With a robust economy, well-educated workforce, and supportive regulatory framework, Canada offers fertile ground for foreign direct investment.
If your company is seeking to expand operations internationally, Canada could be the ideal market. But establishing your business in a foreign jurisdiction is a challenging and complicated process. To provide clarity and help you decide whether Canada is the right choice for you, we’re addressing the most frequently asked questions about doing business in Canada as a foreign investor.
Why Choose Canada For Foreign Investment?
Canada attracts organizations from around the world seeking to establish or expand into a thriving and reliable market. The Canadian economy ranks among the top globally for stability, transparency and competitiveness. With the world’s most educated workforce, Canada is one of the most popular countries for international investment.
Geographically, Canada’s proximity to the United States is often (though less so of late!) a major draw, particularly for American businesses seeking close cultural and regulatory similarities. Yet Canada’s attractions go well beyond its southern border. Federal and provincial governments operate within a predictable constitutional monarchy, creating an atmosphere that is both business-focused and politically secure. Extensive trade agreements allow international companies to tap into multiple global markets, enabling them to scale quickly. With competitive corporate tax rates, strong intellectual property protections and helpful government programs supporting commercial accessibility, Canada is primed for foreign investment.
What Are Canada’s Biggest Sectors And Industries?
Several large, high-growth industries anchor Canada’s economy. International businesses evaluating expansion should pay close attention to regional strengths to align market entry with Canada’s leading industries. Major sectors include:
Real Estate – With consistent population growth and infrastructure expansion, Canada boasts a thriving real estate and rental/leasing sector. Vacancy rates in Toronto, Vancouver, and Montréal remain under 3%, driving strong investor yields in both residential and purpose-built rental markets. Attractive opportunities can also be found in commercial leasing, from office and industrial properties to land for energy projects and agricultural uses.
Financial & Professional Services – Toronto is Canada’s financial hub, home to major banks, insurance firms, and a thriving fintech landscape. Professional services, from legal to accounting, support small and medium-sized enterprises (SMEs) and large corporations nationwide.
Energy & Natural Resources – Canada is one of the world’s top oil, natural gas, and hydroelectric power producers. The oil sands in Alberta represent a significant global energy source, while mining, including steel, nickel, gold, and potash, drives exports in Saskatchewan, B.C. and Quebec.
Manufacturing & Automotive – Manufacturing contributes roughly 10% of Canada’s GDP, with automotive assembly concentrated in Ontario’s “Auto Alley.” Key sub-sectors include aerospace, machinery, and food processing.
Technology & Innovation – Canada’s AI research, fintech, and clean-tech industries have experienced significant growth in recent years, particularly in Toronto, Montreal, and Vancouver. The country ranks among the global top 10 for AI patents and investment, offering a promising and forward-thinking landscape for international investors.
What Is The Best Business Structure When Expanding Into Canada?
When entering the Canadian market, a pivotal decision is choosing a suitable legal and operational structure. The common forms – federal or provincial corporations, foreign branches, subsidiaries, and joint ventures – offer different advantages, tax considerations, and liability frameworks.
Corporate Entity – Incorporation can occur at the federal or provincial level. Federal incorporation enables a company to operate under the same name across all provinces and territories, which can significantly enhance your firm’s national presence. On the other hand, provincial incorporation can sometimes simplify registration if you plan to concentrate your operations in one region. Under federal rules, at least 25% of a corporation’s directors must be Canadian residents, while other provincial statutes have looser residency requirements, so it’s worth exploring the differences.
Foreign Branch – An alternative to setting up a separate incorporated entity is to operate as a foreign branch, which involves registering your existing company as an extra-provincial corporation. A foreign branch is an extension of the parent company, meaning it is not legally distinct from its parent. As such, any liabilities or legal issues arising in Canada may directly impact the foreign entity.
Subsidiary – Unlike a foreign branch, a subsidiary is established as a separate legal entity under Canadian law, which limits the parent company’s exposure to its investment in the subsidiary. With a subsidiary, foreign investors benefit from clearly delineated corporate governance, regulatory compliance that aligns with local business practices, and access to certain Canadian tax incentives and deductions available only to resident corporations. This structure often results in lower perceived risk and enhanced credibility with local stakeholders.
Joint Venture – In Canada, joint ventures are frequently established for large-scale infrastructure or resource projects. By collaborating with a Canadian partner, foreign investors can share risks and costs while benefiting from local knowledge. Joint ventures can help international companies navigate challenging markets, such as industries with complex regulatory requirements.
How Do I Set Up A Business In Canada?
Once you’ve defined your business structure, the next step is to register your business name (respecting any bilingual requirements in Québec). This involves selecting a unique name, verifying its availability through tools like the NUANS name search, and registering it either federally or provincially, depending on your scope of operations. You must also obtain a Business Number (BN) from the Canada Revenue Agency (CRA), which is essential for managing taxes, collecting GST/HST, handling payroll deductions, and ensuring full compliance with Canadian tax regulations. In addition to the BN, you may also need to register for GST/HST immediately if you anticipate exceeding revenue thresholds.
Different industries require specific permits and licenses to operate legally within Canada. Depending on your business type and location, you may need additional certifications or regulatory approvals, from health and safety permits for food-related ventures to zoning and construction permits for retail or industrial operations.
What Are The Labour Requirements In Canada?
For businesses in federally regulated sectors, such as telecommunications, banking, and interprovincial transportation, the Canada Labour Code establishes mandatory standards on wages, hours of work, overtime pay, and leave entitlements. Companies operating at the provincial level follow employment standards legislation for their specific province (e.g. Ontario’s Employment Standards Act or British Columbia’s Employment Standards Code).
Canadian labour regulations emphasize the provision of a safe and healthy work environment. Businesses must comply with occupational health and safety (OHS) standards by conducting regular risk assessments, providing necessary training, and ensuring that workspaces meet safety protocols. Furthermore, employment practices must align with anti-discrimination and human rights laws for fair treatment during hiring, promotion, and termination processes.
Most foreign nationals require a Canadian work permit, issued by Immigration, Refugees and Citizenship Canada (IRCC), to work legally in Canada. Employers hiring temporary foreign workers must obtain a Labour Market Impact Assessment (LMIA) demonstrating that no qualified Canadians are available for the role.
International business owners and foreign investors should consult with Canadian legal and HR professionals to tailor employment contracts and human resource policies to local standards.
What Government Incentives And Grants Are Available For Foreign Investors In Canada?
Foreign businesses seeking to establish operations in Canada can benefit from various government incentives and grants designed to foster innovation, promote economic growth, and facilitate market entry.
At the federal level, programs like those offered through Invest Canada and the Strategic Innovation Fund provide non-repayable grants and interest-free loans. These funds help cover project costs, including facility expansion, technology acquisition, and the training of a skilled workforce. Provinces also offer tailored incentives, such as FedDev Ontario and Trade and Invest BC, which target local industry strengths, making it crucial to explore regional opportunities that align with your expansion strategy.
Investment tax credits, such as those available through the Scientific Research and Experimental Development (SR&ED) program, help companies offset the costs associated with research and development. Businesses can also utilize the Accelerated Investment Incentive, which allows a larger portion of certain capital assets to be written off in the year of purchase. Additionally, credits and deductions are available for green technologies, manufacturing investments, and digital innovation, providing further financial benefits.
Initiatives such as the Global Skills Strategy can streamline the recruitment of highly skilled foreign talent with expedited work permit processing and temporary work permit exemptions. Other programs that can help when hiring foreign workers include the Temporary Foreign Worker (TFW) Program and the International Mobility Program (IMP).
Businesses operating at the forefront of key industries can join one of Canada’s Global Innovation Clusters. Backed by significant investment, these clusters bring together companies, academic institutions, and non-profit organizations to create dynamic innovation ecosystems in sectors such as digital technology, advanced manufacturing, and sustainable industries. This initiative offers foreign investors access to competitive government grants and incentives, positioning Canada as a prime destination for capitalizing on breakthrough innovations while fostering long-term economic expansion.
Don’t miss Part Two of our ‘Doing Business in Canada – FAQs’ series, where we answer questions about tax implications, free trade agreements, the Investment Canada Act and more.
This article was written by the NVS Professional Corporation team, your knowledgeable Barrie and Markham accountants. The content is intended as a general guide for informational purposes only. For specialist advice tailored to your specific situation, please reach out to our expert team.
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