Mathieu Leblanc
Senior Manager | Ing., M. Ing., MBB | Tax

There is not a day goes by that you don’t hear about additive manufacturing, or 3D printing as it is more commonly known.

While the technology may have been around for more than 20 years and some patents have already expired, its rapid adoption in a number of fields such as aeronautics and medicine has created unprecedented interest, particularly with investors. But it’s not easy for local manufacturing SMEs to see how they can benefit from this technology nor how it could change their business model. Where should they start?

I find this field fascinating and I met with Martin Lavoie, Executive Director of Canada Makes, a national organization dedicated to promoting the adoption and development of advanced and additive manufacturing, to demystify the topic.

Myths and realities about additive manufacturing (3D printing)

Myth no. 1: Everybody will have a 3D printer at home.

Not really. It’s a bit unrealistic to think that 3D printing will be as common in our homes as a microwave oven or personal computer. This idea brought some companies, such as Stratasys to extraordinary heights only to have them drop back to earth. However, the industrial market, in particular for rapid prototyping and tool manufacturing, quickly adopted the 3D printer and service centre business model.

Myth no. 2: 3D printers can only be used for plastic toys.

If that’s what you think, you haven’t Googled 3D printing in a long time! 3D printers can print a wide array of materials, from thermoplastics and composite materials to the most exotic metals, such as titanium. A Montreal entrepreneur has even developed a printer that can print nanomaterials. It’s expected that machines capable of printing conductive materials will soon be marketed, which will revolutionize the electronic products market.

Myth no. 3: Only large businesses can afford these expensive printers.

This market diversified extensively and quickly. While some industrial metal printers may cost over $500,000, industrial plastic printers sell for under $100,000. There is something to suit all tastes and budgets. For example, at the RAPID conference in the U.S. this month, one business introduced a metal printer costing $120,000.

Myth no. 4: In the future, everything will be printed.

Obviously not! It will always be more cost effective to machine many goods, parts and industrial components. It is true though that some complex parts could not be machined and will have to be produced on a 3D printer in the future. It’s important to understand the advantages and disadvantages of 3D printing on the basis of what you manufacture. Get advice from an expert who can help you develop a 3D printing business plan.

Myth no. 5: The technology is too recent, it’s not worth investing in it yet.

Reality could catch up with you sooner than you think. Consider companies such as General Electric, Siemens, Ford, United Technologies Corporation to name but a few that are using 3D printing technology for their parts and components. If you are in these companies’ supply chain, no matter how distantly, or in the same industry, you would be wise to look into this now. You could hire a coop student who has a bit of additive manufacturing experience to prepare a feasibility study. Now is the time when you should determine where adopting this technology could make sense for you. If the feasibility study seems positive, take the plunge, work with a service centre. After all, you’re an entrepreneur and a good entrepreneur never passes up a growth opportunity.

 

If you haven’t seen remarkable examples in aeronautics, I invite you to view some GE videos, which can be found here:

http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/14434/GEs-Greg-Morris-Discusses-the-Formation-of-GE-Additive.aspx

Another example is the Norsk (Rapid Plasma Deposition) part for the Boeing 787 (which is finished by Mecachrome in Mirabel!):

https://www.aero-mag.com/norsk-titanium-aerospace-grade-additive-manufactured-structural-components-boeing-787-dreamliner/

30 May 2017  |  Written by :

Mathieu Leblanc is a senior director at Raymond Chabot Grant Thornton. He is your expert in taxation...

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Pierre Bourgeois
Partner | CPA, CA | Tax

Below is an update for certain items discussed during the Raymond Chabot Grant Thornton international tax seminar held on April 18 and 19, and resulting from the April 26, 2017 Canada Revenue Agency (CRA) and Finance Canada (Finance) round tables of the Canadian chapter of the International Fiscal Association (2017 IFA round table). We also outline other items of interest from the 2017 IFA round table.

Unless otherwise noted, legislative references in this document are to the Income Tax Act, RSC, c.1 (5th Supp.) and its regulation.

18 May 2017  |  Written by :

Mr. Bourgeois is a partner at Raymond Chabot Grant Thornton. He is your expert in taxation for the...

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Marie-Pierre Pelletier
Senior Director | Tax

Companies established in many countries cannot escape transfer pricing.

Transfer prices are the prices at which related entities located in different countries trade, including the sale of goods, services or intellectual property.

In Canada and most countries, these prices must be established by respecting the arm’s length principle, which stipulates that the conditions for related entities’ transactions must be the same as those that would have been agreed upon by non-related entities.

While companies established abroad must comply with transfer pricing rules, they can also use them to optimize their tax situation. Therefore, it is in their best interest to know these rules as soon as they plan on expanding abroad.

A planning tool

The proper use of transfer pricing can help a group minimize its tax burden. In fact, economic theory states that the greater the work performed, risks assumed and assets held, the higher the expected returns. Therefore, it would be to a group’s benefit if value-added functions, valuable assets and high risk activities were within a jurisdiction with a lower tax rate since a greater portion of the group’s profits will be taxed at a favourable rate.

Documenting transfer pricing

The Canada Revenue Agency (CRA) is one of the most aggressive tax bodies in the world when it comes to auditing transfer pricing. When it deems that the arm’s length principle is not being observed, the CRA can adjust the transfer pricing and impose a penalty. This penalty will apply if the adjustment increase exceeds the lesser of $5,000,000 and 10% of gross income.

However, the penalty will not apply if the taxpayer can prove that, through transfer pricing documentation, serious efforts were made to comply with the arm’s length principle. This documentation is therefore essential for companies established abroad as it must provide a complete description of transactions between the group’s entities and demonstrate the method used to determine the transfer pricing.

Your Raymond Chabot Grant Thornton consultant can help you better understand these issues.

15 May 2017  |  Written by :

Ms. Pelletier is a senior manager at Raymond Chabot Grant Thornton. She is your expert in taxation...

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Suzanne Breton
Senior Manager | MBA | Management consulting

What luck! A new client from Asia has just placed a $250,000 order. It’s your first international order. But are you well prepared for this?

What happens if, for example, during shipping, the merchandise gets stopped at customs? It goes without saying that the client won’t pay until he’s received the goods…Result: your dream turns into a nightmare.

We’re not trying to discourage you; we’re just trying to show you the importance of properly planning an export project. Here are five steps to follow.

1. Give it some proper strategic thought

First, ask yourself if exporting is truly one of the best growth strategies for your business. If so, are you ready to devote the necessary time and resources? At what cost?

As applicable, this project must have the full support of management and be integrated into the company’s overall strategy.

2. Analyze all export aspects

Then, analyze whether the company’s main functions are able to realize this project, in particular:

  • Human resources: Do you have enough employees and are they well trained? For example, you would like to export to Mexico, but do your representatives speak Spanish?
  • Production: Are you able to respond to an increase in demand? Should you obtain larger facilities or purchase additional equipment? If applicable, how much will you have to invest?
  • Marketing and distribution: Should you review your marketing tools? What distribution method will you use?
  • Financial and legal resources: What is your short- and long-term financial capacity? How much will international development cost and what means of financing have you planned? Would you be able to protect your intellectual property abroad?

Completed with the help of external experts, this analysis will help identify the company’s weaknesses with regard to the general export risks and challenges, and develop an action plan in response. Above all, don’t dream of rapid returns: it could take years for an export project to become profitable.

3. Target and analyze your market

Don’t target all the markets. Choose the most attractive market for your business by conducting a study to understand the business dynamics of this market, your future clients’ profile, barriers for entry, etc. You will learn the rules of export at a lower risk.

Then, make sure you analyze the potential and characteristics of this market by going to visit as often as possible.

Are you considering the United States? Don’t forget that each state has its own requirements.

4. Develop a strategy for this market

You may then develop an operating and marketing strategy tailored specifically to this market. How will you penetrate this market (through a partner, an established distribution network, by delegating representatives, etc.)? How will you organize the logistics (transportation, customs, etc.)? What will your marketing strategy be for this market?

N.B.: What works well at home may not necessarily apply abroad. It may be necessary to innovate and adapt your products and services to meet the expectations of the targeted market.

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5. Analyze your financial needs

Lastly, thoroughly analyze the project costs related and examine financing possibilities. Pay particular attention to expenses that seem minor, such as travel. The bill will quickly add up if you travel several times to China!

There is a wide range of financing options through export loans and subsidies. We will be pleased to guide you and help you plan your international growth.

15 May 2017  |  Written by :

Suzanne Breton is a senior manager at Raymond Chabot Grant Thornton. She is your expert in...

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