Operating in Multiple Provinces 2025 — How to Allocate Income and Avoid Double Taxation

Canadian businesses expanding beyond Quebec face complex interprovincial tax rules. Income earned in multiple provinces must be allocated correctly to prevent double taxation. Each province enforces its own formulas and filing requirements. CRA monitors allocations to ensure accuracy. Mackisen CPA Auditors Montreal provides integrated interprovincial tax solutions to ensure every dollar of income is reported and taxed correctly.

Legal and Regulatory Framework

Income Tax Regulations 402(3): Defines allocation of taxable income among provinces based on revenue and payroll.
Taxation Act (Quebec) Section 1029.8.36: Establishes Quebec’s right to tax income earned within the province.
Excise Tax Act: Governs GST/HST for interprovincial sales.
CRA Administrative Policy P-218: Provides guidance on identifying permanent establishments in multiple provinces.
Provincial Corporate Acts: Require registration of businesses with a permanent establishment in each province.

Key Court Decisions

Imperial Oil v. Quebec (2017): Upheld Quebec’s right to tax a portion of corporate income based on in-province payroll and revenue.
Boreal Transport v. Ontario (2020): Clarified allocation for corporations operating vehicles and employees across borders.
Sunrise Logistics v. The Queen (2018): Denied full provincial deduction where documentation for interprovincial expenses was incomplete.

Why CRA and Provinces Audit Income Allocation

CRA and provincial agencies audit interprovincial businesses to confirm payroll, sales, and expenses align with allocation percentages. Common issues include double counting revenue, missing permanent establishment registration, and mismatched expense allocations. Mackisen ensures corporate income is apportioned correctly and filings are synchronized across provinces.

Mackisen’s Strategy

1. Permanent Establishment Identification — Determine taxable presence based on offices, employees, or contracts.

2. Revenue and Payroll Allocation — Apply CRA and Quebec formulas to distribute taxable income accurately.

3. Corporate Registration — Ensure compliance with provincial corporate registrars.

4. GST/HST and QST Coordination — Manage sales tax filings in multiple provinces.

5. Audit Preparation — Maintain supporting schedules and payroll documentation for each jurisdiction.

Real Client Experience

A Quebec logistics company operating in Ontario was double taxed due to inconsistent allocations. Mackisen recalculated revenue shares, filed amended returns, and recovered $160,000 in overpaid taxes. A Montreal engineering firm with Alberta contracts optimized its allocation and reduced combined taxes by 12 percent.

Common Questions

How is income divided between provinces? Based on payroll and revenue earned in each jurisdiction.
Do I need to register in each province? Yes, if you have staff, offices, or recurring contracts.
Can Mackisen handle multi-province filings? Yes, we file and reconcile returns with CRA and all provincial authorities.

Why Mackisen

Mackisen CPA Auditors Montreal are Canada’s experts in interprovincial taxation and compliance. Our CPAs handle allocation, registration, and tax optimization across provinces, ensuring full CRA and Revenu Québec compliance. Call Mackisen CPA Auditors Montreal today for your 2025 Multi-Province Tax Consultation. The first meeting is free and designed to protect your profits nationwide.