Getting Talent Into Canada

PROPOSAL

Revised: 2016-12-02, added section: Special Note for “US Persons”

Initial Release: 2016-10-04

Introduction

As a nation, Canada already assists and facilitates technology startups through various incentives and programs.

A proposal outlined below could help more startups as well.

This is a call to action with little effort required by startup incubators and accelerators but also calls for acknowledgement by Immigration authorities that existing policies may be used in this way.

To be clear: government policy remains unmodified.

Background

Existing programs include the Scientific Research and Experimental Development Tax Credit program (SRED, commonly pronounced “shred”) which functions as a non-dilutive form of investment to a startup because a portion of tax on revenue gets offset, thereby allowing those funds to be allocated on growing the business.

For historical perspective SRED is as beneficial to the tech community for sources of funding as the Advanced Research Projects Agency (ARPA) in the US, renamed the Defence Advanced Research Projects Agency (DARPA) in 1972, with its current form, Intelligence Advanced Research Projects Activity (IARPA), also in the US.

Individual provinces of Canada have additional programs as well, which may be found through organizations such as the BC Innovation Council.

Although this is a woefully incomplete list, it must mention Express Entry and others ways to immigrate plus the Temporary Foreign Worker Program which are immensely beneficial to various tech industries.

As valuable as each of these are, there is room for improvement as described below– without changing any policy for immigration or work permits.

Problem Being Solved

Beyond funding, there is still the need for experts and talented individuals needed by startups.

Many startups, however, do not necessarily need or want all of their skilled labour to be full-time employees.

Likewise, some individuals may not want to be tied to a single project or a business so new that ink is still wet on its papers of incorporation.

There is an underutilized and underserved resource of free-lance workers, albeit those not yet standing on Canadian soil. While these individuals are not necessarily entrepreneurs themselves, they often have the right mindset for working with a startup and therefore capable of contributing to the local economy in unique ways.

While these individuals would not qualify for the Entrepreneur Visa, an ordinary Work Permit would suffice.

The huge upside is that non-tech businesses would gain access to expertise for developing their business where a full-time subject matter expert would go unused after a few months. This usage is the ideal situation for a contractor relationship.

For example, consider the Human Resources business in British Columbia, Amui. This incredibly useful company is in business to help small to medium sized companies find answers to HR inquiries in an efficient and expedient way. Amui could greatly benefit by using Machine Learning techniques, which is outside the expertise of these very knowledgeable founders.

While an ML expert is required to help build this piece of their business offering, that person would become unnecessary upon completion of that milestone. That person instead would be best utilized for annual tuning updates or ad hoc requests rather than being a full-time employee.

Meanwhile, this ML expert can satisfy needs of additional businesses in similar positions: only in need of occasional assistance or in an advisory capacity, such as being available to angels and venture capitalists for vetting potential startups for investment.

This is a similar model to how Axiom Zen models itself as a “venture studio” with its stable of web designers and software developers available to its constituent set of startups. However, facilitating the volume of subject matter experts in additional fields would put undo burden on this one business. Further, while Axiom Zen is great at what they do and how they do it, it might not be easily replicated for deep niche industry offerings.

The current problem is:

  1. There is a lack of local experts in niche subjects such as Machine Learning, so bringing individuals from other countries is an attractive answer.
  2. Although policies and programs exist, these are relatively unknown to individual foreign candidates that might be a perfect match.
  3. Finally, of those who are willing and able, there could be a more well-defined path to facilitate their arrival for hitting the ground running– so to speak.

Additional perspectives from immigration news website, CanadaVisa.com:

From The Globe And Mail newspaper:

Clearly, the need is known and businesses of all sizes are asking for improvements.

Proposal

The idea is roughly: accommodate individual foreign free-lancers present in Canada– with caveats below.

Specifically:

Facilitate individual subject matter experts from other countries to each establish a Canadian business. Upon their arrival in Canada, each may be issued a Work Permit to operate their own company. Have that company be the vehicle by which other enterprises large and small gain access to that expertise as a contractor.

By partnering with local startup incubators and accelerators, much of the logistics are already addressed for individuals legally allowed to work in Canada.

The missing pieces are:

  1. Facilitate creation of the business entity on behalf of the foreign specialist.
  2. Prepare everything in advance such that the newcomer may obtain their Work Permit upon arrival into Canada.
  3. Co-ordinate contracts in advance of arrival such as with vetting the would-be contractor by a startup incubator and also using the incubator as match-maker for services to individual startups.

A key element to this is that the skilled worker need not wait for the Temporary Foreign Worker Program or full Permanent Residency through Express Entry or any individual Provincial Nomination Program. As excellent as those programs are, there is a lack of timeliness that can delay further business critically.

In lieu of the rigorous vetting processes of those immigration programs, verification of skills and knowledge may be performed as an enterprise would conduct a series of technical interviews. Such interviews today leverage commodity video conferencing services like Zoom, Skype, and Hangouts.

Such interviews would be conducted by startup incubators or accelerators as gateway to the next step, also facilitated by those same organizations: incorporation.

A key point is that these individuals are in their own legal entity and therefore not a liability of a startup incubator or accelerator. Since the individual is doing something separate from the incubator or accelerator, it is only fitting that their business also be legally de-coupled.

The startup incubator or accelerator may function as match-maker between contractor and businesses, just as how many working relationships are current brokered.

The startup incubator or accelerator may also provide office space for the contractor, since the startups being served are likely to be members of that co-working facility already.

A partial list of startup incubators and accelerator in British Columbia include:

Promoting The Program

Presuming the above proposal gets supported by at least one startup incubator and is recognized as a bona fide path to obtain a Work Permit by Canadian Border Agents:

Consider promoting this program in locations with top-tier universities for respective experts. For computer science topics, it might be Bangalore, India and Manchester, England.

There are also advantages from an international commerce perspective, such as British Columbia being an excellent replacement for the well-known tactic of registering a business in Delaware.

Therefore, facilitating media relations with publications that cover such topics would help spread news of the program.

Details & Compliance

There are several subtle points of formality, legality and compliance to address:

1. Work Permit

Existing policies within Immigration, Refugees and Citizenship Canada (IRCC, formerly CIC) accommodate a Foreign Worker who owns more than 50% of a Canadian company, to obtain a Work Permit to operate that company. Requirements are reduced or waived compared to other situations involving a Foreign Worker.

Requirements of this policy have been revised as of Summer 2016.

An overview is available regarding LMIA advertising exceptions, for specific positions and some of the official policy is given on International Mobility Program: Canadian interests - Significant benefit - Entrepreneurs/self-employed candidates seeking to operate a business [R205(a)-C11].

2. Tax

Compliance with tax code of the Canada Revenue Agency (CRA) is subtle and sometimes misunderstood especially with respect to determining whether a person is considered an employee versus contractor.

There have been issues where both parties believed that they had a contractor relationship, but CRA determined otherwise.

Without enumerating the principle factors by which the CRA makes their determination, a key point is whether the individual has multiple clients simultaneously during that calendar year or not.

3. Incorporating

While the process of incorporating in Canada is relatively straight-forward, there are subtle issues to address that might be unfamiliar to a newcomer.

Timing of when to incorporate can be significant.

For instance, Section 85 Rollover might incur unexpected taxes for an individual assigning certain kinds of intellectual property or resources such as an existing website to their own company. In some cases, licensing (rather than “disposing”) such things to the company might be advised.

Therefore, some assistance with these matters would help the ease the path.

Special Note for “US Persons”

The following information further highlights a subject where assistance to newcomers would be a benefit– even if only offering a list of appropriate Professionals by region in Canada that might assist.

For individuals considered to be “US Persons” by the IRS which includes anyone born in the US even if having never resided there, US citizens, those who have ever been in possession of a “Green Card” or other specific types of visa, those who own property in the US under certain conditions, and so on– there is additional compliance to consider.

Those who meet any of the broad definitions of a “US Person” have their world-wide income taxed by that nation regardless of country of residence.

While Canada and US have a tax treaty for eliminating double taxation for many conventional scenarios such as salary from “earned income,” certain forms and uses of a corporation introduce further paperwork filing and possibly tax owed.

Topics to research, to consider and to discuss with a professional who specializes in cross-border tax compliance include:

Such a professional in Canada is a Chartered Professional Accountant (CPA), yet some may still advertise using the former title, Chartered Accountant (CA). These are licensed Professionals, and such titles in Canada are legally protected terms as is Engineer.

Also, a “US Person” living outside the US is required to use such a Professional in preparing both their personal and corporate tax returns to be submitted to the IRS.

A CPA is also required for a Canadian corporation filing tax returns to CRA.

Next Steps

If this approach is of interest to you, consider joining the national conversation on immigration (see also Discussion guide on immigration).

Summary

The Government of Canada seeks ways to grow the national and provincial economies, and it has many programs and incentives. By utilizing policy that already exists, there is an opportunity to facilitate time-critical needs of startups that are otherwise underrepresented and underserved.

This proposal is essentially to facilitate free-lance workers originating from other countries to be present and working in Canada.

While everything already exists to allow this legally and logistically, this proposal suggests ways to streamline how a particular individual might be partnered with startups as clients.

The buy-in requested by this proposal is for existing startup incubators and accelerators to perform vetting similarly to a technical job interview process, facilitate the incorporation process, and be match-maker between these individuals and startups.

Additional buy-in would come from Immigration, Refugees and Citizenship Canada (formerly CIC) such that this be recognized as a bona fide use of existing policies when these individuals request a Work Permit from Canadian Border Agents.

About The Author

Daniel Pezely has been in the software industry professionally for 30 years starting as an assistant in a consulting firm that also sold “IBM Compatible” Personal Computers in the mid-1980’s. He started his first tech business at age 19 while attending university. After Main Street, experience continued on Wall Street, Silicon Valley and briefly overseas. Married to a Canadian, he and his lovely wife of 22 years reside in British Columbia where he is currently launching tech startup, Snagz.net, based in Vancouver.

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