Doing Business & Investing In...
CANADA C
hris Munn is a tax partner with Hogg, Shain & Scheck Professional Corporation in Toronto, Canada. He is a graduate of Wilfrid Laurier University, receiving his CA designation in
1990. Hogg, Shain & Scheck provides accounting, auditing, taxation and management consulting services to entrepreneurs and subsidiaries of foreign entities.
Q What makes Canada an attractive investment/business destination?
Canada is the second largest country in the world with a population exceeding 33 million; half of which resides within 150 kilometres of the U.S. border.
Canada’s exports approximately 72% of goods to the United States, 7% to Europe, 4% to China and 2% to Japan.
Businesses currently benefit from low interest rates, the availability of credit and a sound expanding economy. Canadian banks have strong balance sheets due to regulation, strong capitalization and conservative practices. Unemployment rates are slowly improving and inflation remains low.
Foreign investors should consider an investment in Canada for the following reasons:
• Attractive business environment.
• Strong growth record – Canada has led all G7 countries in economic growth from 2003-2012.
• Incredible market access – foreign investors will have access to both NAFTA and the EU once the Comprehensive Economic and Trade Agreement comes into force.
• Highly educated workforce. 58
www.finance-monthly.com • Competitive R&D environment.
• Low tax rates – overall marginal tax rate is the lowest in the G7.
• Financial stability. Q
What policies currently exist in Canada that benefit business and investment?
Investment Canada Act (“ICA”): Foreign investors have always played a significant role in providing the necessary capital to develop Canada’s economic potential. Non-Canadian investors must essentially follow the same rules that apply to Canadian corporations. Since Canada has no exchange control laws, investors can easily repatriate profits from Canada.
Foreign investment is subject to limited government regulation which has usually taken the form of:
• Withholding taxes on outbound dividends, certain types of interest or royalties;
• Special incentives applicable only to Canadian controlled corporations;
• Limits on the degree of foreign ownership especially in sensitive areas of the economy.
The ICA’s purpose is to encourage investments by both Canadians and non-Canadians which will contribute to economic growth and employment opportunities in Canada. It also provides for a review mechanism of significant investments by non-Canadians to ensure there is a benefit to Canada.
When establishing a new business (except in cultural areas) or acquiring a small business (<$5 million in assets), the foreign investor is only required to notify the government of their investment. No review is required.
If a review is necessary, the approval process is usually fast and straightforward due to
DOING BUSINESS & INVESTING IN
HOGG, SHAIN & SCHECK CHRIS MUNN CPA, CA, BBA
“Low interest rates, the availability of credit and a sound expanding economy.” Chris Munn shares Canada’s invest-appeal.
government imposed deadlines, and the limited range of reviewable transactions. There is a tendency for the government to approve a majority of the reviewable transactions.
Competition Act: This is a Federal statute which outlines the basic principles for the conduct of business that are designed to promote competition and efficiency in the Canadian economy. The Competition Act contains both criminal
offences for anti-
competitive behaviour and non-criminal provisions regulating the review of certain trade practices and the review of certain merger transactions.
PIPEDA: A foreign investor must be aware of Canada’s personal information protection legislation. PIPEDA (Personal Information Protection And Economic Document Act) forces every business to obtain an individual’s consent when it collects, uses or discloses the individual’s personal information. Each business is responsible for safeguarding all collected personal information.
Employment Standards: Every province has enacted legislation that regulates various
aspects of the
employer-employee relationship including minimum wage, holiday pay, overtime pay, leaves of absence, termination and severance.
The Canada Labour Code governs the employment standards of a unionized workforce.
Q
How does Canada’s tax system fit into the business/investment equation?
Income Tax: Canadian residents are taxed on their worldwide income. Non-residents of Canada are usually subject to tax on their Canadian source income, including income from a business or employment carried on in Canada, and income from the disposition of “taxable Canadian property”. Individuals are taxed at graduated rates. These rates depend on the type of income, province of residence and other factors. The highest marginal tax rate in
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