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Doing Business in Canada About This Guide Doing Business in Canada About This Guide Goodmans Guide to Doing Business in Canada (the “Guide”) was developed by Goodmans to provide executives, counsel and potential United States (“US”) and foreign investors with a practical overview of Canada’s legal framework and key business legislation. The discussion in this Guide is confined to the laws of the province of Ontario, as well as the federal laws of Canada that apply in Ontario as of January 1, 2020. Because the laws and policies of governments and regulatory authorities change, some of the information may not be accurate after that date. This Guide provides general information only and should not be relied upon as legal advice. The “Business Visits and Relocation” section of this Guide was prepared by PwC Law LLP (Toronto). For further information, please contact Melodie Molina at 416.598.8849 or visit: http://www.pwc.com/ca/en/law/immigration-law.html. Doing Business in Canada 2 Contents Introduction 9 Types of Business Organization 10 Sole Proprietorships 10 Corporations 10 General 10 Federal or Provincial Incorporation? 11 Management of a Corporation 12 Subsidiary or Branch? 12 Partnerships 13 General Partnerships 13 Limited Partnerships 14 Real Estate Investment Trusts (“REITs”) and Income Trusts 14 Contractual Arrangements 15 Joint Ventures 15 Franchising 15 Licensing 15 Conclusion 16 Acquiring or Establishing a Business in Canada 17 Investment Canada Act 17 Reviewable Transactions 18 Cultural Industries 20 Competition Act 21 Merger Notification 21 Substantive Merger Provisions 23 Other Competition Act Provisions 24 Financing a Business Operation in Canada 25 Securities Law 25 Personal Property Security 28 Government Assistance Programs 29 Doing Business in Canada 3 Dispute Resolution 30 Canada’s Court System 30 Civil Litigation 30 Class Actions 31 Alternative Dispute Resolution 31 Insolvency and Restructuring 32 Bankruptcy 32 Receivership 32 CCAA Restructuring 32 CBCA Restructuring 33 Proposals Under The BIA 34 Overview of Canada’s Tax Regime 36 Income Tax 36 Taxation of Canadian Residents 36 Basis of Taxation 37 Individuals and Trusts 37 Corporations 37 Taxation of Non-Residents 37 Choice of Business Entities 38 Withholding Tax 39 Treaties 39 Transfer Pricing 39 Goods and Services/Harmonized Sales Tax 40 General Rules 40 Harmonized Sales Tax and Provincial Sales Tax 40 Other Commodity Taxes and Duties 41 Customs Duties 41 Excise Duties and Taxes 42 Importing or Trading Goods 43 Product Standards 43 Doing Business in Canada 4 Canadian Standards Association International 44 Consumer Protection 45 Competition Act 46 Civil Provisions 46 Criminal Provisions 47 International Trade 48 Trade Agreements 48 Canadian Import Duties 59 Canadian Import Restrictions 61 Canadian Export Restrictions 61 Special Economic Measures Act 62 United Nations Act 63 Employment and Labour 64 Employment Standards 64 Severance 65 Human Rights 65 Labour Relations 66 Pay Equity 67 Employment Equity 67 Privacy 67 Occupational Health and Safety and Workers’ Compensation 68 Accessibility for Individuals with Disabilities 68 Payroll Deductions and Remittances 68 Business Visits and Relocation 70 Temporary Entry 70 Temporary Resident Visa 70 Business Visitor 70 Work Permit Process 71 Temporary Foreign Worker Program 71 Global Talent Stream 72 Province-specific Requirements 72 Doing Business in Canada 5 International Mobility Program 73 Permanent Residence 75 Family Class Immigration 76 Business Class Immigration 76 Economic Class Immigration 77 Privacy and Data Protection 79 Obligations Imposed by Canadian Privacy Law 80 Policies and Procedures 80 Designating a Privacy Officer 81 Safeguarding Personal Information 81 Personal Information in a Third Party’s Control 81 Data Retention 81 Access to Personal Information 82 Challenging Compliance 82 Enforcement 82 Non-Canadian Businesses 82 Anti-Spam Legislation 83 E-Commerce and Emerging Technology Businesses 84 Jurisdiction 84 E-Commerce Legislation 84 Emerging Technology Businesses 85 The Technology Sector in Canada 85 Other Recent Developments 86 Industrial and Intellectual Property 88 Copyright 88 Domain Names 92 Industrial Design 92 Patents 95 Trademarks 96 Environmental Law 100 Jurisdiction 100 Doing Business in Canada 6 Federal Environmental Law 100 Ontario Environmental Law 101 Climate Change 102 Cleantech 104 Laws, Policies, Incentives and Programs to Support Cleantech in Canada 104 Federal Government Laws and Programs 105 Cannabis 108 Federal Laws and Regulations 108 The Cannabis Regulations 108 Path to Cannabis Edibles 109 Cannabis 2.0 110 Provincial Laws 111 Ontario 111 Municipal Considerations 112 Real Estate 113 Capacity to Buy, Hold and Sell Real Property 113 Forms of Land Ownership 113 Condominiums 113 Joint Ventures 114 Agreements to Buy, Sell and Lease Land 115 Conveyancing 116 Title Opinions and Title Insurance 116 Land Use Planning 116 Property Taxes and Fees 118 Land Transfer Tax 118 Goods and Services Tax 118 Municipal Taxes 119 Residential Rent Controls 119 Regulation of Real Estate Brokers 120 Regulation of Mortgage Brokers 120 Doing Business in Canada 7 Energy 121 Jurisdiction 121 Federal Regulation 121 Provincial Regulation 122 Mining and Natural Resources 123 Mining 123 Oil and Gas 123 Exploration and Development 124 Mining Leases 124 Surface Right 124 Environmental Issues 125 Aboriginal rights and the duty to consult 125 Capital Markets 127 Securities Regulation 128 Doing Business in Canada 8 I Introduction Canada is a federal state in which jurisdiction is constitutionally divided between two levels of government – federal and provincial. In some areas, either the federal government or the provincial government has exclusive jurisdiction. In others, both levels of government regulate different aspects of a particular activity. In addition, provincial governments delegate certain powers to municipal governments. A business may therefore be regulated at three levels – federal, provincial and municipal. It may also be affected by policies and decisions of administrative tribunals. Canada is a constitutional monarchy. Although Queen Elizabeth II is Canada’s official head of state, the governments of Canada are democratically elected by the population. At each level, the elections are independent, which sometimes results in a different political party governing at the federal and the provincial levels. In addition, Canada is governed by a Charter of Rights and Freedoms that guarantees certain rights of individuals as against the state. All of the provinces of Canada, except Québec, are common law jurisdictions, with strong historical ties to the British common law. Québec is a mixed common law/civil law jurisdiction in which private law matters, such as contract and property, are governed by a Civil Code. Canada provides an attractive climate for foreign businesses. It has stable political and economic systems, one of the world’s soundest banking systems and it is rich in both natural and human resources. Canada ranks among the top nations in global competitiveness, ease of doing business, transparency, political stability and human development. It’s cities are among the world’s best for quality of life, health and safety, infrastructure and education. Doing Business in Canada 9 ITypes of Business Organization Sole Proprietorships A business owned by one person is called a sole proprietorship. This is the simplest form of business organization. The individual is responsible for all of the business’s obligations and his or her personal assets may be seized to meet these obligations. There is no commercial legislation dealing specifically with sole proprietorships. However, a sole proprietor may need to comply with federal, provincial and/or municipal regulations affecting trade and commerce, licensing and registration. For example, in Ontario a sole proprietor who carries on business or identifies his or her business to the public under a name other than the owner’s name, must register the name. A sole proprietorship might be suitable for a small enterprise because it avoids many of the costs of setting up and running a corporation and the complex regulatory scheme that governs corporations. In addition, non-capital start-up losses of the business are generally deductible from the sole proprietor’s income from other sources. One disadvantage of a sole proprietorship is the owner’s unlimited liability. Another disadvantage is that the business can be transferred only by selling the assets. Corporations General The corporation is the most common form of business organization in Canada. A corporation has a legal personality distinct from its shareholders and management. A corporation’s existence is potentially perpetual, since it is not affected by the departure or death of any or all of its shareholders or managers. As a separate legal entity, a corporation has the rights, powers and privileges (and potentially the obligations) of a natural person. It can hold property and carry on a business, and it is subject to legal and contractual obligations. Doing Business in Canada 10 Types of Business Organizations The main advantages of the corporation are: (a) the limited liability of the shareholders; (b) the possibility of perpetual existence; and (c) the flexibility of the corporate form for financing and estate planning purposes. The disadvantages include the costs associated with incorporation, operation and dissolution. In addition, every corporation resident in Canada or carrying on business in Canada that deals with non-arm’s
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