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North America

Doing Business in Canada:
Top 5 Benefits of Operating North of the U.S.

By March 1, 2019August 23rd, 2022No Comments
Toronto sign with skyline

It’s United States’ friendly neighbor to the North, which makes the idea of doing business in Canada attractive for many executives. Aside from its proximity to the U.S. and its residents’ jovial reputation, there are some fruitful business-related perks associated with expanding into the country.

Below we explain five of the top benefits for choosing Canada as your next international expansion destination.


Table of Contents

1. Canada Continues to Lower its Corporate Tax Rates

U.S. companies do benefit from operating internationally regarding corporate tax rates. As of 2019, the United States’ national rate sits at 21%, with local rates varied, and branch rates 21%/31%. It can be a huge cost for companies, which is why many seek global operation options.

As of 2019, the Canadian corporate tax rate is 15%, which is one of the lowest internationally. Through an effort to drive economic growth in the country, Canadian officials continue to adjust these tax rates. To give you an idea of how quickly it’s moving down the scale, it was 18% in 2010.

2. Income Tax Treaty May Remove Burden for U.S.-based Companies

Businesses headquartered outside of the country are required to pay income tax on the profits earned from Canadian operation. But, there is a treaty that relieves some of the economic burdens. If your company does not have a permanent establishment (PE), which is defined in the income tax treaty, your operational profits are not subject to Canadian income tax.

A permanent establishment includes a fixed place in which you carry out business in the country. To skirt around a PE, you may sell products or services through an independent contractor that works for other companies. This may allow you to avoid paying Canadian income tax on your business’ profits. However, there are risks to consider when hiring an independent contractor.

It’s important to note that you’re not automatically off the hook if you do not have a PE. You need to pay compliance costs and claim the benefit of the treaty exemption by filing a Canadian tax return with details of your in-country operations. Using a partner service may be the best option for you to ensure you’re remaining compliant.

3. Doing Business in Canada is Familiar

Canada shares many traditions with the United States, which makes it easier for local business owners to begin operations to its north. For example, just like it is in the States, the most common Canadian greeting is a firm handshake, unlike operating in an Eastern country such as Japan where it’s customary to bow when you greet another party.

Canadian demographics are similar to the United States’. They share very close statistics to America in terms of religions and ethnicities. English is also one of the country’s official languages, along with French.

Regarding language, the people of Quebec, the second-most populated division in Canada, speak primarily French. We recommend that employees have one side of their business card translated into French and one side in English. When giving the business card to a new contact in Quebec, the employee should hand it to them with the French side facing up.

4. The Canadian Economy is Stable

In 2011, Canada ranked #1 in Forbes’ Best Countries for Business list. The country earned its top spot due to its trade freedom, investor protection, low corruption, minimal red tape and low corporate tax rates. As of December 2018, Canada ranks #6 on the Forbes list; the United States sits at #17.

Canada’s stable economic growth from 2005 to 2014 is impressive because it withstood the test of the financial crisis, which began in 2008. The country’s major banks came out of the crisis as some of the strongest in the world. According to Forbes, this stability is attributed to the early intervention by the Bank of Canada and the organization’s conservative lending practices; damage was not nearly as bad as banks in the U.S.

Currently, the OECD has projected steady growth for Canada in the coming years. This stability is attractive to business owners looking for a trusted market to begin an international expansion. For that reason, Canada may be the perfect test market for companies in financial services, digital media, and renewable energy.

5. Canada has a Highly Skilled Workforce

If you’re planning on hiring in-country employees, Canada has a great pool of people. Among the countries in the Organization for Economic Co-operation and Development (OECD), Canada ranks second for highest share of 25-34 year-olds (61%) with tertiary education, and first in terms of foreign-born adults with a tertiary degree (65%). According to the Canadian Council for Social Development, nearly 45% of the country’s people are between the ages of 25 and 54 years old.

Break into Canada on Your Own Terms with an Experienced Partner

If you’re ready to expand globally, Canada may be an ideal country in which to start—and we can make it happen in as few as 48 hours. Velocity Global’s International PEO (Professional Employer Organization) solution allows us to hire on your behalf so you can focus on what matters most: running your day-to-day operations. Ready to expand global operations into the Great White North? We’re ready when you are.

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