Can a foreigner own a company in Canada?

Yes, a foreigner can own a company in Canada. Non-residents may hold shares, act as directors, and operate businesses across most sectors without obtaining Canadian citizenship or permanent residency. However, company ownership Canada involves navigating a layered framework of federal and provincial rules, residency requirements for directors, and sector-specific restrictions that vary significantly by industry. This guide explains who can own what, which structures work best for non-residents, where restrictions apply, and what practical steps a foreign founder should take to set up and maintain a compliant Canadian company.

Canada';s approach to foreign business ownership is generally open, but it is governed by several overlapping legal instruments. The Canada Business Corporations Act (CBCA) is the primary federal statute for incorporating companies at the federal level. It sets out rules on share ownership, director residency, and corporate governance. Provinces have their own equivalent legislation - for example, Ontario';s Business Corporations Act and British Columbia';s Business Corporations Act - each with distinct requirements.

Under the CBCA, there is no restriction on foreign nationals owning shares in a federally incorporated company. A non-resident can hold 100% of the shares. The more significant constraint under the CBCA has historically been the director residency requirement: at least 25% of directors of a federal corporation must be resident Canadians. This rule does not apply in all provinces. British Columbia and Prince Edward Island, for instance, have no resident director requirement, making them attractive choices for fully non-resident ownership structures.

The Investment Canada Act (ICA) is a separate federal statute that applies when a foreign investor acquires control of an existing Canadian business above certain financial thresholds. For new incorporations - where a foreign national is starting a company from scratch rather than acquiring an existing one - the ICA review process generally does not apply. Founders should still be aware of it if they plan to acquire a Canadian business later.

The Competition Act may also be relevant for larger transactions, but for most small and medium-sized foreign-owned startups it does not create a practical barrier at the formation stage.

The choice of corporate structure is the single most consequential decision a foreign founder makes. Canada offers several options, each with different implications for ownership, liability, and tax.

A corporation is the most common vehicle. It provides limited liability, a separate legal personality, and access to Canada';s extensive tax treaty network. A foreign individual or foreign company can own 100% of the shares of a Canadian corporation. The corporation pays Canadian corporate income tax on its profits, and dividends paid to a non-resident shareholder are subject to Canadian withholding tax, typically at 25% under domestic law, though this rate is often reduced under a bilateral tax treaty.

A branch office is an alternative for foreign companies that want a Canadian presence without creating a separate legal entity. The branch is not a distinct legal person; the foreign parent company is directly liable for its Canadian activities. Branch profits are also subject to a branch tax in addition to corporate income tax, which can make this structure less efficient than a subsidiary corporation in many cases.

A partnership or limited partnership is used in certain investment and real estate structures. A limited partnership allows foreign investors to participate as limited partners without taking on management responsibilities or unlimited liability. General partners, however, bear full liability, and at least one general partner is typically required to be a Canadian resident in some provinces.

A sole proprietorship is technically available to non-residents but offers no liability protection and is rarely used by serious foreign investors. It also requires the individual to file Canadian tax returns directly.

In practice, most foreign founders choose a provincial corporation in British Columbia or Ontario, or a federal corporation under the CBCA, depending on where they intend to operate and whether they can satisfy the director residency requirement.

The director residency requirement is the most common practical obstacle for foreign founders. Under the CBCA, at least 25% of a corporation';s directors must be resident Canadians. For a company with fewer than four directors, this means at least one director must be a Canadian resident. A "resident Canadian" is defined as a Canadian citizen ordinarily resident in Canada, a permanent resident, or a Canadian citizen not ordinarily resident in Canada who falls within specific categories.

Several provinces have eliminated this requirement entirely. British Columbia, Alberta, Nova Scotia, Prince Edward Island, New Brunswick, and Quebec do not impose a resident director requirement for provincially incorporated companies. Ontario removed its resident director requirement in recent years, making it significantly more accessible for non-residents. This change has made Ontario and British Columbia the two most popular provincial jurisdictions for foreign-owned companies.

For founders who incorporate federally or in a province that still requires a resident director, the practical solution is to appoint a nominee director. A nominee director is a Canadian resident who agrees to serve on the board for a fee, typically under a nominee agreement that limits their actual authority and indemnifies them against liability. This arrangement is legal and widely used, but it adds an ongoing cost and requires careful drafting of the nominee agreement to protect all parties.

A common mistake among foreign founders is to incorporate federally without understanding the resident director requirement and then discovering they cannot meet it without engaging a nominee. Engaging a qualified lawyer before incorporation avoids this problem entirely.

If you are structuring a Canadian company for the first time and are uncertain which jurisdiction suits your situation, contact info@vlolawfirm.com. We can help structure the setup correctly the first time.

While Canada is broadly open to foreign investment, certain sectors are subject to ownership restrictions or enhanced regulatory scrutiny. Foreign founders should identify whether their intended business falls within a restricted category before incorporating.

Telecommunications is regulated under the Telecommunications Act and the Broadcasting Act. Foreign ownership of Canadian broadcasting undertakings is limited to 20% direct ownership and 33.3% indirect ownership through a holding company. Telecommunications common carriers face similar restrictions. These rules are administered by the Canadian Radio-television and Telecommunications Commission (CRTC).

Financial services, including banking, are regulated federally. The Bank Act restricts foreign ownership of Schedule I banks, which are domestic banks. Foreign banks may operate in Canada through Schedule II or Schedule III bank structures, subject to approval by the Office of the Superintendent of Financial Institutions (OSFI).

Transportation is subject to restrictions under the Canada Transportation Act. Airlines, for example, must be Canadian-controlled, with non-Canadian ownership capped at 49% of voting shares, and no single non-Canadian may hold more than 25%.

Cultural industries, including book publishing, film distribution, and certain media businesses, are subject to the Investment Canada Act';s cultural business review process, which applies regardless of the transaction size.

For most other sectors - technology, professional services, retail, manufacturing, real estate development, and e-commerce - there are no ownership caps, and a foreign national can own 100% of the company without restriction.

A Canadian corporation is a tax resident of Canada and pays Canadian corporate income tax on its worldwide income. The federal corporate tax rate is applied to taxable income, with a small business deduction available to Canadian-controlled private corporations (CCPCs). A foreign-owned corporation does not qualify as a CCPC, so it does not benefit from the small business deduction. This is a meaningful cost difference that foreign founders should factor into their planning.

Provincial corporate income tax is levied in addition to federal tax. Rates vary by province, and the combined federal-provincial rate for a non-CCPC is generally in the range of 26% to 31%, depending on the province.

When the Canadian corporation pays dividends to its non-resident shareholder, Canada withholds tax at the source. The domestic withholding rate is 25%, but Canada has tax treaties with dozens of countries that reduce this rate, often to 5% or 15% depending on the treaty and the shareholder';s ownership percentage. Founders should confirm the applicable treaty rate before structuring dividend flows.

Transfer pricing rules under the Income Tax Act require that transactions between the Canadian company and its foreign parent or affiliates be conducted at arm';s length prices. The Canada Revenue Agency (CRA) scrutinises related-party transactions, and inadequate documentation can result in adjustments and penalties. Maintaining contemporaneous transfer pricing documentation is a non-obvious requirement that many foreign-owned companies overlook in their early years.

Goods and Services Tax (GST) and Harmonized Sales Tax (HST) registration is required once the company';s taxable supplies exceed the registration threshold in a calendar quarter or over four consecutive quarters. Even below the threshold, voluntary registration is often advisable to recover input tax credits on Canadian expenses.

Scenario one: a US-based technology founder. A US citizen wants to establish a Canadian subsidiary to hire Canadian software engineers and access Canadian government innovation grants. She incorporates a British Columbia company, which has no resident director requirement. She is the sole director and 100% shareholder. The company registers for GST/HST and opens a Canadian business bank account. Because Canada and the United States have a tax treaty, dividends paid to her US holding company are subject to a reduced withholding rate. She files annual corporate tax returns with the CRA and maintains transfer pricing documentation for a software licence agreement between the Canadian subsidiary and her US parent.

Scenario two: a European investor acquiring a Canadian e-commerce business. A German investor wants to acquire an existing Canadian online retailer with annual revenues above the ICA review threshold. The acquisition triggers a net benefit review under the Investment Canada Act. The investor submits a notification to Innovation, Science and Economic Development Canada (ISED) and demonstrates that the acquisition is of net benefit to Canada. The review process takes several weeks. After approval, the investor restructures the company';s board to include a nominee director to satisfy any residency requirements and appoints a Canadian-resident CFO to manage day-to-day compliance.

These two scenarios illustrate that the path for a new incorporation differs substantially from the path for an acquisition, and that the investor';s home country affects the tax efficiency of the structure.

Can a non-resident be the sole director of a Canadian company?

Yes, in several provinces. British Columbia, Ontario, and Quebec, among others, do not require any directors to be Canadian residents for provincially incorporated companies. A non-resident can therefore be the sole director and sole shareholder of a company incorporated in those provinces. For a federally incorporated company under the CBCA, at least 25% of directors must be resident Canadians, which means a single non-resident director is not sufficient on its own. The choice of incorporation jurisdiction is therefore a practical decision, not merely an administrative one. Founders who want full control without a nominee director should choose a province that has eliminated the residency requirement.

How long does it take and what does it cost to incorporate a Canadian company as a foreigner?

Incorporation itself is relatively fast. A provincial incorporation in British Columbia or Ontario can be completed in a matter of days once the required documents are prepared. Federal incorporation under the CBCA takes slightly longer. The government filing fees are modest. Professional fees for a lawyer to prepare the articles of incorporation, a shareholders'; agreement, and any nominee director arrangements typically start from the low thousands of Canadian dollars, depending on complexity. Ongoing costs include annual filing fees, accounting and tax compliance, and nominee director fees if applicable. Many foreign founders underestimate the ongoing compliance costs, particularly for transfer pricing documentation and GST/HST filings, which can add meaningfully to the annual cost of maintaining a Canadian entity.

Does owning a Canadian company give a foreigner the right to live or work in Canada?

No. Owning shares in or directing a Canadian company does not automatically confer any immigration status. A foreign national who wants to work in Canada must obtain the appropriate work permit or permanent residency through Immigration, Refugees and Citizenship Canada (IRCC). There are immigration pathways that may be relevant to business owners, including the Start-up Visa Program for eligible entrepreneurs and the Intra-Company Transfer stream for employees of multinational corporations. However, these are separate processes from company incorporation and have their own eligibility criteria. A common mistake is to assume that incorporating a Canadian company creates an automatic right to enter and work in Canada; it does not.

Foreign ownership of a Canadian company is entirely achievable and, in most sectors, straightforward. The key decisions are the choice of incorporation jurisdiction, the director residency strategy, and the tax structure for cross-border flows. Sector-specific restrictions apply in telecommunications, financial services, transportation, and cultural industries, but the vast majority of business activities are open to 100% foreign ownership.

VLO Law Firms advises international clients on company ownership in Canada. We can assist with incorporation, director arrangements, shareholder agreements, Investment Canada Act filings, and ongoing compliance. To request a consultation, contact: info@vlolawfirm.com