How to Do Business in Canada
From snow-capped mountains and glittering glaciers to spectral rainforests and remote beaches, Canada is the godfather of the great outdoors. But there’s more to the world’s second-largest country than dazzling landscapes and fresh air. The nation’s robust economy, stable political system, natural resources, skilled workforce, and world-class infrastructure combine to create an accommodating international business environment. In US New’s latest Open for Business report, Canada ranks as the tenth most business-friendly country in the world.
The country’s dominant industries are services, manufacturing and natural resources, which are spread across its 13 provinces and territories - from oil and gas in Alberta to automotive assembly in Ontario. Whatever industry you intend on tapping into, you’ll need to know how to do business there. This guide to doing business in Canada will provide you with some useful tips.
Business Culture in Canada
Business culture in Canada is a blend of American, British, and French traditions, meaning that practices are nuanced in each province. English is the most widely spoken language in Canada and is generally used in business interactions. However, anyone doing business in Quebec should be aware that it’s a French-speaking province.
In 1971, Canada adopted a national policy of multiculturalism. Therefore, equality, diversity, and justice are highly regarded values within the business environment.
The management style in Canada tends to be less formal than in the UK and Europe. Managers prefer to be viewed as part of the team, rather than authority figures. Decisions ultimately rest with senior executives, but input is valued from all levels of the organisation.
Much like their American neighbours to the south, Canadians prefer a direct style of professional communication. However, they tend to be more reserved and less willing to show emotion than their US contemporaries. Communicate what you mean in a tactful and forthright manner to gain respect, avoiding confrontation and aggression.
Benefits of Doing Business in Canada
With its strong economy and political stability, Canada is an attractive market for businesses looking to expand internationally - and the advantages of doing business in Canada don’t end there.
Low corporate tax rates
To help stimulate economic growth and attract international business, Canada has gradually lowered its corporate tax rate in recent years from 18% to 15% - making it one of the most competitive corporate tax rates in the world. This is significantly lower than the UK, for example, which from April 2023 will be either 19% or 25% depending on annual profits. Canada’s low corporate tax rate has contributed to it having the lowest business tax burden among G7 countries.
Companies without a permanent establishment - a fixed place of business through which the business is wholly or partly carried on - in Canada can do business there without paying corporate taxes.
Savvy businesses leverage Canada’s geographic location to expand their international reach. In addition to its diverse domestic markets, Canada offers access to significant global markets - notably the US, Mexico and the EU. For example, Canada and the US share one of the largest bilateral trading relationships in the world, with over $1 trillion traded in goods and services in 2021. Situated between the Atlantic and Pacific oceans, Canada is also a vital crossroads between North American markets and the booming Asian economies. It is also lapped by the Arctic Ocean, providing extensive access to global shipping networks via over 550 seaports.
Lucrative and diverse markets
Canada is home to a diverse set of flourishing industries, many of which are linked to its abundance of natural resources. For example, it ranks fifth in the world for oil production and has the world’s third-largest proven oil reserves, producing 4.6 million barrels of crude oil per day in 2018.
Along with mining, manufacturing is the backbone of the Canadian economy. According to the Government of Canada, manufacturing accounts for approximately CAD$174 billion of the nation’s GDP and represents more than 10% of its total GDP. This market diversity underpins the nation's resilient economy: if one industry experiences a challenging period, others can compensate.
Canada has made great strides in its commitment to improving its intellectual property (IP) regime, by reducing administrative burdens and streamlining procedures for businesses. In 2018, Canada acceded to the Hague Agreement, which makes it easier for domestic and international companies to file for IP patents via a centralised application. This year, Canada has agreed to sign up to several more international IP treaties: the Madrid Protocol, the Singapore Treaty, the Nice Agreement, and WIPO’s Patent Law Treaty.
Canada’s extensive international trade agreement portfolio creates enticing opportunities for international businesses: Free Trade Agreements (FTAs), Foreign Investment Promotion and Protection Agreements (FIPAs), and World Trade Organisation (WTO) agreements. Plus it’s the only Group of Seven (G7) member to have struck trade agreements with all six other countries in the group. Canada currently has 15 ratified trade agreements with 49 countries, providing preferential access to 1.5 billion consumers globally.
Challenges of Doing Business in Canada
Scaling a business internationally comes with challenges - and Canada is no exception. You might find regional, legal, financial, and administrative hurdles to overcome there.
Regional laws and regulations
Organisations conducting business in Canada must comply with federal laws that apply nationwide, such as the federal Goods and Services Tax (GST), which is currently set at 5%.
However, Canada’s provinces and territories establish their own laws and regulations governing business, making compliance nuanced. If you’re shipping products throughout Canada, you must comply with the packaging, labelling, certification, and customs regulations in each province.
VAT rates, such as those for the GST and Harmonised Sales Tax (HST), vary throughout the country. The Canada Revenue Agency (CRA) sets a federal rate, and some provinces harmonise or combine the provincial VAT with the federal VAT. For example, businesses operating in Quebec must pay the Quebec Sales Tax (QST) in addition to the GST.
Canada ranks just 100th in the world for contract enforcement in the World Bank Group Doing Business report 2020 - the last time the comparison of business regulation in 190 economies was conducted. This measure of the time and cost to resolve a commercial dispute and the quality of judicial processes shows it takes 910 days to enforce contracts in Canada. This is mainly due to insufficient court capacity and cumbersome outdated court processes.
However, the report indicated that Canada has increased the efficiency of the courts by expanding electronic document submission and streamlining procedures. For example, by introducing an e-system that allows plaintiffs to file the initial complaint and pay court fees electronically.
Despite being more stable than emerging market currencies - such as the South African rand and the Indian rupee - the Canadian dollar is sensitive to the demand for exports, which are concentrated in energy and commodities. Currently, Canada is benefitting from a global oil shortage amid the war in Ukraine, which has depressed the currency, making the nation’s other industries more competitive internationally. However, these accommodative conditions could be reversed if oil commodities recover, with the rising balance of payments placing upward pressure on the Canadian dollar - potentially driving up the cost of doing business in Canada.
Canada ranks a lowly 124th in the world for getting electricity in the Doing Business 2020 report. According to the report: “This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures the reliability of supply, transparency of tariffs and the price of electricity.”
Make International Payments with Clear Currency
To unleash the potential of doing business in the world’s eighth-largest economy, you must prepare for the challenges.
As a currency specialist with a wealth of market knowledge and experience, Clear Currency can help your business to save on international payments to and from Canada. When you join us, you’ll be assigned a dedicated account manager who will cut through the jargon and provide a friendly, one-to-one service. You’ll also have access to our quick and easy international payments platform. Open your free Clear Currency account today for quick, secure and cost-effective international currency transfers.
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