Last reviewed 2026-10-20
Oct 20, 2026 · @Dave
Overview
Canada is one market with thirteen sets of rules: the federal government sets income tax, GST, immigration, competition, privacy for private-sector commerce and federally regulated industries, while provinces and territories control incorporation (optionally), employment standards, most contract and property law, provincial sales tax and workers' compensation. Quebec is the outlier: a civil-law system, its own tax administration (Revenu Québec), its own pension plan and a strict French-language regime.
Three practical rules follow from that structure:
- Find the province first. Where the worker lives, where the work is done and where the company is incorporated each decide a different rule.
- Quebec needs its own checklist. Language, tax filings, payroll registrations and contract interpretation all differ.
- Cross-border payments carry withholding duties. Paying a non-resident for services performed in Canada triggers a 15% federal withholding obligation on the payer, not the recipient.
This guide covers four audiences: foreign companies selling to or contracting with Canadian companies, foreign companies establishing a Canadian presence, foreign companies hiring in Canada, and Canadian businesses paying non-residents. Figures are as of October 20, 2026 and cited to the government pages opened for this guide; anything not linked is labelled as a general-knowledge summary to verify. This is research, not legal or tax advice: have a Canadian lawyer or CPA confirm anything you act on.
Doing business in Canada
A foreign company can sell into Canada without any entity, but the moment it has people, offices or inventory there it needs a structure. Starting a new Canadian business is usually only notifiable, not reviewable, under the Investment Canada Act: the notification is due within 30 days after the business is implemented. Any foreign investment, including a new business, can still face a national security review, and the government has up to five years after implementation to order one (ISED FAQ). Review thresholds for 2026 apply to acquisitions of control: C$1.452 billion enterprise value for WTO investors, C$2.179 billion for trade-agreement investors, and C$578 million in asset value for WTO state-owned enterprises (ISED thresholds).
| Structure | Liability | Tax profile | Typical use |
|---|---|---|---|
| Canadian subsidiary (federal CBCA or provincial) | Limited to the subsidiary | Resident corporation; dividends to the parent are subject to Part XIII withholding | Employees, offices, long-term operations |
| Branch of the foreign company (extra-provincial registration) | Foreign parent is directly liable | Parent is taxed on Canadian-source income; branch profits tax may apply | Short-term or regulated operations |
| Partnership or joint venture | General partners liable unless limited | Flow-through; foreign partners file in Canada | Project and investor structures |
| No presence (sell cross-border) | Parent only | Risk of a permanent establishment and GST/HST duties | Remote sales, contractors, digital services |
Points to settle before choosing:
- Federal or provincial incorporation. Federal (CBCA) incorporation gives name protection across Canada but still needs registration in each province where you operate. Provincial incorporation is cheaper where you only operate in one province. The CBCA still requires at least 25% resident Canadian directors, or at least one resident Canadian if the board has fewer than four directors (CBCA s. 105, consolidation current to September 30, 2026). A majority is required in some regulated sectors. Provincial statutes differ: confirm with counsel.
- Beneficial ownership. Non-public CBCA corporations must keep a register of individuals with significant control: people who own or control 25% or more of the votes or of the shares by fair market value, or who have control in fact (ISED). Since January 22, 2024 they must also file that information with Corporations Canada, with the annual return and within 15 days of a change. A corporation that breaks the register rules without reasonable cause faces a fine of up to $100,000 (CBCA s. 21.1). Changes up the ownership chain can trigger updates.
- Quebec. Registration is with the Registraire des entreprises; the Charter of the French Language applies to business names, signage, contracts and workplace communications (see Contracting and Quebec below).
- Bank, payroll and tax accounts. A new corporation needs a CRA business number and separate GST/HST, payroll and corporate-tax accounts; Quebec adds Revenu Québec accounts for QST, source deductions and the pension plan.
Tax
A Canadian corporation pays federal tax of 15% on general income (after the general rate reduction) and 9% on active business income up to the C$500,000 small-business limit (CCPCs only), plus provincial tax (CRA corporation tax rates). Combined general rates run from 23% (Alberta) to 30% (Newfoundland and Labrador, PEI).
| Province | Combined general rate | Combined small-business rate |
|---|---|---|
| Alberta | 23% | 11% |
| British Columbia | 27% | 11% |
| Ontario | 26.5% | 12.2%, falling to 11.2% from July 1, 2026 |
| Quebec | 26.5% | 12.2%, falling to 11.2% for years starting after April 29, 2026 |
| Nova Scotia | 29% | 10.5% (limit $700,000) |
A non-resident-controlled corporation is not a CCPC, so it does not get the small-business rate. Treat the general rate as the planning number. Provincial inputs: Ontario 11.5% general and a small-business rate falling from 3.2% to 2.2% on July 1, 2026 (Ontario); Quebec's small-business minimum rate falls from 3.2% to 2.2% for taxation years beginning after April 29, 2026 (Revenu Québec); BC and Nova Scotia from the CRA page above. Alberta's 8% and 2% provincial rates were not confirmed on a government page.
Paying non-residents
- Services performed in Canada. Any payer, resident or not, must withhold 15% of fees paid to a non-resident for services rendered in Canada and remit it by the 15th of the next month. A payer that fails to withhold is liable for the full amount plus interest and penalties (CRA IC75-6); the Income Tax Act penalty is 10% of the amount not withheld, or 20% for a repeat made knowingly or through gross negligence (ITA s. 227(8)). The non-resident can apply for a waiver, ideally 30 days before services start or the first payment; treaties do not remove the withholding by themselves. This is Regulation 105 withholding. It applies only to services performed in Canada, not to services performed abroad or to employee pay. Revenu Québec has a separate page on payments to non-residents who perform services in Québec (Revenu Québec). That page could not be opened for this guide, so whether an additional Québec withholding applies is unconfirmed.
- Passive income (Part XIII). The Income Tax Act sets a 25% tax on amounts a resident pays a non-resident as dividends, rents, royalties and management fees, and as interest that is non-arm's-length or participating debt interest. Arm's-length interest is generally exempt (ITA s. 212; CRA IC76-12). The payer must withhold and remit by the 15th of the next month, and faces a 10% penalty for failing to withhold (CRA NR4 guide). Treaties reduce the rate. Under the Canada–US treaty: dividends 5% to a company holding at least 10% of the voting stock, otherwise 15%; interest generally taxable only in the recipient's country, with exceptions such as contingent interest; royalties capped at 10%, with copyright (literary, dramatic, musical, artistic, excluding film and TV), computer software and patent or know-how payments taxable only in the recipient's country (Finance Canada consolidated text, a convenience version without official sanction). Treaty relief needs the payee's residence and eligibility documents (forms NR301, NR302 or NR303). Check the treaty for any other country.
Sales taxes
GST (5%) or HST applies to most supplies: 13% in Ontario, 14% in Nova Scotia, 15% in New Brunswick, Newfoundland and Labrador and PEI (CRA rates). A non-resident that carries on business in Canada and is not a small supplier must register under the normal regime and may have to post a security deposit. Small-supplier status ends once worldwide taxable supplies pass C$30,000 in a single calendar quarter or over four consecutive quarters. Whether a non-resident carries on business in Canada is a question of fact: where agents, contracts, payment and inventory are (CRA RC4027). A non-resident that does not carry on business in Canada generally need not register under the normal regime. It must use the simplified regime if it sells digital products or services to Canadian consumers and unregistered businesses and passes C$30,000 in 12 months (CRA threshold). Simplified registrants cannot claim input tax credits, and suppliers of goods held in or shipped from Canada, such as from a fulfilment warehouse, must use the normal regime (CRA). Quebec (QST 9.975%), BC (7%), Saskatchewan (6%) and Manitoba (7%) run separate provincial sales taxes; their non-resident registration rules were not checked.
Permanent establishment and residency
A foreign company that employs a Canadian-based sales or management employee, keeps an office or inventory in Canada, or has staff who habitually conclude contracts here risks a permanent establishment under treaty rules, which brings Canadian corporate tax filing. Central management and control in Canada can make a foreign-incorporated company a Canadian tax resident. These are fact-driven questions: get an opinion before a first hire.
Incentives
Canadian-controlled private corporations and some other Canadian companies can claim SR&ED (scientific research and experimental development) credits; foreign-controlled corporations get a lower refundable rate. A Canadian company with a foreign parent must also follow transfer-pricing rules on intercompany charges. Both are areas where specialist advice pays for itself.
Hiring in Canada
There are four ways to put someone to work in Canada: employ them through a Canadian entity, employ them through a foreign entity registered for payroll, use an employer of record (EOR), or engage them as an independent contractor. The first two carry full employer duties; the third moves them to a vendor at a fee; the fourth is the cheapest and the riskiest if the relationship is really employment.
Employee or contractor
CRA first asks what the parties intended, then looks at control, tools and equipment, the ability to subcontract or hire helpers, financial risk, responsibility for investment and management, and opportunity for profit (CRA RC4110). Courts use the Wiebe Door and Sagaz test: control, ownership of tools, chance of profit and risk of loss, and whether the worker is in business on their own account. No factor decides alone. In Quebec the test is subordination under the Civil Code. Either party can ask CRA for a CPP/EI ruling (form CPT1) by June 29 of the following year. Getting it wrong means back CPP and EI (both shares), a 10% penalty rising to 20% for a repeat made knowingly or through gross negligence (ITA s. 227(8)), interest, and retroactive employment-standards and workers'-compensation exposure. A worker incorporated to avoid employee status can be a personal services business (PSB). That applies where the worker would reasonably be an employee of the client but for the corporation, unless the corporation employs more than five full-time employees throughout the year or is paid by an associated corporation (ITA s. 125(7)). A PSB gets no small-business deduction or general rate reduction, pays an extra 5% federal tax (ITA s. 123.5) and has limited deductions (CRA). The 33% federal rate is derived here as 28% (38% less the 10% abatement) plus 5%, not quoted from a CRA page.
Employer payroll costs (2026)
| Item | Employee | Employer | Source |
|---|---|---|---|
| CPP (first tranche, outside Quebec) | 5.95% of earnings from $3,500 to $74,600; max $4,230.45 | Matches the employee amount | CRA |
| CPP2 (outside Quebec) | 4% from $74,600 to $85,000; max $416 | Matches the employee amount | CRA |
| EI outside Quebec | 1.63% up to $68,900; max $1,123.07 | 1.4 times the employee rate; max $1,572.30 | CRA |
| EI in Quebec | 1.30%; max $895.70 | 1.4 times the employee rate; max $1,253.98 | CRA |
Employees working in Quebec contribute to the Quebec Pension Plan instead of the CPP (see the next table). Other provinces require workers' compensation registration and, in some, an employer health tax (Ontario, BC, Manitoba, Newfoundland); those rates were not checked for this guide.
Quebec payroll costs (2026)
| Item | Employee | Employer | Source |
|---|---|---|---|
| QPP base plus first additional | 6.30% of earnings from $3,500 to $74,600; max $4,479.30 | Matches the employee amount | Revenu Québec |
| QPP second additional | 4% from $74,600 to $85,000; max $416 | Matches the employee amount | Revenu Québec |
| QPIP (parental insurance) | 0.430% up to $103,000; max $442.90 | 0.602%; max $620.06 | Revenu Québec |
| Health Services Fund | None | General employers: 1.65% of total payroll up to $1 million, rising on a sliding scale to 4.26% at $7.8 million or more | Revenu Québec |
| CNESST (workers' compensation) | None | 2026 average rate $1.54 per $100 of insured payroll, on up to $103,000 per worker; your rate depends on your classification | CNESST |
| Labour standards contribution | None | 0.06% of remuneration up to $103,000 | Revenu Québec |
Quebec employers register with Revenu Québec for source deductions and these contributions, and with the CNESST. EI for Quebec employees is in the table above. Primary and manufacturing employers have a lower Health Services Fund scale (1.25% at the bottom); see the Revenu Québec page.
Employment standards (Ontario as the worked example)
Each province has its own statute. Ontario's general minimum wage is $17.95 an hour from October 1, 2026 (Ontario). Termination notice after three months of service ranges from one week (under a year) to eight weeks (eight or more years), and employers terminating 50 or more people at one establishment in four weeks must give 8, 12 or 16 weeks' notice by headcount (Ontario ESA guide). Severance pay of up to 26 weeks is owed after five years where the employer's global payroll is at least $2.5 million, or 50 or more people are cut in six months on a permanent closure (Ontario ESA guide).
These are floors. Outside Quebec's own rules, courts award "reasonable notice" at common law that is often much longer than the statutory minimum. In Ontario, a termination clause that breaches the ESA in any way can void the whole termination provision, not just the offending part. Waksdale v. Swegon North America Inc., 2020 ONCA 391, applied this to a for-cause clause. Dufault v. Ignace (Township), 2024 ONCA 915, followed it for "at any time" termination wording, and the Supreme Court of Canada refused leave to appeal on June 5, 2025 (SCC 41680). The two judgments themselves were not opened for this guide, and a case called "Bryce" could not be matched to a reported decision. Quebec has its own notice rules and a right to a French-language workplace. Do not copy an at-will US employment contract: it is not enforceable the way it reads, and it can create liability.
Recent Ontario ESA changes for employers (Ontario): from January 1, 2026, employers with 25 or more employees must state expected pay in public job postings (a range may not span more than $50,000; not required above $200,000), disclose AI use in hiring, say whether the posting is for an existing vacancy, and not require Canadian experience. They must also tell interviewed applicants within 45 days whether a hiring decision was made, and keep the records for 3 years (Ontario). Since July 1, 2025, those employers must give new hires written basic information. Since November 27, 2025, employees receiving a mass termination notice get three unpaid days of job-search leave, and extended temporary lay-offs are possible with approval.
Provincial comparison (2026)
| Rule | Ontario | British Columbia | Alberta | Quebec | Federal (Canada Labour Code) |
|---|---|---|---|---|---|
| General minimum wage | $17.95 from Oct 1, 2026 | $18.25 from Jun 1, 2026 | $15.00 | $16.60 from May 1, 2026 | $18.15 from Apr 1, 2026 (a higher provincial rate applies if there is one) |
| Individual termination notice | 1 to 8 weeks after 3 months, by years of service | 1 week after 3 months, 2 after 12 months, 3 after 3 years, plus 1 a year to 8 | None up to 90 days; then 1 week, rising to 8 weeks at 10 years | None under 3 months; 1 week up to 1 year; 2 weeks from 1 to 5 years; 4 weeks from 5 to 10 years; 8 weeks at 10 years or more | 2 weeks (none under 3 months); from 3 years, 1 week per year to 8 |
| Statutory severance pay | Up to 26 weeks (5+ years, and payroll of $2.5 million or 50+ cut in 6 months) | None beyond the length-of-service pay above | None | None beyond pay in lieu of notice | Yes, from 12 months: greater of 2 days' wages per year or 5 days |
| Group termination (50+ at one site) | 8, 12 or 16 weeks by number cut | 8, 12 or 16 weeks by number cut, within 2 months | 4 weeks' notice to the Minister, plus individual notice | Not checked | 16 weeks' notice, plus a joint planning committee |
| Annual vacation and pay | 2 weeks, 4%; 3 weeks, 6% from 5 years | 2 weeks, 4% after 12 months; 3 weeks, 6% from 5 years | 2 weeks, 4% after 1 year; 3 weeks, 6% from 5 years | 2 weeks, 4% after 1 year; 3 weeks, 6% from 3 years | 2 weeks, 4%; 3 weeks, 6% from 5 years; 4 weeks, 8% from 10 years |
| Paid public holidays | 9 | 11 in 2026 | 9 | 8 | 10 |
Sources: Ontario minimum wage, termination, vacation, holidays. BC minimum wage, Employment Standards Act ss. 63 and 64, vacation, holidays. Alberta minimum wage, termination, vacation, holidays. Quebec minimum wage, termination, vacation, holidays. Federal minimum wage, termination, vacation and holidays. The "none beyond" entries for BC and Quebec severance reflect the statutes' structure and were not separately confirmed on a government page.
Using an employer of record
An EOR employs the person legally in Canada and bills you for payroll, benefits and a fee. It avoids setting up an entity and solves payroll registration, but it does not remove your own permanent-establishment, control-and-direction or immigration questions. Choose one that is registered in the worker's province. No CRA or provincial guidance specifically on EORs was found, so treat these points as general practice and have counsel confirm who counts as the employer for your worker.
Contracting, language and privacy
Contracts
Common-law provinces enforce contracts much as the US and UK do; Quebec applies the Civil Code, which imposes good-faith duties and treats standard-form (adhesion) contracts more protectively. A foreign governing-law clause is generally respected, but Canadian courts will apply mandatory local rules (employment, consumer, language, privacy) regardless. For cross-border deals, specify the governing law, a forum or arbitration seat, currency and the tax allocation, including who bears withholding and sales tax. Payment of services performed in Canada to a non-resident triggers the 15% Regulation 105 withholding discussed above unless a waiver is held.
Quebec's French-language rules
Under the Charter of the French Language as amended by Bill 96 (royal assent June 1, 2022):
- New standard-form (adhesion) contracts, and the documents attached to them, must be given to the other party in French first. The parties may then expressly choose another language. This has applied since June 1, 2023. It does not apply to contracts with a person not domiciled in Quebec or with a business whose seat or establishment is outside Quebec (OQLF).
- Invoices and receipts, public catalogues and brochures (in any medium) must be in French. Inscriptions on products and packaging must be in French, and no other language may be more prominent. Public signs and commercial advertising must be in French; another language is allowed only if French is markedly predominant (Charter). Consumers have a right to be informed and served in French.
- Employers must use French in written communications with staff, including job offers and written employment contracts. A job offer published in another language must be published in French at the same time, to a comparable audience. An employer may require another language only if the duties demand it and it has first taken reasonable steps to avoid doing so (Charter).
- Businesses with 25 or more employees over a six-month period must register with the OQLF and begin a francization process; they need proof of registration or a certificate to get subsidies or public contracts. For businesses with 25 to 49 employees this took effect on June 1, 2025 (OQLF notice). A francization committee is required at 100 or more employees (OQLF).
- Fines for a company are $3,000 to $30,000 for a first offence. They double for the first repeat and triple for later ones (OQLF FAQ). Section 206 sets higher fines of $10,000 to $250,000 for some offences, including giving false or misleading information (Charter s. 206).
Date check: Bill 96 received royal assent on June 1, 2022. The French-first contract rule took effect on June 1, 2023, not 2022. Other Bill 96 provisions have their own start dates, so confirm any rule not listed here with counsel.
Privacy
PIPEDA governs private-sector handling of personal information in commercial activity, including data that crosses provincial or national borders, and applies to federally regulated organizations (OPC). Alberta, BC and Quebec have private-sector laws deemed substantially similar, which apply instead of PIPEDA inside the province. Quebec's private-sector Act, strengthened by Law 25, covers information held by businesses about people in Quebec (CAI). Whether PIPEDA reaches a foreign company with no Canadian presence was not confirmed on a government page.
| Point | PIPEDA | Quebec Law 25 |
|---|---|---|
| Breach reporting | Report to the OPC and notify individuals when there is a real risk of significant harm; keep records of every breach (PIPEDA ss. 10.1, 10.3) | Notify the CAI and individuals when an incident presents a risk of serious injury; keep an incident register (CAI) |
| Penalties | Offences for knowingly failing to report a breach or keep breach records: fine up to $100,000 if prosecuted by indictment, $10,000 on summary conviction (PIPEDA s. 28) | Administrative monetary penalties up to $10M or 2% of worldwide turnover; penal fines for companies from $15,000 up to $25M or 4% of prior-year worldwide turnover, doubled for repeats (CAI) |
| Accountability | A designated compliance person | The person with the highest authority (the CEO by default) is responsible and may delegate in writing; publish the officer's title and contact details. Privacy impact assessment before transfers outside Quebec (since September 2023) and for new information systems (CAI) |
For marketing, Canada's anti-spam law (CASL) requires consent for commercial electronic messages. The maximum administrative penalty for a violation is $10 million for an organization and $1 million for an individual (CASL s. 20(4)). Law 25 also gives a private right of action, which was not verified here.
Foreign workers, checklist and sources
Bringing in foreign workers
Hiring someone who needs a work permit follows one of two routes. The Temporary Foreign Worker Program needs a Labour Market Impact Assessment (LMIA): C$1,000 per position, non-refundable, and it cannot be charged to the worker (ESDC). The International Mobility Program is LMIA-exempt and carries a C$230 employer compliance fee per worker, paid through the Employer Portal (not due for open work permit holders) (IRCC). IRCC lists workers under free trade agreements among the LMIA-exempt categories (IRCC); the CUSMA-professional and intra-company-transfer pages were not opened, so confirm eligibility and the port-of-entry process with IRCC. ESDC's September 2026 average LMIA processing times were 98 business days (high-wage), 82 (low-wage) and 9 (Global Talent Stream), updated monthly (ESDC).
Low-wage LMIAs face tight limits (ESDC): applications are not processed where the wage is below the provincial threshold and the metropolitan area's unemployment rate is 6% or higher (applications from September 26, 2024); employment is capped at one year; and workers may be 10% of low-wage positions per worksite (20% in some sectors). In Quebec, low-wage LMIAs for Montréal and Laval are not processed until December 31, 2026, with listed sector exceptions, and applications for work over 30 days go to Service Canada and the MIFI at the same time, in French (ESDC Quebec page). Penalties for non-compliance are real: ESDC reported $4,882,500 in penalties and 36 employer bans for 2024–25 (ESDC), and over $10.2 million in penalties and 30 bans for 2025–26 (ESDC).
Pre-engagement checklist
- Decide the structure: subsidiary, branch, EOR or contractor, and the province of operation
- Confirm permanent-establishment and residency exposure before the first Canadian hire
- Register for the CRA business number, payroll and (if needed) GST/HST; add Revenu Québec accounts for Quebec work
- Withhold 15% on payments for services performed in Canada by non-residents, or obtain a waiver 30 days ahead
- Use a province-specific employment agreement with a termination clause drafted for that province
- Classify each worker (employee vs contractor) against the CRA RC4110 factors
- In Quebec, prepare French contracts, invoices, websites and job postings, and register with the OQLF at 25 employees
- Appoint a privacy lead, publish a privacy policy and set up breach reporting
- Confirm CASL consent before any marketing email or text
- Have a Canadian lawyer and CPA review the structure and the contract
What this guide did not verify
Not confirmed on a government page: whether Revenu Québec adds a withholding on payments to non-residents for services in Québec; Alberta's provincial corporate rates; the CUSMA-professional and intra-company-transfer rules; the Waksdale and Dufault judgments themselves; BC and Quebec statutory severance; Quebec collective-dismissal rules; non-resident rules for QST, BC, Saskatchewan and Manitoba sales taxes; employer health taxes outside Quebec; Law 25's private right of action; whether PIPEDA reaches foreign companies with no Canadian presence; and EOR treatment. Not covered: sector regulation (financial services, health, cannabis), securities law, trade and customs, competition law, intellectual-property filing, unionized workplaces, and the other provinces' employment statutes in detail. Each is a candidate for the next guide.
Sources
- CRA IC75-6, Regulation 105 withholding
- Income Tax Act s. 212 (Part XIII), s. 227(8), s. 125, s. 123.5
- CRA NR4 withholding guide and IC76-12
- Finance Canada, Canada–US tax convention (consolidated)
- CRA RC4027, GST/HST for non-residents, digital economy thresholds, simplified registration, rates
- CRA, corporation tax rates, Ontario corporate income tax, Revenu Québec, small business deduction
- CRA RC4110, employee or self-employed
- CRA payroll: CPP, CPP2, EI
- Quebec payroll: Revenu Québec, 2026 changes, QPP, QPIP, labour standards contribution, CNESST 2026 rate
- Employment standards: see the sources line under the provincial comparison table; Ontario recent ESA changes; SCC 41680 (Dufault)
- Investment Canada Act thresholds and FAQ
- CBCA s. 105, s. 21.1, ISED, individuals with significant control
- Quebec language: Charter of the French Language, OQLF, businesses, contracts of adhesion, 25 to 49 employees, OQLF FAQ on fines
- Privacy: PIPEDA, OPC overview, CAI, Law 25 changes, CAI, sanctions, CASL
- Foreign workers: ESDC low-wage requirements, LMIA processing times, IRCC, how to hire under the IMP, ESDC Quebec
Research, not advice. Rules change and depend on your facts: confirm with a qualified Canadian professional before you act. Items we could not verify are labelled in the text.