According to a new study, 57% of American businesses are considering expanding to Canada. If your U.S. business wants to expand, Toronto Business and Technology Lawyer Sukhi Hansra explains why Toronto’s high-living standard, diverse workforce and strong GDP are just some of the good reasons why you should move your U.S. business to Toronto.
An article in Forbes by Amy Feldman recently stated: “Canada will bolster its economic growth and employment by bringing in international students, at least some of whom will become tech founders, as well as business owners.” Coupled with the recent elimination of Canadian director residency requirements for companies, this renewed stance towards economic growth makes Toronto, the corporate and financial capital of Canada, a viable place to do business.
The 2021 Immigration Trends Report by Envoy Global unveiled that 57% of U.S. employers are considering Canada as part of their talent acquisition strategy. If you wonder whether you should expand your U.S. business to Toronto, the evidence is clear; more than half of U.S. employers are already planning to.
Here are 5 reasons why so many American companies are scaling their operations north across the border.
1. Access to a Diverse Talent Pool
Canada has a highly skilled and diverse labour force. 62% of 25-35-year-olds obtain secondary education, including 65% of foreign-born individuals above the age of 18. And, when it comes to gender hires, women comprise 62% of the workforce, offering much-needed equality in business environments
When compared to the U.S., Canada has overtaken America as “the world’s favourite workplace,” partly owing to its quality education and diverse hires, which has remained an institutional challenge for decades in the U.S., and a worthwhile reason to expand your U.S. business to Toronto. Having a diverse workforce will always provide a competitive edge, allowing businesses to compete in the global arena.
2. A Strong Economy with a Low Corporate Tax Rate
When compared to other G7 countries like the UK and Germany, Canada has one of the strongest banking systems and, according to the Economist Intelligent Unit, is one of the best countries in G20 for doing business. In addition, Canada has the lowest tax rate on new business investments, with total tax and contribution rates standing at 25%.
If you expand your U.S. business to Toronto, you’ll operate from the second-largest financial centre in North America. Toronto is a global economic powerhouse that supports key business sectors such as food processing, financial services, technology, life sciences, fashion, film and tourism.
It is also a leader in manufacturing, digital, and research and development sectors under which fintech, cybersecurity, artificial intelligence and smart car industries are flourishing. According to Reuters, despite Covid-19, the Canadian economy is expected to grow by 6.5% in 2021, which is promising considering the impact the pandemic has had on the global economy. In 2020 alone, $4.4 billion was pumped into venture capital investments in Toronto.
3. Reduced Income Tax
Businesses headquartered outside of Canada are by law required to pay income tax on profits earned from their Canadian operation. However, if a company doesn’t have a permanent establishment (PE), operational profits may not be subject to Canadian income tax. In Canada, a permanent establishment is defined as a fixed place in which business is carried out within the country.
To avoid the necessity of a PE, companies sell products or services through independent contractors who work for other companies. In some instances, this may prevent paying Canadian tax on profits. However, there are still compliance costs, and you have to claim the benefit of this tax treaty exception by filing Canadian tax return details of your in-country operations if you want to “move” your U.S. business to Toronto.
4. A High Quality of Life
A robust health system, high level of education and general safety are some contributing factors that rank Toronto as the 13th best city to live in the world. “Diversity: Our Strength” is the city’s motto. This ethos presides over much of its policy, which makes sense considering Toronto is one of the most multi-cultural cities in the world, making it an appealing place for individuals from all walks of life to work and live.
Overall, Canada performs very well in OECD Better Life index. When asked to rate their life satisfaction, people living in Canada ranked a 7.4 grade compared to the 6.5 worldwide average. Toronto also has a highly-developed infrastructure with strong transport links via rail, bus, air and ferry networks designed for commerce and public use. High quality of life is a typical indicator of business prosperity, which is important to understand if you are looking to expand your U.S. business to Toronto.
5. Ontario Is Eliminating the Canadian Residency Requirement for Directors
The Ontario Better for People, Smarter for Business Act 2020 (Bill 213) received Royal Assent in December 2020 to amend the Ontario Business Corporations Act (OBCA), including the elimination of the current Canadian residency requirements for directors.
Tentatively planned to go into effect on July 1, 2021, when proclaimed, the new amendments eradicate the current requirement whereby 25% of company directors in Ontario need to be resident Canadians. This will affect both private and publicly held Ontario corporations and is a positive move for companies and foreign investors based outside of Canada, as well immigrant entrepreneurs who want to incorporate into the Province of Ontario.
Toronto is a thriving city with an exuberant startup culture that is ripe for new business. Even if you’re not building a company from scratch and merely want to expand your U.S. business to Toronto, it’s wise to speak to a business lawyer who can advise you on best practices and regional laws you may not be familiar with in Canada and Toronto.
The Impact of the Elimination of Canadian Residency Requirements for Ontario Directors
Toronto Business Lawyer
Are you an American business owner who wants to open a location or branch in Ontario? Hansra Law provides experienced, cost-effective legal advice on all aspects of business growth from concept to launch through expansion to exit.
To schedule a FREE phone call to discuss how we can help you expand your business to Toronto, Ontario and Canada, contact Sukhi Hansra at (416) 580-0345.