Benefits and problems of registering a company in Canada in 2023
Benefits of Canada company registration
- It is easy for foreigners to start a business in Canada as only i) one shareholder and ii) one director are required to establish the company. There is also no restriction on their nationality and the minimum paid-up capital for registration of a Canadian company is only US$1 (CAD1);
- Our Clients often choose to start their subsidiary company in Canada to access foreign markets because:
- A company registered in Canada and exporting locally manufactured products and services to the United States and Mexico can do so free of custom duties, thanks to the North American Free Trade Agreement (NAFTA);
- Such advantage allow Canadian businesses to tap into a market representing i) 480 million people and ii) an aggregate value of USD21,000 billion, the second largest in the world after the European Union;
- Canada has also signed 15 free trade agreements with over the quarter of the world countries. Local companies hence benefit from the 13th largest foreign market size in the world according the World Economic Forum;
- Our Clients running a company in Canada will also be able to use excellent infrastructure to sell their products and services abroad: local road, railroad and maritime networks are ranked amongst the 25 best in the world;
- For all the reasons listed above, the World Bank ranks Canada as the 44th best place to trade across borders.
- Our Clients running their business in Canada will pay lower taxes than they would elsewhere because:
- The federal tax rate for Canadian-controlled small businesses only reaches 11% thanks to the small business deduction. Corporate tax rates payable at the provincial level are in a range of 3% to 16%;
- Business setup in Canada also confers certain tax benefits: losses can be carried forward up to twenty years. It is also possible for a shareholder to defer some personal income tax by retaining earnings at the company level;
- Canada has 95 double taxation avoidance treaties currently in force with countries including i) the United States ii) Australia iii) Singapore iv) the United Arab Emirates v) India vi) Germany vii) France viii) Russia and ix) the UK. These treaties provide several advantages to reduce withholding tax payable after Canada business formation;
- For all the reasons listed above, Canada is ranked by the World Bank as the 9th best country in the world for its tax system. Total taxation over a business’ earning only averages 21%, to be compared with 41% amongst OECD countries.
- Forming a company in Canada also confers the following advantages:
- It is easy to open corporate bank accounts all over the world for a Canadian company;
- It is possible to obtain employment and entrepreneurial visas for yourself and your staff after Canada business setup.
- Canada is one of the most cost competitive countries; the cost of operations is less than in the US, UK, Australia, Germany or Japan;
- It is also the second most attractive destination for businesses involved in digital services, R&D services, corporate services, and manufacturing.
Problems with Canada company registration
- All Canadian companies have to appoint at least one resident director. If needed, Healy Consultants can provide our Clients with nominee services for Canada director. Kindly refer to this resident director page for further details;
- Companies for which over 50% of the voting shares are held by non-residents are subject to higher corporate tax rates, which can reach up to 36% depending on the province of incorporation;
- Canada is highly dependent on its natural resources, therefore if commodity prices fall, economic activity reduces in trade-dependent provinces;
- The global demand for Canadian exports has a huge impact on the strength of the Canadian dollar. Consequently, currency spikes can be challenging for most businesses to deal with.