Canada is one of the most economically stable countries in the world, which occupies a leading position in the G7 as a country with a favorable business climate. Every foreigner can officially open his own business by creating an entrepreneurial plan and registering a company with a suitable form of liability. Doing business in Canada is grounds for naturalization and subsequently citizenship .
Is it worth investing in a Canadian business?
The stable economy of the North American state attracts experienced entrepreneurs from all over the world. Russians, Ukrainians, Belarusians and citizens of other CIS countries often note among the advantages of doing business in Canada:
- Loyal taxation system. The corporate tax rate in Canada is 15% and is considered one of the lowest in the world.
- Sustainable economy. Canada ranks 9th among countries on the planet in terms of macroeconomic indicators. According to official data from the World Bank, Canada’s gross domestic product (GDP) was $1,990.76 billion in 2021. Canada’s GDP value represents 1.49% of the global economy.
- A large number of specialists. The country has several leading universities with a good reputation, so the Canadian market is provided with qualified personnel.
- Rising real estate prices. Royal LePage predicts that home values in Canada will rise by 15% by the end of 2022. For foreign investors, this trend is positive, since they earn on the difference between purchases and sales, and real estate itself is a valuable asset.
But there are also disadvantages to doing business in Canada:
- Delay in obtaining some licenses. For example, the procedure for obtaining a building permit consists of 12 stages and can take 250 days.
- Cybercrime . According to Canada’s federal agency, online crime has increased by 160% since 2015, which can greatly harm businesses, especially those that trade online.
- Difficulties in carrying out international trade. Each province has its own rules and requirements, such as packaging and labeling of goods.
Applying for a business visa
A permanent resident visa (PRV) is an official document that provides the right to enter Canada with the further possibility of obtaining a permanent resident card for persons planning to open a business in the country.
To obtain a PRV, the candidate must prepare the following documents:
- internal and foreign passports;
- a completed application form, which can be obtained on the Canadian government website after registration;
- a receipt for payment of 530 CAD (about 395 USD) for data processing and 500 CAD (about 388 USD) for the right to obtain permanent resident status;
- passport size photographs 3.5 x 4.5 cm;
- a bank statement indicating the availability of funds to cover expenses associated with living in Canada – about 12,000 CAD (9,316 USD) per applicant;
- certificate of good conduct;
- a medical certificate confirming the absence of dangerous diseases that pose a threat to Canadians (for example, tuberculosis);
- a covering letter explaining the purpose of the trip;
- invitation from a business incubator or broker.
To obtain a business visa, each foreign entrepreneur must go through 4 mandatory stages:
- Register on the Canadian government website , enter personal and contact information into your profile.
- Pay the visa fee.
- Generate and submit a package of documents online through the website or by visiting the Canadian consulate or visa center in person.
- Submit biometric data (fingerprints, photo and electronic signature).
- Pick up the document in person or use a courier service.
How to open a business
To open a business in Canada, a foreign candidate needs to take several steps:
- Create a plan based on your business idea. The candidate must draw up a detailed plan for the development of the enterprise for 5 years in advance.
- Choose a company structure. In Canada, there are only 3 forms of doing business – Sole proprietorship (individual entrepreneur), Partnership (partnership), Corporation (corporation).
- Select a name. When registering a company, all entrepreneurs need to study the database of Canadian trademarks so as not to repeat an existing name and come up with their own unique name.
- Establish a business. A foreign entrepreneur must register a company in the province if he plans to conduct business in one region, or at the federal level if the candidate plans to conduct business throughout the state.
Business idea
Statistics show that 99.8% of Canadian businesses are small or medium-sized companies with fewer than 500 employees, accounting for almost 38.4% of GDP. The following industries are most popular among immigrants for running small and medium-sized businesses:
- Agriculture;
- catering business;
- wholesale and retail trade;
- construction;
- professional, scientific and technical services.
A business plan is one of the key factors for the success of a future enterprise – it is the one that is submitted to financial organizations that help in opening a company in Canada. A well-written business plan should include the following elements:
- Company name;
- market analysis;
- marketing plan;
- organizational and legal structure of the future enterprise;
- HR plan;
- analysis of financial and equipment needs;
- key financial data.
Choosing a form of ownership
The type of business structure that a foreign entrepreneur chooses affects the amount of taxes and the form of reporting. As described above, there are three forms of organization of activity in Canada.
Sole proprietorship
A sole proprietorship (SP), or sole proprietorship, is an unincorporated business owned by one individual. The SP owner has sole decision-making responsibility and receives all profits. This form of responsibility is suitable for self-employed people, freelancers, and online store owners.
Each individual entrepreneur must submit a T1 declaration on (about):
- payment of annual tax;
- sale of property (if necessary);
- whether there is a taxable capital gain for the year;
- making contributions to a pension fund under a Canada (or Quebec) plan;
- desire to access special insurance benefits for self-employed persons (for example, child benefit).
Partnership
Partnership, or partnership, is a form of business activity between two or more individuals, corporations, trusts or partnerships who come together to jointly trade and other business activities. Each partner contributes his or her share of funds or property to the authorized capital. All shareholders equally distribute the profits from the business and bear responsibilities and losses. The shape is suitable for a variety of types of businesses, such as a physical store, a hostel cafe.
The partnership itself does not pay income tax on the results of its activities and does not file an annual tax return. Instead, each settlor includes a share of the partnership’s earnings or losses on the individual’s, company’s or trust’s own income tax return. All shareholders are also required to report to the authorities on the financial results of the company using special forms .
Corporation
A corporation, or incorporation, is an association of legal entities and individuals to create a product or service. Collectively, this group represents a new legal entity, and each of its members is the owner of a certain share. Most corporations, except royal corporations, charities and the Hutterite Colonies of Canada, must file their T2 Corporation tax return electronically. This is mandatory for those companies whose annual gross revenue exceeds 1 million CAD (about 776 thousand USD). Suitable for IT development or any type of production on a large scale (for example, medicines).
How to register a company
All foreign entrepreneurs wishing to do business in Canada must register their company through the government website . A foreigner can register a company if he is the direct owner, authorized person or representative with RepID or GroupID .
A foreign entrepreneur must meet two conditions to register a business online: have a valid Social Security Number (SIN) and file an income tax return with the Canada Revenue Agency (CRA) to obtain a business number.
In addition to passport information and SIN, to register a business with Business Registration Online (BRO) on the Canadian government website , a foreigner will need to provide the following information:
- company name;
- company number (assigned after registration with the CRA);
- organizational form of business;
- owner’s name and SIN;
- physical address of the enterprise;
- postal address (if different from physical);
- description of the main business activities.
Insurance
Business insurance in Canada is not mandatory, but it protects owners from losses due to unforeseen circumstances that may occur while operating. There are many types of policies available to business owners—their choice depends on the type of business, industry, and income.
When determining the amount of the insurance premium, the following factors are taken into account:
- size and location of the enterprise;
- duration of existence of the company;
- the organization’s annual and projected gross income;
- number of employees hired;
- history of insurance claims.
Business insurance provides coverage for incidents involving third parties and does not cover the owners themselves, employees, contractual liability, or intentional criminal acts.
Licenses and permits
When planning a business in Canada, foreigners may need to apply for licenses and permits from multiple levels of government (for example, a local municipality or provincial government). The application is submitted on the BizPal portal , where you need to indicate the location of the enterprise and industry.
For medium and small businesses, the most common types of permits are:
- General business license – a general license to conduct business in a city or province;
- DBA license – permission for individual entrepreneurs conducting business under a name that differs from the legal one;
- Sales tax permit – sales tax permit required for those companies that sell their goods via the Internet;
- Zoning permit – permission to conduct business within the city (the business owner should check with the local city hall about the need to obtain this document);
- Home occupation permit – permission to conduct business at home;
- Health permits – necessary for enterprises whose work is related to food products;
- Environmental permits – permission required for enterprises that deal with any chemicals or pollutants;
- Police and fire permits – permission from the local fire department and police (required for almost all types of enterprises);
- A signage permit – permission to place a sign that meets the requirements of the city authorities.
Taxes
Canada’s tax system is considered the most loyal among the G7 countries, which makes doing business more comfortable than in other English-speaking countries. Small and medium business owners mainly pay 3 types of fees:
- income tax;
- income tax (federal and provincial);
- VAT (federal and provincial).
The basic income tax rate is 38%, but can be reduced to 28% if income is earned outside of Canada. The table below shows federal and provincial (excluding Quebec and Alberta, which have not signed the required agreement) corporate income tax rates. Companies whose annual income does not exceed 500,000 CAD (about 388 thousand USD) pay a lower rate, while others pay a higher rate.
| Province name | Reduced rate, % | Increased rate, % |
|---|---|---|
| Newfoundland and Labrador | 3 | 15 |
| New Scotia | 3 | 16 |
| New Brunswick | 2.5 | 14 |
| Prince Edward Island | 3 | 16 |
| Ontario | 3.2 | 11.5 |
| Manitoba | 0 | 12 |
| Saskatchewan | 2 | 12 |
| British Columbia | 2 | 12 |
| Nunavut | 3 | 12 |
| Northwest Territories | 4 | 11.5 |
| Yukon | 2 | 12 |
Federal and provincial value added tax rates are 5 and 7% respectively.
Governmental support
Canadian government funding programs can provide support to small and medium-sized businesses, large corporations, non-profit organizations and research institutions. The most popular government programs to support businesses in Canada can be divided into 4 categories:
- grants and loans for business expansion;
- additional financing for the authorized capital;
- grants for the search for qualified personnel to staff the enterprise;
- investing in research and development.
Is it profitable to buy an existing business in Canada?
Buying an existing business in Canada can be an effective way to quickly expand your customer base or gain access to new markets. There are 5 ways to purchase a ready-made enterprise:
- purchase with your own money;
- Seller collateral financing;
- bank loan;
- leveraged buyout;
- joint (share) purchase.
Before purchasing, a foreigner should:
- Carefully check the company for debts.
- Assess financial risks.
- Find out your credit history.
- Analyze basic financial reports (P&L, balance sheet, cashflow).
Business immigration to Canada
Canadian authorities are interested in experienced foreign entrepreneurs. In Canada, there are 4 business immigration programs that enable candidates to obtain permanent resident status with the right to subsequently obtain citizenship.
All applicants wishing to immigrate to Canada as entrepreneurs must meet 3 requirements:
- Receive a letter of support from a Canadian financial institution. All foreigners who want to establish a company in Canada are required to obtain the support of brokers or trust funds. To do this, you need to provide a ready-made business plan to one of the financial intermediaries.
- Speak English or French at a level of at least B2. A certificate confirming knowledge must be attached to the package of documents for applying for permanent residence.
- Have enough money to cover travel expenses necessary to live in Canada. A bank statement or any other documentary evidence of financial availability must also be included in the package of documents.
For business emigration from the CIS countries to Canada, candidates will need to take 6 steps:
- Register an account on the government website and receive a package of necessary applications and questionnaires, as well as instructions for filling them out.
- Create a dossier, including printed and completed forms and applications, as well as collect additional documents .
- Fill out an application on the website, following the instructions that are available after registration.
- Pay the fees, which amount to 2,075 CAD (about 1,630 USD), of which 1,575 CAD (about 1,240 USD) is the application processing fee, 500 CAD (about 388 USD) is the fee for the right of permanent residence.
- Send the application and completed package of documents to:
Immigration, Refugees and Citizenship Canada
Centralized Intake Office – Start Up Business Class
PO BOX 8700
Sydney, NS B1P 0G2
Canada - Apply for a business visa to travel to the country.
If all requirements are met, a business immigrant has the right to apply for permanent resident status in Canada and, after a 5-year period, to obtain citizenship. Foreign entrepreneurs whose goal is to open and conduct business in Canada turn to migration specialists for legal assistance. The process of collecting documents, registering a company and submitting a dossier is long, labor-intensive and requires strict compliance with Canadian legislation. To prevent critical mistakes, candidates seek support from lawyers with a narrow specialization in the field of migration law.