In 1985, Canada replaced the existing Foreign Investment Review Act with the Investment Canada Act, greatly easing its investment regulation policy.
Investment or establishment of a new company for foreigners to acquire a small Canadian company can be notified to the Canadian government, and if the investment exceeds a certain standard, it must be reviewed by the Ministry of Innovation, Science, and Economic Development Canada (Net Benefit Review).

The Canadian Investment Act acts as a basic law on foreign investment, and it also provides incentives such as tax cuts, subsidies, and location preferential treatment to attract more investment.
Such areas that encourage investment include manufacturing, agricultural products, and chemical industries.
On the other hand, there is a special law that regulates investment only in certain areas for reasons such as protecting domestic industries, and the regulatory fields include telecommunications, broadcasting, cultural industry, and financial service industry. Under the Canadian Investment Act, large-scale mergers and acquisitions by foreign investors in Canadian domestic companies must be subject to a Net Benefit Review.
In this case, the investment limit varies depending on whether the country to which foreign investors belong has joined the WTO, and the limit for foreign investors belonging to non-WTO countries is C$50 million (about 45.1 billion won), which has been maintained since the Canadian Investment Act was enacted in 1985.

On the other hand, the amount of investment restrictions applied to foreign investors belonging to WTO member countries was C$1.287 billion in 2023, up sharply from C$1.141 billion in 2022 and C$1.04 billion in 2021. In 2023, the WTO member states' investment limit in Canadian public enterprises was C$512 million (from C$454 million in 2022), and the acquired company's value calculation standard was changed from Asset Value to Enterprise Value to introduce a more accurate value calculation standard.

* Guide to Restrictions on Foreign Investment in Canadian Investment Law as of 2023:
https://ised-isde.canada.ca/site/investment-canada-act/en/investment-canada-act/thresholds

Preliminary National Security Review

In addition to the preliminary review, the Canadian government can conduct an additional National Security Review, a system to evaluate in advance how foreign companies that have acquired Canadian companies can potentially have ripple effects on Canada's national safety.
The review period is usually specified as 45 business days and may be extended up to 45 additional days if necessary.

The preliminary review currently being conducted by the Canadian government has yet to disclose its procedures and processes to the outside world in detail.
Due to these closed administrative procedures, there is criticism in the domestic industry as well as foreign investors who have not received investment approval at the pre-review stage.

Federal Investment Policy

Since the enactment of the Investment Canada Act in 1985, Canada has promoted a policy to become a "country open to business investment," and since 1994, the signing of NAFTA has further boosted investment between countries in the region.
In order to attract investment from foreign companies and promote efficient business operation, various policies are being promoted at the federal and state levels.

• Incentives for investment and R&D in the manufacturing sector are included in the tax system

• Support for enterprises in R&D, technology transfer, human resource development, and overseas market expansion

• Support the training and training needed to run the enterprise

• Provision of capital necessary for technology development and operation of venture companies

Government Support in Foreign Companies

The Canadian government's enthusiasm and support for attracting foreign companies are well seen in high-tech fields such as artificial intelligence (AI).
In 2022, Canada's foreign direct investment (FDI) grew about 6.0 times year-on-year to C$1.2638 trillion, with major investors including the United States, the Netherlands and the United Kingdom.
The fourth industrial revolution field, which the Canadian government is particularly interested in and promotes full support, has invested C$100 million (about 85.6 billion won) in the artificial intelligence field to implement the Pan-Canadian Artificial Intelligence Strategy in 2017.
The artificial intelligence strategy aims to promote R&D cooperation projects between universities, research institutes, and companies to make Canada a leading country in digital information processing.
Research centers and hub systems of international companies such as Oracle, HP, and SAP are in Quebec and Ontario.
IBM's Canadian R&D Center is the third largest of IBM's R&D centers worldwide, and Google has the largest hub center outside the United States in Waterloo, Canada.
In addition, Samsung Electronics and LG Electronics established artificial intelligence research institutes in Toronto and Montreal in 2018.

Overview of Investment Incentives for the Canadian Government

There is virtually no preferential policy for foreign companies because establishing a company in Canada will basically receive equal treatment as a domestic company.
However, it has the strength of having an excellent investment environment as an advanced G7 country, and both the federal and state governments are trying to maintain tax cuts to attract foreign companies to invest.

Canadian Tax Incentives

Tax Cut Policy

• The Canadian government supports foreign investment with special benefits on capital gains and tax breaks on R&D to provide a competitive and stable environment for businesses.

• The federal corporate tax rate, which was 19% in 2009, decreased every year to 15% in 2012, and the same tax rate is applied as of the first half of 2023.
  On the other hand, for small and medium-sized enterprises, a federal corporate tax rate of 9% is applied.

SR&ED Tax Benefits

• Scientific Research and Experimental Development (SR&ED) Tax Benefits is a tax support for R&D activities of companies implemented in Canada, and is the only foreign company among various incentives to support the same tax reduction by applying the same standards as domestic listed corporations.

Support for R&D business in Canada

Strategic Innovation Fund

• The Canadian federal government created a new Strategic Innovation Fund in 2017 by integrating the existing Strategic Aerospace and Defense Initiative (SADI) and the Automotive Innovation Fund (AIF).

• Since 2017, the government has been providing C$1.7 billion (about 1.5336 trillion won) for R&D related to aerospace, information and communication, and automobile industries, and has been supporting a total of 54 R&D projects.
  For reference, the amount of support was provided until 2021.

• As of May 2022, newly added investment projects include Stellantis, General Motors of Canada Company, LG Energy Solution and Stellantis, Westing House Electric Canada Inc., and Honda Canada.

• As of May 2023, newly added investment projects include the PowerCo Volkswagen electric vehicle battery plant, Michelin Canada, and Ranovus Inc.

SIF Website: https://www.ic.gc.ca/eic/site/125.nsf/eng/home

Impact Canada Fund

• The 2017-2018 federal budget bill includes the government's plan to create the Impact Canada Fund, with the government's key basis for expanding investment in innovative technologies.

• In June 2019, the federal government designated four areas for the smart city construction project, announcing a plan to grant a total of C$75 million (about 67.7 billion won).
  Montreal (C$50 million, about 45.1 billion won), Guelph (C$10 million, about 9 billion won), Nunavot (C$10 million, about 9 billion won), and Bridgewater (C$5 million, about 4.5 billion won) in the Nova Scotia Territory were finally selected.

ICF Website: https://impact.canada.ca/en/about

Consortium for Aerospace Research and Innovation in Canada(CARIC)

• Launched in 2014, CARIC is a private non-profit organization that receives C$30 million (about 27.1 billion won) in financial support from the Canadian Ministry of Innovation, Science and Economic Development, and its focus is R&D projects that lead innovative technologies in the aviation industry.

• It also focuses on strengthening communication and cooperation between aerospace companies, research institutes, and educational institutions, financial support for research and technology development projects, and promoting fast and appropriate R&D.

• The main areas of research are noise cancellation, security, composites, air navigation management, automatic navigation systems, interior design, supply chain optimization, aviation electronics and controls, manufacturing and assembly processes, and quality assurance.

CARIC website: https://cluster.aero/capabilities/technology-research-development/consortium-for-aerospace-research-and-innovation-in-canada-caric

Restrictions and Prohibitions (Industry)

Except for the cultural industry, there are no foreign investment restrictions on new investment, but there are partial investment restrictions such as regulations for each industry or prohibiting foreigners from investing more than a certain percentage.

Investment Restricted Industries

• Publishing, distributing and selling books are only allowed if it is possible to create a net benefit under Canadian cultural policy.

• Acquisition of management rights through direct or indirect investment is not allowed in principle, but it is allowed under the condition that a certain part of the profit is reinvested.

Production, distribution, and sale of videos

• Acquisition of existing Canadian companies is not allowed, but import and distribution of products with intellectual property rights is allowed only for new investments.

• When a new film distributor is established, only importers or major investors with international distribution power are allowed.

Production, distribution, and sale of videos

• Acquisition of existing Canadian companies is not allowed, but import and distribution of products with intellectual property rights is allowed only for new investments.

• When a new film distributor is established, only importers or major investors with international distribution power are allowed.

Publication, distribution and sale of publications

• Investments in all publications must be reviewed by the Canadian Heritage, and acquisitions by Canadian companies are not allowed.

• Advertising space for foreign publications is limited to a maximum of 18%.

Broadcasting

• According to the policies of the Canadian Radio-television and Telecommunications Commission (CRTC), foreign companies are regulated in the market at the request of Canadian companies.

• If at least 80% of them are not under the control of foreign nationals through shareholders or the board of directors, it is impossible to issue or reissue a business approval certificate.

Regulation of Foreign Investment Ratio

• Telecommunications industry

• Ownership of telecommunications business operators and managers (Type Carriers) through direct investment is limited to up to 20%.

• In the case of acquisition through a subsidiary, 67% of the subsidiary's shares are limited to domestic ownership.

Other Industries:

• The airline's ownership interest is limited to 25 per cent.

• It is impossible to own the largest stake in a uranium mining company.

• In the case of licensed companies, the foreign investment ratio is limited to 49%.

• In Canada, ownership of land does not exist, so the government has the right to take back individual land at any time through compensation, and in some areas (Prince Edward Island, Saskatchewan, Nova Scotia) only allows the sale of property to local residents.

• Under the supervision of state and federal governments, regulations are determined depending on the situation.

If you wish to have a specific name, you must check the availability of the desired name with NUANS, the Canadian federal corporate name registration system, and submit it along with the Articles of Incorporation. It is also possible to use a serial number as a company name and apply for a separate business name through the NUANS system in the future.
However, all legal documents (including contract documents, income tax return forms, and legal submission documents) must use the serial number. Furthermore, federal corporations must complete registration procedures for each state in which they intend to conduct business activities.
In specific provinces like Ontario, Alberta, Nova Scotia, Saskatchewan, and Newfoundland Labrador, they are required to obtain an Extra-Provincial License. Since corporate registration procedures in different states may vary based on the industry, it is advisable to contact each state government or consult a corporate establishment agency for accurate information.

Province of Ontario

• Area: 1,076,395 km²

• Population: 14.75 million

• Provincial capital: Toronto

• Major industries: manufacturing (automobile and parts), agriculture, forestry, mining, and service industries

• Remark: Economic and industrial center responsible for more than a third of Canada's total GDP.
  The world's top five automakers, General Motors, Ford, FCA, Honda, Toyota, and truck maker Hino are located, with 13 finished car and engine production plants operating.
  In addition, the government has recently fostered Toronto, Ontario, as the "second Silicon Valley," and Samsung Electronics and LG Electronics established an artificial intelligence research center in Toronto in 2018, making headlines.

Province of Quebec

• Area: 1,542,056 km²

• Population: 8.48 million

• Province: Quebec City

• Major industries: manufacturing (aeronautics), power production, mining, paper pulp, service industry

• Remark: French is the official language due to the large number of French residents, and English is the only non-official language in Canada, the widest state in Canada and the second most populous.
  Montreal is the main hub of Canada's aerospace industry, and is home to aerospace companies such as Bell Helicopter Textron, Bombardier Aerospace, Pratt and Whitney Canada and Rolls Royce Canada.

Province of British Columbia

• Area: 944,735 km²

• Population: 5.24 million

• Provincial capital: Victoria

• Major industries: forestry (soft wood), agriculture, construction, fishing, aquaculture, manufacturing, high-tech industries, and tourism

• Note: It is geographically advantageous to enter the North American market and the Asia-Pacific market easily.
  Vancouver Port, the largest port on the Pacific coast of North America, is located, and the tourism industry is developed due to its beautiful natural scenery (600 national and state parks).
  In addition, forest products (69% of Canadian timber production), marine products, energy, and tourism industries are developed as a global source of natural resources.
  Recently, it has emerged as a center of the tech industry along with Ontario and Quebec.

Federal Corporation

A federal corporation can be engaged in business activities in all states in Canada and can be used with the same mutual use in all states.

• At the time of establishment of a federal corporation, if a company name is not applied separately, a unique name that automatically replaces the company name in the computer will be determined, and the given unique number is recognized as a name (e.g., 123456 Canada Inc.).

• For more information on the establishment of a federal corporation, follow the guidelines of the Ministry of Innovation, Science and Economic Development Canada through the link below, or recommend consulting with a local lawyer.

• www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html

Documents for the establishment of federal and state corporations can be submitted online or offline, and online documents can be received through agencies such as Cyberbahn, ESC Corporate Services, and OnCorp Direct.
- - ECore: https://www.oncorp.com/oncorphome/pages/index.aspx
- - ESC Corporate Services: www.eservicecorp.ca

If you wish to have a specific name, you must check the availability of the desired name with NUANS, the Canadian federal corporate name registration system, and submit it along with the Articles of Incorporation. It is also possible to use a serial number as a company name and apply for a separate business name through the NUANS system in the future.
However, all legal documents (including contract documents, income tax return forms, and legal submission documents) must use a serial number. Furthermore, federal corporations must complete registration procedures for each state in which they intend to conduct business activities.
In specific provinces like Ontario, Alberta, Nova Scotia, Saskatchewan, and Newfoundland Labrador, they are required to obtain an Extra-Provincial License. Since corporate registration procedures in different states may vary based on the industry, it is advisable to contact each state government or consult a corporate establishment agency for accurate information.

Related forms and websites

• After January 15, 2020, you can apply for federal corporate registration online, and it costs C$200 to apply online.
  Website: https://ised-isde.canada.ca/site/corporations-canada/en/register-federal-corporation-province-or-territory

• As of September 15, 2021, all paper transactions require a corporate key and must be submitted along with the relevant forms.
  Form Application
  Website: https://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07026.html#74&type=form

  • Article of Incorporation: https://forms.mgcs.gov.on.ca/en/dataset/5351

  • Initial Registered Office Address and First Board of Directors CBSA Form 2: https://www.ic.gc.ca/eic/site/cd-dgc.nsf/vwapj/FRM-2-e.pdf/$file/FRM-2-e.pdf

• NUANS Corporate Name DB Search Report Application Website: www.nuans.com

  • Business Number RC1 Form: www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc1/rc1-19e.pdf

Principal Corporation

In essence, a Provincial Corporation can only conduct business activities within the state where it is established.
Similar to a federal corporation, a serial number is automatically assigned by the government system at the time of the state corporation's establishment.
Unless a separate name is applied for, this number is approved under the company name (e.g., 123456 Ontario Inc.). Furthermore, just like when establishing a federal corporation, you can apply online for the establishment of a corporation through the agency mentioned below:
- - Ecore: https://www.oncorp.com/oncorphome/pages/index.aspx
- - ESC Corporate Services: www.eservicecorp.ca

If you wish to have a specific name, you can apply for the relevant mutual license through the Business Name Registration procedure before submitting the Articles of Incorporation.
It is also possible to operate as a numbered company without specifying a specific name and apply for a name change in the future to conduct business activities.
However, serial numbers must be used for all legal documents, including contract documents, income tax returns, and legal submission documents.
For businesses established in other states seeking to engage in activities within a particular state, they must obtain an Extra-Provincial License from the state they wish to operate in.
If a similar company name already exists in the state, they must apply for a separate trade name.
Please note that registration regulations may vary depending on the business registration-related industries.
It is recommended to contact each state government or consult a corporate establishment agency for accurate confirmation.
* State Business Registration Website: https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04578.html

Related forms and websites (Ontario based):

• Ontario Business Registry: https://www.ontario.ca/page/ontario-business-registry

• Articles of Incorporation, Form 1: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=5351E&NO=5351E

• Consent to Act as First Director, Form 2: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=1&ENV=WWE&TIT=5260&NO=5260E

• NUANS Corporate Name DB Search Report Application Website: www.nuans.com

Branch: Branch, Liaison Office, and Project Office

An overseas company that is not established as a federal or state corporation in Canada may establish a branch office if it wishes to engage in business activities in Canada.
Since the local office belongs to a foreign company, not an independent corporation, it does not have an independent legal personality, and the foreign parent company bears all legal responsibilities. If the same name as the parent company is registered in the state, acquiring an Extra-Provincial License is impossible, preventing the establishment of a branch under that name.
After securing a lease for a workplace to be used as a branch office, the company must proceed with the process of obtaining an Extra-Provincial License in the state where the workplace is located.

The required submission documents for acquisition include:

• Extra-Provincial License Application Form

• Agent Selection Form

• Company name inquiry report (certificate of non-registration of the parent company name in the state)

• Certificate of Status issued by the government of the country where the parent company is located (indicating company name, date of establishment, country of location, tax payment status, etc.)

• Cover Letter (specifying the contact person, address, and phone number)

• Branch Profit Tax is imposed on branches of foreign companies under the Canadian Income Tax Act (Income Tax Act).
  Foreign corporate branches do not receive incentives from the Canadian government and are not protected as Canadian companies in legal disputes.

Reference website:

• Ontario Extra-Provincial Corporations Act: www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90e27_e.htm

Related Forms

• Application for Extra-Provincial License EPCA Form 1: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=5280&NO=5280E

• Appointment of Agent for Service EPCA Form 2: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=5281&NO=5281E

• NUANS Federal Trade Name DB Search Report Application Website: www.nuans.com

• Business Number RC1 Form: www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc1/rc1-19e.pdf

Liaison Office

Same regulations as a 'Joint Office'.

Corporation

Listed on the Stock Exchange

• In the IPO method, which is most commonly used for listing a corporation, it is common for not only accountants and lawyers but also the financial sector to cooperate together.

• In addition to the well-known Toronto Stock Exchange (TSX), corporate public sales are possible through the Canadian Securities Exchange (CSE), mainly used by startups or venture companies to raise funds, with 780 listed as of May 2022.

• To list CSE, there is a way to submit a business description (Prospectus) through the Securities Commission of the state or reversely acquire or merge listed companies, and detailed listing conditions and procedures can be found on the link below.

* * https://thecse.com/en/about

Limited Liability Company

There are no Limited Liability Companies (LLCs) in Canada; instead, a similar structure is the Limited Partnership (LP).
It involves a separate establishment procedure compared to private companies and unlimited joint ventures.
The Declaration of General Partners is included in the submission form. A Limited Partnership consists of two or more individuals, companies, or trusts (hereinafter referred to as partners).
One or more General Partners have management rights and bear unlimited liability for corporate debt and obligations.
Additionally, there can be one or more Limited Partners who are only entitled to income distribution at an agreed-upon rate.

• Unlike corporations, it is not necessary to submit business income tax certification documents to the relevant state government every year, and it can be reported as each partner's personal income.

• Like shareholders of a corporation, Limited Partners have liability only within the limit of the amount of investment.

Reference website

• Partnerships Act: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90p05_e.htm

• Limited Partnerships Act: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90l16_e.htm

Private Business Operator

As a foreigner, it is virtually impossible to establish a private company in Canada.

• Gains and losses incurred by private companies lead to unlimited liability of the owner, and the social insurance number must be entered on paper in accordance with the regulations in order to issue a business identification number for tax payment, which is an essential procedure.

• In addition, permanent residency, citizenship, and Canadian address are essential to establish a private company in Canada.

• As a foreigner, it is possible to establish a company in Canada as a partnership with Canadian nationals who have at least one Canadian address.

Download related forms (private companies, unlimited partnerships):

• Application Form for Registration of a Private Company/Unlimited Partnership Company BNA Form 1: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=ON00227&NO=ON00227E

• Business Number RC1 Form: www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc1/rc1-19e.pdf

Download related forms (limited partnership):

• Application Form for Registration of Limited Partnership Company Registration Under Partnership/Limited Partnership Form 5: https://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=5298&NO=5298E

• Business Number RC1 Form: www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc1/rc1-19e.pdf