Canada Expansion Guide
Global Upside helps companies set up, hire, and operate in Canada. Set up a legal entity quickly and easily with our solutions for branch, subsidiary, and rep office. Looking for an alternative to permanent establishment? Hire and pay employees in Canada without a legal entity by using our PEO & employer of record services. Once your business is set up, our teams can support with recruitment and staffing, human resources, employee benefits, payroll, accounting, and tax.
Canada is the second-largest nation in the world by landmass and is barely populated. The country has the world’s longest coastline and shares it with the United States of America. It boasts a multicultural society that welcomes foreigners and exports a vast amount of intellectual and natural resources. Canada is a Commonwealth state that obtained self-governance in 1931 and full legislative authority in 1982.
Limited Liability Corporations (LLC) are the most common forms of a business entities in Canada. If the number of directors is less than four, it is preferred that at least one of those directors is a Canadian resident.
There are two significant forms of corporate subsidiary structures in Canada:
Corporation form (limited liability corporation)
A corporation form (limited liability corporation) is an establishment under either federal or provincial/territorial law and is common among most foreign businesses. Income and loss cannot be combined with operations in other corporate entities for Canadian tax purposes.
A flow-through form is an unlimited liability company that may be created by incorporating in the provinces of British Columbia, Alberta, or Nova Scotia.
A branch is an establishment, separate from the corporate headquarters, in which business is conducted. The branch must be registered by the associated corporation in each province or territory that it plans to conduct business in. The parent company remains liable for the branch’s debts and responsibilities.
All Canadian-based employers must have contracts with their employees that are either written or verbal and both are equally binding and enforceable.
There is no precise definition in the Labor Code of Canada of what constitutes a written agreement.
Some of the details typically mentioned in the written contract include:
- Job title and pay (including overtime rates)
- Sickness and work-related injury entitlements
- Pension schemes or social security
- Disciplinary rules and grievances
- and more
The different types of employment relationships are:
- Permanent Employment – Under the permanent employment designation, the Canadian Labor Code specifies four major categories. There are four types of jobs:
Despite the fact that all of these are covered by the Labor Code, there is no statutory distinction between them.
- Fixed-Term Contracts – Per the Labor Force Survey of Canada, contract jobs are positions that are defined by the employer before hiring and are supposed to end on a certain date or once a specific task or project is completed.
- Temporary Employment – The Labor Code of Canada does not distinguish between permanent and temporary employees. Under the law, all employees are protected.
In Canada, a probationary period set at the provincial level, and ranges typically from 1 to 12 months.
Employees are required to work 8 hours per day, or 40 hours per week.
Employees in Canada are entitled to the following leave:
- Annual leave – Per the Canadian Labor Law, employees are entitled to:
- 2 weeks of annual leave – on completion of 1 year of employment
- 3 weeks of annual leave – on completion of 5 years of employment
- 4 weeks of annual leave – on completion of 10 years of employment
The annual leave varies from province to province.
- Maternity leave – Per the Labor Code of Canada, female employees are entitled to a paid maternity leave of up to 17 weeks.
- Sick leave – Employees get paid sick leave of 17 weeks if they have worked for the same employer for a minimum of three consecutive months.
- Parental leave – Employees who are entitled to the Employment Insurance (EI) parental benefits in Canada have two alternatives under the Employment Insurance Act: standard or extended.
The following are the statutory national holidays observed in Canada:
- January 1 – New Year’s Day
- April 2 – Good Friday
- April 5 – Easter Monday
- May 24 – Victoria Day
- July 1 – Canada Day
- September 6 – Labor Day
- September 30 – National Day for Truth and Reconciliation
- October 11 – Thanksgiving Day
- November 11 – Remembrance Day
- December 25 – Christmas Day
- December 26 – Boxing Day
The two kinds of retirement benefit systems for employees in Canada are:
- contribution-based – Canada Pension Plan (or the Québec Pension Plan, if the employee lives in Québec) (CPP/QPP)
- government-sponsored – Old Age Security Plan (OAS)
Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, the disabled and the injured, and the unemployed.
Some examples of social insurance programs are:
- Dependents’/Survivors Benefit – The Canada Pension Plan (CPP) pays survivor benefits to authorized survivors or the estate of a departed contributor who has made sufficient contributions to the scheme. Beneficiaries include legal spouse, common-law partner, legally separated spouse.
- Life and Disability Insurance/Benefit – To qualify for a disability benefit under the Canada Pension Plan, a disability should be both “serious” and “chronic,” and it must prevent the employee from working at any job regularly.
- Unemployment Insurance – The Employment Insurance (EI) scheme requires temporary financial assistance to unemployed workers while they search for employment or develop their skills.
Employers must, generally, either provide the employee two weeks written notice or pay the employee two weeks regular earnings instead of notice when they decide to terminate a position.
Visa/ Work Permits
There are typically two categories of visas:
- Temporary visas – Temporary visas allow the applicant to reside in Canada for a set period, generally up to six months, for tourism, visiting family, learning, or working (can be single-entry or multiple-entry).
- Permanent visas – Permanent visas allow the holder to live and work in Canada indefinitely, to become a Canadian citizen.
Most employment in Canada requires foreign nationals to get a work permit. There are usually two types of work permits:
- Employer-specific work permit – An employer-specific work permit allows a person to work in Canada for a certain employer. The nature of work to be done, the employer, the location of work, and the period of the permission must all be included.
- Open-work permit – With a few exclusions, an open work permit allows anyone to work for any employer in Canada.
Canadian Generally Accepted Accounting Principles (GAAP) requires a Publicly Accountable Enterprise to use International Financial Reporting Standards (IFRS). Accounting Standards for Private Enterprises or IFRS may be used by a non-publicly accountable enterprise. It is necessary to prepare annual financial reports.
The standard corporate tax rate is:
- Federal – 15%
- Provincial and territorial – 8% – 16%
Value Added Tax (VAT)
Goods and Services Tax (GST) is a value-added tax (VAT) levied in various nations
The standard GST rate in Canada is 5%. It applies to most goods and services.
Typically, the corporate tax return must be filed within six months of the financial year’s end.
Late filing of returns, failure to withhold and remit taxes on time can result in penalties.
The legal measures modify as per jurisdiction. Personal data must be collected with consent and only used for the purposes for which it was collected. In most jurisdictions, where notice has been given through clear employer policies, email and internet use may be monitored.
Anti-Bribery & Anti-Corruption Law
The Criminal Code of Canada is the act concerning criminal law and offenders are liable to imprisonment.