Canada consistently ranks among the world’s most attractive destinations for foreign investors. In 2023, the country drew USD 50.3 billion in foreign direct investment (FDI) and held a total stock of USD 1.66 trillion. With abundant natural resources, a highly educated workforce, and privileged access to U.S. markets, Canada offers fertile ground for entrepreneurs.
Yet this openness is coupled with regulations designed to ensure that investments benefit Canadians and safeguard national interests. Understanding these rules can make the difference between a smooth expansion and costly missteps.
Legal Framework Governing Foreign Ownership
Investment Canada Act (ICA)
The Investment Canada Act is the primary law governing foreign investment in Canada. Its purpose is to ensure that significant investments by non‑Canadians contribute positively to the Canadian economy. Any non‑Canadian seeking to acquire control of an existing business or start a new one must submit either a notification or a formal application for review unless an exemption applies.
The Act empowers the government to examine transactions for economic benefit and national security, balancing Canada’s welcome mat against the need to protect sensitive technologies, critical minerals and personal data.
Net‑Benefit Review Thresholds
Not all investments trigger an in‑depth review. The ICA sets financial thresholds (updated each year) that determine when a foreign acquisition must be assessed for “net benefit.” In 2025, the threshold for private‑sector investors from World Trade Organization (WTO) member countries is CAD 1.386 billion.
For investors from nations with trade agreements like CUSMA or CETA, it rises to CAD 2.079 billion. State‑owned enterprises face a lower threshold of CAD 551 million, while investors from non‑WTO countries or those acquiring cultural businesses need approval for transactions exceeding only CAD 5 million. Deals below these amounts generally require notification rather than a full review.
National Security Review and FDI Landscape
Beyond economic thresholds, Canada can review any foreign investment that might threaten national security. Recent policy updates emphasize sectors such as critical minerals, artificial intelligence, and biotechnology.
Even with heightened scrutiny, the country remains an attractive FDI destination. Manufacturing FDI rose to CAD 18.2 billion in 2023, and Canada treats foreign investments on par with domestic ones once they clear regulatory hurdles.
Choosing the Right Business Structure
Branch Office vs. Subsidiary
One of the first decisions for non‑residents is whether to operate through a branch office or a subsidiary. A branch is an extension of the foreign parent, meaning profits and liabilities flow directly back to the parent company. Branches are relatively simple to set up, and obtaining an extra‑provincial license in the provinces of operation is often sufficient. They also avoid Canada’s director residency requirements, making them a cost‑effective choice for short‑term projects.
A subsidiary, by contrast, is a separate legal entity incorporated under federal or provincial law. While it must appoint at least 25 % resident directors under the federal Canada Business Corporations Act (CBCA), it shields the foreign parent from liabilities and can project a permanent, locally rooted image. Subsidiaries file their own tax returns and often find it easier to secure financing and regulatory approvals.
Partnerships and Sole Proprietorships
Foreign entrepreneurs can also participate in partnerships, which come in general or limited forms. In a general partnership, partners share management and liability; in a limited partnership, limited partners contribute capital without taking on full liability.
Sole proprietorships are less common for non‑residents because many provinces require the proprietor to reside in Canada, but they remain an option for those who meet local residency rules.
Director Residency Requirements
Under the CBCA, at least one‑quarter of directors must be resident Canadians. If there are fewer than four directors, at least one must be a resident.
However, some provincial laws, such as those in British Columbia, Nova Scotia, Prince Edward Island, New Brunswick, Quebec, Alberta, and Ontario, have eliminated resident director requirements. Choosing the appropriate jurisdiction can therefore reduce governance challenges.
Registering a Business as a Non‑Resident
Federal vs. Provincial Incorporation
Incorporating federally grants the right to operate across Canada and use the same name in all provinces, but it still requires extra‑provincial registration in each province of operation. Provincial incorporation may be simpler and cheaper initially but it restricts the use of your corporate name outside that province.
Regardless of jurisdiction, you must conduct a NUANS name search, draft articles of incorporation, and obtain a business number (BN) from the Canada Revenue Agency for tax accounts.
Extra‑Provincial Registration and Agent for Service
When a non‑resident corporation wishes to conduct business in a province where it isn’t incorporated, it must complete extra‑provincial (branch) registration. This process gives legal standing to operate locally but comes with ongoing obligations.
A key requirement is appointing an Agent for Service, also known as a registered agent or attorney, in each province of operation. This agent receives legal notices and court documents on behalf of the corporation.
Non‑resident corporations are required to maintain such an agent. Failing to appoint one can lead to prosecution and disqualify the corporation from initiating legal actions. In some provinces, the business owner can act as the agent if they reside locally; otherwise, companies must engage a professional service provider.
Business Immigration Pathways
Start‑Up Visa Program
Canada’s Start‑Up Visa Program targets immigrant entrepreneurs who have the potential to build innovative businesses. To qualify, applicants must secure a commitment from a designated angel investor group, venture capital fund, or business incubator.
Also, meet language proficiency requirements and bring sufficient funds for settlement. The program offers permanent residence and allows entrepreneurs to obtain a work permit while their application is processed if their venture provides a significant economic benefit.
Self‑Employed Persons Program
The Self‑Employed Persons Program grants permanent residence to individuals who have at least two years of experience in cultural activities or athletics and who can make a significant contribution to Canada’s cultural or athletic life. Although the program was recently paused for review, its mandate underscores Canada’s desire to attract world‑class artists and athletes.
Provincial Nominee Program (PNP)
Each province and territory operates its own Provincial Nominee Program (PNP) to attract newcomers with skills, education, and work experience that meet local labour or investment needs. Some PNP streams specifically target entrepreneurs and investors.
Generally, candidates must demonstrate management experience, a minimum net worth, and a willingness to invest and create jobs in the province. Successful nominees receive a provincial nomination that accelerates their permanent residence application.
Business Visitors and Work Permits
Foreign nationals who come to Canada for short‑term business activities may not need a work permit. Business visitors engage in international business activities, such as negotiating contracts, exploring opportunities, attending conferences, or providing after‑sales services, without entering the Canadian labour market.
To qualify, their principal place of business and source of income must remain outside Canada. They may need an electronic Travel Authorization (eTA) or a Temporary Resident Visa (TRV), depending on their nationality. Those who undertake productive work must obtain a work permit, often requiring a Labour Market Impact Assessment (LMIA) unless exemptions apply.
Sector‑Specific Foreign Ownership Restrictions
Although Canada generally allows full foreign ownership, several sectors are tightly regulated:
- Banking: Under the Bank Act, no person may own or control more than 10 % of the shares of a Schedule 1 bank (Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD)).
- Broadcasting: The Broadcasting Act prohibits issuing broadcasting licences to non‑Canadians or to companies effectively owned or controlled by non‑Canadians.
- Telecommunications: The Telecommunications Act caps foreign ownership and control at 20 % of voting shares in a telecommunications common carrier.
- Insurance: The Insurance Companies Act limits any person to owning 10 % of the shares in a Canadian‑owned life insurer.
- Other sectors: Additional federal or provincial laws restrict foreign involvement in oil and gas, farming, book publishing, aviation, fisheries, liquor sales, mining, and certain professional services. Foreign investors may need to structure deals as joint ventures or minority ownerships to comply.
Taxation and Compliance for Non‑Resident Corporations
Canada’s tax regime is comprehensive. A non‑resident corporation must file a T2 Corporation Income Tax Return if it carries on business in Canada or disposes of taxable Canadian property during the tax year.
Returns must be filed in Canadian currency and accompanied by applicable schedules (e.g., Schedule 91 for treaty‑based exemptions). Payments made for services rendered in Canada are subject to a 15 % withholding tax. This withholding serves as an advance tax payment; the corporation later reconciles actual tax liability through its T2 return.
Employers may need payroll deduction accounts when paying employees or subcontractors. Passive income such as dividends, rents and royalties is generally subject to Part XIII withholding taxes.
Non‑resident corporations often must register for GST/HST if their annual taxable supplies exceed CAD 30,000. Because Canadian tax law is complex and interacts with international tax treaties, consulting an accountant or tax advisor is prudent.
Benefits and Challenges of Investing in Canada
Here’s a table summarizing the Benefits and Challenges of investing in Canada:
| Benefits | Challenges |
|---|---|
| Stable economy: Strong institutions, sound banking, and a diversified economy that is resilient to global shocks. | Regulatory complexity: Investors must navigate the Investment Canada Act, sector-specific regulations, and immigration rules. |
| Skilled workforce: Highly educated and multicultural, supporting advanced industries like technology and biotech. | Director residency requirements: The need for resident directors under the CBCA can complicate governance structures. |
| Market access: Agreements like CUSMA, CETA, and CPTPP grant preferential access to markets across North America and Europe. | Sectoral limits: Industries like banking and telecom impose strict foreign ownership caps. |
| Supportive programs: Federal and provincial governments offer tax credits, grants, and immigration pathways for entrepreneurs. | Tax compliance: Filing T2 returns, handling withholding taxes, and managing GST/HST registration require diligence. |
Steps for Foreign Entrepreneurs to Start a Business in Canada
- Select your structure (branch, subsidiary, partnership, or joint venture).
- Choose the jurisdiction (federal vs. provincial) and verify director residency rules.
- Reserve your corporate name and conduct a NUANS search.
- Prepare articles of incorporation and obtain a business number.
- Register extra‑provincially in each province of operation.
- Appoint an Agent for Service for legal notices.
- Open a corporate bank account and meet KYC requirements.
- Obtain immigration permits (Start‑Up Visa, PNP, work permit or business visitor status).
- Register for tax accounts (corporate income tax, GST/HST, payroll).
- Ensure ongoing compliance (annual filings, maintaining resident directors, renewing licences).
Need expert help navigating this process?
Bestax is an experienced Canadian accounting and advisory firm that assists foreign entrepreneurs with incorporation, tax planning, and regulatory compliance. Whether you’re registering a new company, filing a T2 return or exploring immigration options, Bestax’s professionals can streamline the process. Visit Bestax to schedule a consultation and set your venture on the path to success.
Quick FAQs
Can non‑residents fully own a business in Canada?
Yes. Non‑residents can own 100 % of a Canadian corporation unless the business operates in a regulated sector like banking, broadcasting, telecommunications, or insurance, where shareholding limits apply.
What are the requirements for non‑residents to start a business in Canada?
Non‑residents must choose a business structure, incorporate federally or provincially, appoint resident directors when required, register extra‑provincially, and designate an Agent for Service. Immigration status (Start‑Up Visa, PNP, or work permit) and tax registration (BN, GST/HST) are also necessary.
Are there any restrictions on foreign ownership of businesses in Canada?
Yes. The Bank Act, Broadcasting Act, Telecommunications Act, and Insurance Companies Act impose caps on ownership percentages. The ICA requires review for large or sensitive transactions and allows national security assessments.
Can non‑residents purchase an existing business in Canada?
They can. Acquisition is subject to the ICA’s review thresholds. Deals below the thresholds generally require only notification. Sector‑specific limits still apply.
What are the tax implications for non‑residents owning a business in Canada?
Non‑resident corporations must file a T2 return if they conduct business or dispose of taxable property in Canada. Corporations may need payroll accounts and must register for GST/HST once revenues exceed CAD 30,000. Tax treaties may reduce withholding, but proper filings are essential.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
