Top 10 challenges of doing business in Canada
Article 5 minute read

Top 10 challenges of doing business in Canada

11 May 2018

It’s easy to understand why Canada is an attractive market for companies looking to invest overseas, with its abundant resources spread across the country and its consistently stable political environment

According to Forbes, it is a welcoming business environment (the second-best country in the G20 to do business) and a highly-educated workforce make it an appealing place to invest, work and live.

As a testament to its transparent policies and solid infrastructure, Canada was ranked 18th (out of 189 countries) by The World Bank in its Ease of Doing Business Survey from 2018. Specific business criteria that Canada ranks highly for include starting a business (2nd), protecting minority investors (8th) and getting credit (12th). Surprisingly, the two areas where Canada scored relatively badly were enforcing contracts (114th) and getting electricity (105th).

With a low corporate tax rate and trade agreements with the key markets of Europe, the United States and Latin America, Canada is well positioned as a base of operations and a target for international expansion. Its competitive R&D environment and financial stability keep it driving innovation.

As a leading provider in Canada for several decades, TMF Group provides many local-specific services alongside the global offering. Our local experts ensure you stay up-to-date with market and legislative developments.

1. Starting a Business

Starting a business in Canada is a fast and user friendly process taking just a day and a half. Filing for incorporation and registering for VAT is all it takes.

2. Dealing with Construction Permits, Registering a Property & Getting Electricity

Construction permits, on the other hand, are a long and cumbersome process, taking on average 250 days and 12 steps. In addition, in December 2017, the cost of construction permits for commercial use was increased, including a rise in fees for site plan approval and building permits.

Registering a property takes 4 days and 5 steps.

Getting electricity in Canada is also a challenge, taking on average 140 days and 7 process steps. Not only that, but the cost of electricity is exorbitant, especially in Ontario. According to Statistics Canada, electricity prices in Ontario grew by 71% from 2008 to 2016 - the fastest growth of any Canadian province, surpassing the 34% average growth across Canada. The country has plans for the privatization of electricity distribution to increase competition and reduce electricity costs in Ontario.

3. Labour

The Canadian job industry has been facing a shortage of unskilled workers for the last 18 months and has reached crisis point. The main cause is attributed to Canada’s society, based on high education and high paying jobs. According to the latest annual Talent Shortage report by Manpower Group Inc., around one-third (32%) of Canadian employers surveyed admitted to facing difficulties in hiring the unskilled workers they need due to labour scarcity.

4. Technology

Canada has been a prime target for cybercrime (state-sponsored attacks and lone hackers). The Federal agency reported an increase of more than 160% in cybercrime from 2015 to 2016, particularly in Winnipeg and Manitoba (Statistics Canada). The government has a five-year plan with a budget of $500m to battle cybercrime and define Canada’s digital security strategy.

Forward thinking, Canada is taking steps to future proof its workforce for the anticipated changes in job types towards technology, through an entire network of reskilling programmes. These programmes aim to teach new skills to people and help them to reskill in AI or place them in jobs in different technology fields.

5. Paying Taxes

Canada has a low federal and provincial corporate tax rate of around 27% net and labour tax of just 12.9%, however the submissions process takes 131 hours per year.  Federal VAT is 5% and some provinces have a provincial VAT and others do not. Some provinces harmonize or combine the provincial VAT with the Federal VAT and others do not. Ontario’s harmonized VAT for instance is 13%.

6. Trading Across Borders

The challenge to trading across borders is understanding the differing provincial regulations, such as labelling and packaging requirements and certification standards and customs procedures. Exporters should be prepared for Canada Customs documentation, bilingual labelling, and packaging requirements, as well as Canadian federal and provincial sales tax accounting.  This is where a local counterpart can assist companies through the many differences in requirements.

7. Enforcing Contracts

The country ranks 114th in areas of contract enforcement in the World Bank 2018 report, as it can take around 910 days to make the contract come alive. This is mainly due to insufficient court capacity and cumbersome outdated court processes.

8. Resolving Insolvency

Canada ranks 11th in resolving insolvency, in the World Bank 2018 report, with a recovery rate of 87.5 cents in the dollar.  The process takes, on average, eight months.

9. Obtaining Credit

Although Canada ranks 12th in getting credit in the World Bank 2018 report, the challenge is the small business sector, who face funding challenges and inadequate infrastructure to expedite their growth and cash on future opportunities. Government initiatives are not very prominent, although there are initiatives in place. Some companies are unable to find the initial $500K or $1m of investment needed, whereas some struggle with securing investment to accelerate market growth.

Recently, the trend has been for Canadian technology companies to turn to the US to get capital for their ventures. However, major banks and insurers in Canada announced plans to create a fund to invest up to $740m in small but growing Canadian firms as a part of the measures initiated to boost economic growth.

10. Culture

Core Canadian values include fairness, equality, inclusiveness and social justice. This is demonstrated by the country’s governance approach, which includes public healthcare, higher taxation to promote the redistribution of wealth, the legalisation of same-sex marriage, the abolition of capital punishment and the suppression of far-right politics.

English is the business language, but it is very useful to speak some French if doing business in Quebec. In Quebec business signage must be in French only. A handshake is the usual greeting, however, in Quebec colleagues or business associates may greet one another with a kiss on the cheek. Canadians value punctuality, and it is rude to be more than a few minutes late.

Contact our local TMF Group experts

TMF Group has the local knowledge to help you navigate any challenge or opportunity. Whether you want to set up in Canada or just want to streamline your Canadian operations, talk to us today.

Learn more about TMF Group in Canada.

Written by

Gary Hokkanen

Managing Director Canada

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