Canada has a business-friendly environment and draws part of its attractiveness towards investors from a favourable blend between a high quality of life, good infrastructure, developed cities and a sound regulatory regime for companies. The number of total effective taxes for companies is a relatively low one and the process for opening a company is simple. The country has managed to build and maintain a reputation for a stable economy and a reputable business environment.
A good business environment
Canada is a country that has proven its financial stability over the years and has demonstrated an important degree of resilience in front of the global turbulence. It has a good policy management that is implemented successfully at a macro-economic level, allowing it to maintain its financial stability, low inflation and low unemployment rates.
Foreign investments are encouraged in Canada, with few restrictions in some business fields, such as media and communications, cultural businesses in some cases as well as air and railway transportation. Existing restrictions concerning foreign investments in the telecommunications sector have been eased.
In the World Bank Doing Business Report 2019, Canada ranks 22nd in a list of 190 economies worldwide, with 11 key indicator sets. The country ranks well for the easiness with which investors can start a business as well as for obtaining credit, paying taxes, cross-border trading, resolving insolvency issues and other areas.
Some of the top industries in Canada include the business and financial services sectors, the IT and software sector, aerospace and automotive, biopharmaceutical and medical devices, machinery and equipment production, the oil and gas sector as well as the renewable energy sector. The largest manufacturing sector in Canada remains the agri-food industry. Various business fields are developed at a provincial and territorial level, providing diverse business opportunities in all of the main regions.
In Forbes’s List of Best Countries for Business, Canada ranks on sixth place, with the report emphasizing on the country’s important natural resources: “Canada now ranks third in the world in proved oil reserves behind Venezuela and Saudi Arabia and is the world’s seventh-largest oil producer”.
Easy company incorporation
Opening a company in Canada is a simple process that, on average, lasts approximately two days. Investors need to file for incorporation and registration online via an online filing center and pay the necessary fees. Entrepreneurs choose between the four types of incorporation: with a number instead of a company name, with a pre-approved name, incorporation with a subsequent name approval and incorporation with a pre-reserved number. Upon registration, the details of the new company are forwarded to the Canada Revenue Agency, which will then issue the business number. Investors can choose among a few main legal forms which suit the needs of individual entrepreneurs, small, medium and large companies. These are the corporation, the unlimited liability company, the partnership, cooperative, sole proprietorship and branch of a foreign company.
Many Canadian companies have grown to become international ones.Canadian businesses that branch out overseas, such as in the United Kingdom, may want to request specialized assistance for matters that concern different legal procedures and observe the local rules, otherwise they may need the legal advice of a defence attorney.
Attractive taxation for companies
The general corporate income tax rate in Canada is 15% at a federal level and between 11.5% and 16% at a provincial or territorial level.The provincial taxes apply in addition to the federal ones. Resident companies in Canada are subject to the corporate income tax rate on their worldwide income while non-resident companies are subject to taxation on incomes derived from their Canadian permanent establishment and on the capital gains tax on the disposal of taxable property in the country.
Small Canadian controlled private corporations can benefit from a different taxation regime, with the federal tax rate levied on business income above a certain amount and a reduced rate applicable after this threshold.
Canada has signed a broad network of taxation treaties, allowing for the reduction of the withholding tax or even the elimination of this tax when there is such a treaty between Canada and the non-resident company’s country of origin.
Research and development incentives, along with other types of tax incentives are available for companies in Canada. Direct and indirect funding by the Government is possible for innovative businesses and research centers and programs are especially supported. Incentives for scientific research and experimental development are available in the form of tax credits and tax deductions. Investment tax credits are available to small and medium-sized controlled private corporations, subject to certain requirements including the fact that the controlled private corporation is not a foreign-controlled one. British Columbia and Quebec offer reduced tax rates for revenues deriving from the use of patents and licenses for using patented technologies. Other federal and provincial tax incentives can apply for media and environmental business activities as well as for processing and manufacturing companies.
The wide range of tax incentives for different business activities and the Government support for search and development can be important for companies in Canada, especially for small to medium-sized ones. This variety of incentives contributes to the overall attractive business climate.
The University of Toronto, the University of British Columbia and the universities in Alberta and Montreal are just some of the best universities in Canada. Talented individuals are to be found in all regions of the country and the pool of highly qualified and dedicated employees is diversified in Canada, across the major business sectors. When comparing the average employment costs, these tend to be lower in Canada compared to the United States, for example. Social security contributions are applied at a federal level and are made both by the employer and by the employee to the Canada Pension Plan.
A good business regime and favorable conditions for starting a company are not singular qualities for this country. Canada has much more to offer apart from a good business environment. The country also ranks well in the 2019 Bloomberg Healthiest Countries Index, ranked 16th out of 169 evaluated countries. According to a Bloomberg article, “in North America, Canada’s 16th-place ranking far surpassed the U.S. and Mexico, both of which dropped slightly to 35th and 53rd”.
Froman excellent business infrastructure and regulatory regime to a high quality of live and diverse investment opportunities, Canada meets the needs of a diverse pool of investors and can be a top location for starting a business.