Are you thinking about setting up a business in Canada? If so, you’re in the right place!
Here, we’ll discuss the pros and cons of doing business in Canada so you can make the most informed decision.
With a stable and diverse economy, Canada is a great place to start a business. We’ll cover everything from taxes and regulations to cultural and political climates.
By the end of this article, you’ll better understand the advantages and disadvantages of doing business in Canada.
So, let’s dive in and explore the pros and cons of doing business in Canada.
What are the advantages of doing business in Canada?
1. Lower Corporate Taxes
Due to the comparatively low corporate tax rates, foreign business owners and entrepreneurs often look to the Canadian market.
This is particularly true in locations like the US, where the corporate tax rate is currently 21%.
Canada, however, has one of the lowest rates available, making it a highly attractive option for investors and entrepreneurs.
This is why many foreign entities seek to enter the Canadian market, as the higher taxes in their native countries can harm their business profits and success.
Related: How To File Taxes For Small Business In Canada
2. A Stable Economy
Canada is ranked number one on the Forbes Best Countries for Business list.
Compared to the US, Canada has an economically stable environment, which minimizes the risk of a business closure.
This stability is due to factors such as low taxation, unrestricted trade, and efficient bureaucracy.
Canada’s economy is also resilient to economic downturns due to quick action from the Bank of Canada and lenient credit practices.
3. Abundance of skilled people
Due to its high-ranking universities and quality vocational training institutes, Canada has abundant skilled people in the workforce.
Canada has many young adults aged 25-34 with post-secondary education, making 62% of the population.
Therefore, companies looking to invest in Canada will not encounter difficulties finding qualified employees.
Furthermore, offering jobs to Canadian citizens or permanent residents is important to ensure a successful business in Canada.
4. Equality and Multiculturalism
Canada is a large nation in terms of both size and power and ranks highly amongst the G7 in providing equal opportunities to its citizens, both native and migrant.
Through its Skilled Workers Programs, Canada allows skilled migrants to work and live there, while business visas enable migrants to come to Canada and set up small businesses.
Additionally, Canada is renowned for its diversity: boasting over 200 languages, it is one of the world’s most multicultural and multilingual nations.
5. Intellectual property protections
Canada is committed to innovation and is taking steps to reduce administrative burdens and streamline procedures for Canadian businesses in the area of intellectual property (IP).
In 2018, Canada joined the Hague Agreement, and in 2020 the country agreed to be part of several other international IP treaties, such as the Madrid Protocol, the Singapore Treaty, the Nice Agreement, and WIPO’s Patent Law Treaty.
These steps are intended to improve the IP regime in Canada, providing businesses with a competitive advantage.
6. Canada is geographically accessible
Canada’s geographic location and logistical infrastructure make it an ideal place for business.
With its expansive landmass, Canada has well-developed transportation systems that provide easy access for foreign entrepreneurs and companies.
Furthermore, its physical location allows for efficient global connections, making it a great choice for those looking to do business abroad.
- Canada is bound by three oceans—the Atlantic, Pacific and Arctic—providing significant access to ocean-bound transport networks.
- Canada boasts over 550 seaports, making it a major hub for massive-scale shipping and receiving.
- Canada features over 1,000 airports and 370 heliports, providing employees, company leadership and stakeholders easy access to their Canadian operations.
Canada’s expansive size, efficient transportation system, and close proximity to major world markets make it an ideal place for international employers to not only source talent but also ensure easy access to their workforce.
What are the disadvantages of doing business in Canada?
Business owners looking to expand into Canada should be aware of the potential challenges.
1. Navigating provincial rules
One such challenge is understanding the laws and regulations of each of Canada’s ten provinces.
Similar to the U.S., each province has its own government, meaning companies must keep up with federal and provincial laws and taxes.
Additionally, labor laws vary from province to province, which impacts employee contracts.
A distinct consideration is Quebec, as it has its own civil law system, requiring all forms and filings to be completed in French and all workers to be conversant in the language.
Moreover, Quebec-based firms must pay Quebec Sales Tax in addition to the Canada-wide Goods and Services Tax (GST).
2. Lots of Regulation
The Canada Free Trade Agreement has recently addressed the issue of inter-provincial trade in Canada, intending to reduce restrictions and barriers to trade, labor mobility, and financing.
Despite this, many businesses in Canada still find it hard to navigate the different rules and regulations in each province and territory, making it feel as though they are operating in 13 distinct countries rather than one.
There remains an opportunity for further improvement in this area.
3. Smaller Market Size
It is often said that Canada faces a “scale-up” challenge.
This is why the nation is a major exporter; there is minimal potential for growth within the nation’s borders.
It is common to find that the most successful enterprises originating in Canada have offerings they provide outside of the Canadian market.
Though this limited market size should not be overly problematic for companies looking to enter Canada from other areas, it is still prudent to be aware of.
4. Understanding business licensing requirements
Professional licensing requirements in the U.S. and Canada are similar and involve substantial regulation in industries like architecture and engineering.
Obtaining a license in Canada requires a substantial amount of training and strict examinations.
Moreover, permits and licenses are granted at different levels of government, and businesses expanding into the country must ensure that all applicable regulations are complied with.
This process also applies to acquiring business licenses.
As in the U.S., new businesses in Canada similarly need to apply for a license in their respective jurisdiction.
Note that the licensing procedure can be more extended in certain Canadian industries; for instance, in the construction industry, it can take up to nine months to procure a permit—a process that is even longer in Quebec, where special construction permits are obligatory.
Related: 4 Types Of Small Business In Canada: Pros & Cons
5. Contract enforcement challenges
In Canada, contract enforcement can be a lengthy process.
The World Bank’s Doing Business 2019 report states that it takes an average of 910 days to resolve a delinquent contract in the country.
Despite having a strong and clear legal system, enforcing agreements in a timely manner can be difficult.
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