have to register for the GST/HST if you provide only GST/HST-exempt goods and services or if you fall under the small supplier category. However, consult with an accountant or lawyer who assists in incorporation to help navigate this for you.
  4. Take advantage of being a resident business owner in Canada, as is there is no legal obligation to pay, collect or remit GST/HST. The exception is if the vendor has voluntarily registered and if taxable revenue is $30,000 or less in the most recent four consecutive quarters – aside from ride sharing services. For foreign vendors with businesses in Canadian territory, the Organisation for Economic Co-operation and Development recently recommended limiting the compliance burden on foreign vendors, as they may have sales tax obligations in multiple jurisdictions.

 

By securing a Canadian merchant account for your payment needs, foreign high-risk merchants will gain tremendous benefits. Doing your research and knowing all of the facts will help your US or Europe-based company expand.

Ready to secure a Canadian merchant account for your high-risk business?

It’s hard to ignore that the U.S. offers the largest consumer market on earth with a GDP of $20 trillion and 325 million people today. If you want a piece of the pie without actually setting up shop in the US, then Canada is your best North American option for an offshore merchant account.

Contact DirectPayNet to learn about our payment solutions. Our team is waiting to help your business grow!

About the author

I serve as the portfolio manager and operations assistant at DirectPayNet. Prior to helping high-risk merchants navigate credit card processing and compliance, I gained extensive experience in affiliate marketing for several online retail verticals (including education, health, insurance, sports and gaming). In 2016, I became a certified fraud examiner (CFE). You can email me with any questions about merchant accounts.