Read this post because
It will give you insights about what makes Canada a top business expansion destination.
As the Canadian Prime Minister, Justin Trudeau puts it:
“Whether you have established roots here or are exploring Canada –– for your next business expansion, I am confident that investing in Canada will be one of the best decisions you make this year.”
But just like the words of any other decent politician, we should trust but verify:
Talent in Canada
One of the vital considerations for any business is access to talented workforce. According to OECD, Canada is the most educated country in the world. Every year Canada attracts the brightest minds to its leading universities. Canadian post-secondary institutions saw a 25% increase in international applications in 2019 and Canada now ranks as the world’s fourth most popular destination for international students. As a world leader in post-secondary research, Canada is now urging other G7 countries on investment in higher education.
The Canadian workforce is also diverse with more than 200 identified languages spoken, and the number is increasing yearly. Canada is welcoming international students and talent by offering several government programs to ease the transition to their new home. These students represent 22% of the population in Canada, immigrants here are an essential part of highly skilled workers, filling half of all Science, Technology, Engineering related jobs in Canada.
Canada has introduced the Global Skills Strategy to make the process easier and faster for businesses to attract their needed talents. Eligible foreign workers with employer-approved applications can move swiftly through the immigration system and receive work permits within two weeks. In addition to speed, employers receive client-focused white-glove service through a dedicated and knowledgeable team of officers who understand the perspective of new companies driven to compete on the global stage.
The streamlined system means Canada has accomplished top-of-class status when it comes to the brain gain, according to CBRE’s Annual Tech Talent Scorecard. Toronto, Vancouver, Montreal and Ottawa had a combined brain gain of more than 65,000 tech workers in 2017. This tech talent gain is more significant than San Francisco (over 46,592) and Seattle (over 10,118) combined.
Tech & Innovation in Canada
Canada is now dubbed “Silicon Valley of the North” and for good reasons. With only 38 million in population, Canada is punching well above its weight in innovation. Some even consider it to be the “world’s tech incubator”. Canada’s innovation ecosystem is heavily fueled by its students in science, technology, engineering and mathematical sciences who join its diverse and highly skilled workforce every day. Canadian universities, being among the best in the world, are essential contributors in incubating new innovation and businesses. Canadian university-based incubators are constantly ranked among top 10 in the world with the DMZ at Ryerson University siting at number 1. Canadian universities and colleges are now global leaders in the co-operative education, combining academic studies with real-world experience. That is why Canadian graduates bring the skills and knowledge required to push Canada’s innovation plan and create tangible businesses with real outcomes.
Global demand for Canadian education is surging at incredible rates with a 154% increase in international students in Canada between 2010 and 2018. In 2019 more than 721,000 students were given study-permits to come and study in Canada. These numbers are only expected to rise in the future as Canada is consistently ranked by international students as the most desired destination for study because 1) the quality of Canadian education system, 2) Canada’s reputation as a tolerant and non-discriminatory society, and 3)Canada’s reputation as a safe country.
Canada is ranked 6th in the world for scholastic performance in math, science and reading. Its universities conduct $1 billion in research for businesses and help refine their competitive advantage. There are now more than 42 business incubators in Canada affiliated with 96 Canadian universities.
Canada is also a pioneer in designing immigration programs that specifically target talents that can further its innovation agenda. The Start-Up Visa Program is perhaps the most important one. This program allows up to 5 start-up founders to immigrate to Canada with their families to lunch and develop their innovative businesses in Canada.
Rates of start-up funding and scaling are rising with unprecedented pace. 2019 figures show that venture capital investment in Canada reached a record high of $6.2B in that year. This represents a 69% increase from 2018. The deal sizes also showed a promising increase from previous years that attest to increasing start-up scaling rate in Canada. The average deal size in 2019 doubled the average of the previous 5-year period and sat at $11.6M.
Read Canadian VC Investment Conquers New Peaks in 2019 for more on Canadian VC market.
Another Canadian advantage in global innovation is its strength in Research and Development. As a world leader in cutting edge R&D, Canada incentives investors for large-scale business partnerships. It challenges them to work together on ambitious, market-driven proposals to elevate innovation ecosystems. This delivers simpler and more efficient support to business and entrepreneurs, making it easier for companies to invest in Canada.
Investors can access an expensive array of programs including the Scientific Research and Experimental Development (SR&ED) that provides billions in tax credits and incentives to businesses conducting R&D in Canada. This unique program allows investors to claim R&D expenditure such as salaries, contracts, overhead and even materials. SR&ED is a significant incentive for investors who find product testing and development among their largest expenses during the development phase of their ventures.
Canada now has more than two million small and medium sized enterprises (SMEs) that are playing an integral role in the Canadian economy. The National Research Council of Canada (NRC) delivers the Industrial Research Assistance Program (IRAP) through its network of hundreds of advisors across Canada. IRAP provides financial support (up to $5 Million dollars) to qualified SMEs engaged in innovative, tech-driven projects.
Canada’s Global Connectivity
Canada is well situated to serve as a central hub for global trade. Its coastal ports provide direct maritime access to Asia, South America and Europe, while the inland Great Lakes provide easy access to several US states. On the southern border lies the world’s largest single-country consumer market with 330 million people.
With 14 trade agreements, Canada is the only G7 country that offers investors preferential market access to more than 50 countries, with over 1.5 billion consumers and a combined GDP of nearly USD $50 trillion. The modernising of the Canada-United States-Mexico Agreement (USMCA) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) guarantee market access to both the EU and North America. None of the other top investment destinations in the Americas can offer access to all 28 EU Member States. Once fully implemented, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will give companies operating in Canada access to one of the largest trading blocs in the world, providing enhanced access to key Asian markets.
All of the above are in part behind the Foreign Direct Investment (FDI) in Canada increasing from $551B in 2008 to $824B in 2017 and FDI inflows into manufacturing in 2018 were at an impressive 61.76% increase over the previous year. Canada is no longer a market contender rather it is the leader among G7 in economic growth and has been as such for the past three years.
Ease of Doing Business in Canada
According to the World Bank Group, Canada is ranked 3rd in the world for ease of starting a business ahead of Germany, Japan and United States. Canada ranks first in the G7 in a study measuring a country’s potential for investment and growth in its economic infrastructure. Four of North America’s top 10 financial centres are Canadian: Toronto, Montreal, Vancouver and Calgary. Canada is consistently ranked among top 10 countries in the world for minority investor protection (ranked 7th according to WBG).
Canada is the lowest-cost G7 country in manufacturing and the corporate services sectors. Canada also has the lowest business costs in the digital and R&D sectors. For example, companies can write-off up to 100% of new machinery and equipment costs and specified clean energy equipment to spur adoption of advanced technologies, processes for manufacturers as well as clean-tech. Businesses in all sectors can also write-off a larger share of costs for newly acquired assets, including long-lived assets like buildings and intangibles like patents and IP. Continue reading for more information about these programs and incentives.
There is global consensus that Canada’s banking system is the safest in the world, ranking as the world’s safest banking system for six consecutive years according to reports by the World Economic Forum. Canada is ranked 2nd in the G7 and G20 countries, 8th among 149 countries for overall prosperity (Legatum Prosperity Index). This ranking is based on Canada’s economic quality, business environment, governance, education, health, safety and security, personal freedom, social capital and natural environment.
Quality of Life in Canada
Successful businesses know the true value of operating in areas that are attractive to people in general and their employees in particular. Canada ranks first overall for the third consecutive year, for providing a good quality of life(based on 80 countries and 75 different metrics including political stability, strong job market, safe environment, good public education system). Canada ranks far above average in well-being, personal security, housing, health status, social connections, environmental quality, jobs, earnings, education and skills.
A well-functioning society engenders trust and participation, demonstrates political stability, upholds the rule of law and enjoys positive relations with other countries. Canada’s free and independent media disseminates information, where citizens become well informed, and public discourse leads to greater openness, collaboration and better decision-making.
Education and health care are essential foundations for any society. Both health care and education (primary and secondary) are universal and inclusive, and freely accessible to all Canadian citizens, permanent residents and some non-Canadian temporarily residing in Canada. Not only these essential services are provided for free in Canada but also they are consistently ranked among the best in the world for quality. Canada is ranked 4th globally in total health expenditure per capita, and its paying off. According to the Lagatum Institute’s Prosperity index, Canada has the best healthcare system among 149 countries. Canada spends slightly more than OECD average on its education system but its quality ranks well above the OECD average in all indicators. In fact Canada has one of the best primary, secondary and post-secondary education systems in the world.
With over 200 languages indented as mother tongue, Canada is considered one of the most multilingual societies in the world. Canada is peaceful and it is run by a government that is an avid advocate of global peace promoting order, diversity and equality. According to almost all global surveys, Canada is now one of the safest countries in the world. A peaceful environment is where human potential breeds and prospers. Human capital is undoubtedly the most important driving factor economic prosperity.
Business Incentives in Canada
Scientific Research & Experimental Development (SR&ED): This is Canada’s largest R&D program with more than $3 billion dollars available to claim. Companies of any size that invest in R&D in Canada can take advantage of this tax incentive program. SR&ED incentive comes in two forms: Income tax deduction or investment tax credit that can be applied against income backward or forward and in some cases the credit is refundable. To be eligible for SR&ED projects should:
– Address a technological or scientific uncertainty;
– Address, or attempt to address, a technological advancement, and
– Use a systematic investigation or search.
Foreign companies may qualify for SR&ED indirectly and through incorporating a Canadian and Canadian resident subsidiary to perform eligible R&D work in Canada either for itself or on a contractual basis for the parent company. Canadian subsidiary can then apply for SR&ED and deduct expenditures and claim a 15% non-refundable tax credit. This credit may be used against federal payable taxes to reduce them in the current year, previous 3 years or future years.
If you are a foreign company interested in doing R&D in Canada, Contact Us for more information.
Accelerated Investment Incentive: This is an enhanced Capital Cost Allowance (CCA) on equipment purchases that allows investors to write off 100% of their first-year machinery and equipment expenditure for manufacturing and processing, and for clean energy equipment. This incentive involves a 50% CCA deduction increase for property acquired after November 20, 2018 that becomes available for use before 2024, and the suspension of the existing CCA half-year rule in respect of property acquired after 20 November 2018 that becomes available for use before 2028. This incentive applies to property for which CCA is calculated on a declining-balance basis, as well as for classes of property with straight-line depreciation or classes for which depreciation is based on unit of use. Property that becomes available for use after 2027 is not eligible for the Accelerated Investment Incentive.
if you are a foreign company interested in investing or expanding to Canada, Contact Us for more information.
Strategic Innovation Fund: This fund of $1.2+ Billion dollars incentives investments in Canada through 5 streams:
Stream 1: Encourage R&D that will accelerate technology transfer and commercialization of innovative products, processes and services;
Stream 2: Facilitate the growth and expansion of firms in Canada;
Stream 3: Attract and retain large scale investments to Canada;
For-profit Canadian incorporated corporations carrying on business in Canada are eligible for these streams and the SIF contribution amount will be based on a sharing ratio that will not exceed 50% of the costs for eligible activities.
Stream 4: Advance industrial research, development and technology demonstration through collaboration between the private sector, researchers and non-profit organizations;
Consortiums that may include Canadian universities, colleges, research institutes, for-profit corporation and/or not-for-profit entities are eligible for this stream. The Lead Applicant must be Canadian incorporated, and carry on business in Canada. SIF contribution will be non-repayable and its amount will not exceed 50% of the total eligible costs (except for recipients that are academic institutions and Networks, where the contribution provided may cover 100% of their eligible costs)
Stream 5: Support large-scale, national innovation ecosystems through high impact collaborations across Canada.
Networks (lead applicant must be a non-profit or for-profit organization incorporated in Canada) are eligible for this stream. SIF contribution will be non-repayable and its amount will not exceed 50% of the total eligible costs (except for recipients that are academic institutions and Networks, where the contribution provided may cover 100% of their eligible costs)
SIF projects are evaluated based on their potential to benefit Canada:
– Creation and commercialization of new intellectual property in Canada;
– Development of new and improved products, services or processes;
– Collaboration between post-secondary institutions, NGOs, indigenous communities and other private sector firms;
– Significant R&D creating technology with the potential for market disruption.
Eligible costs under SIF are limited to non-recurring costs that are specifically related to the project, including: direct labour, overhead (program limits apply), subcontracts and consultants, direct materials and equipment, other direct costs, land and buildings.
SIF contributions are either payable or non-repayable. If payable, the repayment will be based on performance and in accordance with a risk-sharing approach.
if you are a foreign company interested in investing or expanding to Canada, Contact Us for more information.
Pan-Canadian AI Strategy: Given that Canada is among the global forerunners in AI and machine learning, Pan-Canadian Artificial Intelligence Strategy was lunched in 2017 to ensure Canada will maintain its leadership position. Canada is the first country to release a national AI strategy. This initiative now has more than $125M in funding with more than 54 industry partnerships. The objectives of this strategy are to further advance the current AI ecosystem in Canada by:
– Increasing the number of highly skilled researchers and graduates;
– Enhancing research capabilities and discoveries through collaboration across three centres of excellence;
– Demonstrating global leadership around the economic, ethical, policy and legal implications around advancement in AI technologies;
– Supporting a national research community on AI;
Foreign companies engaged with AI and machine learning that are considering Canada for expansion can tap into a growing AI talent pool, leverage national AI research capabilities, and partner with leading AI research institutes on new technology developments.
Innovation Superclusters Initiative: Superclusters are dense areas of business activity characterized by their large number of companies, post-secondary and research institutions. Canada’s Innovation Superclusters Initiative brings together technology clusters across the country into industry-led consortiums. Each supercluster focuses on technology innovation in one of the following areas: ocean sciences, artificial intelligence, advanced manufacturing, protein industry, and digital technology.
The objective of this initiative is to solve complex challenges, drive economic growth, develop and attract top talent, and advance world-leading research and innovation. It is expected that this initiative will infuse nearly $2B into the economy and grow GDP by $50B over the next ten years.
Private sector members in any of these superclusters can:
Lead or join supercluster projects;
Provide and access technology solutions developed through the supercluster;
Meet industry, community and government partners;
Access project funding;