An Overview | Doing Business in Canada
Canada consists of ten provinces and three territories, which collectively make up the second-largest country by total area and fourth-largest country by land area. Despite its relatively small population for its land mass, Canada has the eighth largest economy among the industrialized countries. It is in fact one of the wealthiest and most prosperous nations in the world, with the eighth highest per-capita income globally. The United States is Canada’s largest trading partner, and significant trade is also made with countries in the European Union and Asia as well as with Mexico. Canada’s major industries are manufacturing, financial services and services. Canada is a signatory to the General Agreement on Tariffs and Trade (GATT) and to the North American Free Trade Agreement (NAFTA).
With a familiar culture and close proximity to the United States, Canada is often a popular first choice for American and nonU.S. companies looking to expand internationally. But with a disjointed system of provincial laws, getting operations up and running in Canada presents unique challenges.
Expanding to Canada? Key things to keep in mind
Standards Differ by Province
Businesses setting up in Canada must comply not only with federal laws, but with specific provincial provisions. It is essential that companies understand locationspecific policies that may impact business. For example, in Quebec — Canada’s largest province — everything from contracts to advertising must be written in French. Companies should also allow for separate home- and host-country pension plans and GST/VAT plans, which may require experts to navigate.
While the famed Canadian healthcare system provides some services to citizens free of charge, many items considered basic in the U.S. — like prescriptions and dental care — are not fully covered. Many Canadian employers offer supplemental coverage to their workers to close these gaps. Each province has its own health insurance plan, some of which are funded by a payroll tax on employers operating in that province.
The concept of “at will” employment does not exist in Canada. The employeremployee relationship is governed by a contract, requiring notice for termination and often significant, mandatory severance benefits for terminated employees. Since common law forms part of employment legislation, it is important to understand key aspects of the common law impacting employers.
Watch Out for GST
Complying with the goods and services tax (GST) — the Canadian equivalent of valueadded tax — means initial registration, thorough documentation and periodic filings. The federal GST applies to most supplies of goods and services in Canada at a rate of 5%. Additionally, each province may have its own scheme (e.g., Quebec Sales Tax) to consider.
Canada labor laws are dictated in part by location. For example, standards on vacation time, seniority, and full- and part-time workers all vary by province. Canada also has detailed regulations on legally registering an employee versus an independent contractor.
Incorporating Your Business
Companies have the choice of incorporating either federally or locally in one of the provinces. However, there are specific, stringent requirements regarding the incorporation of a business. It is advisable to consult with an expert on the best incorporation strategy for your business prior to expanding operations anywhere in Canada.