Expanding to Canada: Key considerations for entering the Canadian Market
Why are more companies choosing to expand their businesses to Canada?
There are many reasons why companies choose to expand their business to Canada. It is ranked as the 10th largest economy in the world, it offers friendly immigration policies and a highly skilled workforce. Canada is considered one of the safest countries globally to conduct business due to its appealing tax concessions, low corruption rates, and political stability.
For companies looking to do international business in the North American market, Canada may be the ideal candidate to consider for your global expansion.
Market Entry Options for Canada
What steps do you need to take till you have your business up and running in Canada?
There are several methods that can be used to enter the Canadian market. Depending on your business objectives, assessing your best option is crucial. Timelines, costs, resourcing, and employment are all factors that may influence your market entry strategy. Some of the considerations to take into account include;
- Locally hiring employees
- payroll setup
- drafting of local contracts and agreements
- registering a company
- entity set up
- PEO / EOR services
The information below provides an overview of the various market entry options available to you. Depending on your business goals, and operations, deciding on hiring employees locally, setting up an entity, or engaging a PEO / EOR service requires professional advice.
Below is a brief overview of some of the most common market entry options.
1. Set up an Entity
Registering an entity allows companies to hireâ€¯staffâ€¯if necessary, sell goods/servicesâ€¯â€¯, apply for business benefits, and many other options. The main Entity types in Canada for foreign business owners include:
- Sole Proprietorship;
- Limited Partnership;
- Corporation; and Cooperative.
Deciding on which entity is best suited to your need depends on your business objective and background. Register to Centuro Connect for FREE to discover details about the entities types, documents required, timelines, and the procedure of how to apply.
Allow others in different locations to open up your business branches and operate them following your guidelines. They pay you a fee and a percentage of profits. However, they have more operations control within their local market.
3. Direct Exporting
Market your goods and services within a region and export your goods and services from your home region.
- Can take many forms including JVs or having a local partner to represent your firm and help generate business.
- Some countries require a local partner to have an ownership stake within a region.
- You may simply need a distributor to sell your goods.
5. Buy a Company
- You immediately claim market share with an existing customer base.
- No incorporation or initial setup costs/laws to comply with
- However, expensive to buy and need to integrate into the company culture
Give ownership of your product to parties in different regions for them to sell on your behalf,
7. PEO / EOR
A professional employer organisation (PEO) can be defined as an outsourcing firm that provides services to small and medium-sized entities (SMEs).
An ‘Employer of Record’ (EOR) is a third-party contracted by a client company to take on the core compliance responsibilities of an employer, as specified under the law.
If you liaise with a company offering PEO and EOR services you will be able to expand your company in a region without setting up an entity.
- This involves the "leasing" of employees. A resident firm will hire employees on your behalf, and cover payroll and other necessary HR requirements, whilst the employees work for you.
- This enables you to test the market with staff but without the up-front capital of setting up a company.
This may be a suitable option for companies that want to hire a few employees in Canada without setting up an entity.
Canada also offers an Intra-Company Transferee (ICT) Programme that aids companies in entering the market. In order for your company to set up an entity in Canada via the ICT programme, it must meet certain eligibility requirements;
- your business must be selling or providing services at the moment of application;
- the business must be established for one year or longer,
- you should have at least one employee,
- your business should be officially registered in your home country (This should include its own registered office and a complete tax payment record). Your company is also required to have sufficient funds to sustain itself.
If the eligibility criteria are met, your next step is to choose one out of Canada's ten provinces to do business in and register your company. Provinces offer various benefits. Register for Centuro Connect to discover which may be best suited for your company.
Companies are also required to obtain a business number, which can be applied for online via the Canadian government's official website. There is a specific application for non-resident businesses to register for a business number. This number is an identifier unique to your entity.
To register, business owners are required to submit some personal information as well as company information such as; business name, type of business or organisation, name and social insurance number of the owners, physical address, mailing address, and description of major business activity.
Once your organisation is registered, you will need to consider hiring local employees. In most Canadian provinces, it is required to hire at least one Canadian director.
What is the Services tax structure?
Tax structure and Tax Rules in Canada
One of the major tax benefits of setting up in Canada is low corporate taxes. After the general tax reduction, the tax rate for Canada’s corporate system is 15%, one of the lowest rates internationally. Canada also offers several tax incentive programmes such as Scientific and Experimental Development, the Strategic Innovation Fund, the Pan-Canadian Artificial Intelligence Strategy, and Canada’s Ocean Supercluster. This provides huge incentives to companies looking to expand.
The Canadian tax system imposes corporate and income tax under the Income Tax Act (ITA), which applies to both residents and individuals conducting business in the country.
Foreign business owners are generally subjected to taxes on income such as:
- Incomes from an office or employment in Canada.
- Capital gains on the disposition of properly, Income from a business carried on in Canada.
- Incomes of a passive nature are received from Canadian residents.
The federal tax system in Canada is administered by the Canada Revenue Agency (CRA) and assets used in businesses conducted in Canada are taxable Canadian property. The ITA does impose a 25% holding tax on non-residents who receive income from Canada, this includes dividends, rents, royalties, certain trust distribution, and management fees in Canada.
For a detailed breakdown of the tax system in Canada, including rates, and corporate and income tax information, register for Centuro Connect for FREE.
What Visas are available to expanding companies?
Canada offers several options for foreign nationals to conduct business. If your company has been successfully registered in Canada, you will need to apply for a work permit. There are also several visa options for Canada. This application can be submitted online. The Permits and Visas are eligible for all provinces in Canada except Quebec, which has its own provincial requirements.
Work Permits Canada
If you intend to operate a business in Canada, you may be eligible for an employer-specific work permit.
Your company should create or maintain significant social, cultural, or economic benefits. In addition to this, you should meet general eligibility requirements for a Canadian work permit. If obtaining your work permit, your spouse, common-law partner, and children may be able to live, work or study with you. The permit will expire after a specified time, and you should apply to extend your permit at least 30 days before it expires.
Business Visa for Canada
A Canadian business visa allows individuals to travel to Canada to do business. It is a temporary visa, allowing the individual holding the visa to only stay in Canada for a short period, typically under 6 months.
Business Immigration Program
This program aims to encourage and facilitate the admission of successful business people who are seeking new opportunities and help immigrants start a business and settle in Canada. Eligibility criteria include a letter of support from your designated entity, meeting language requirements, and having sufficient settlement funds.
Start-up Visa Program
If your business is innovative, can compete on a global scale, and allows for job creation for Canadian citizens, you may qualify for Canada’s Start-Up Visa programme. This program targets immigrant entrepreneurs with the skills and potential to build a business in Canada. This programme is aimed at business owners with at least 3 years of running a successful enterprise.
Ease of Entry into Canada – a good option for expanding companies
There are many benefits of expanding into Canada. The Canadian government provides ample opportunities for ease of entry. It’s relatively easy for qualified companies to conduct their business in Canada and individuals to immigrate. Some additional reasons why it may be beneficial for your business to expand to Canada.
- Businesses immigrating to Canada will benefit from its vast trade network, which provides an advantage to organizations based in Canada with access to global and diverse markets. Canadian trade pacts include the North American Free Trade Agreement, the European Union’s Comprehensive Economic Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
- Canada has a reasonably stable economy when compared to a country like the United States. This stability will lower your risks of a business shutdown. The reasons for this financial stability are low tax rates, well-managed bureaucracy, and the freedom to do trade.
- If planning on doing business in Canada, you will have access to a highly-skilled workforce. Offering employment to Canadian residents or citizens is one of the key requirements for starting a successful enterprise in Canada.
- Canada is in a convenient location. Not only is it the second-largest country on earth, but it is surrounded by three oceans and traversed over 6 time zones. Canada has 550 port facilities and 18 airports.
Eager to learn more? Contact us for guidance, support, and expert advice on expanding your business to Canada and beyond. Register for Centuro Connect now to discover more information and receive expert advice.
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