Insight
Doing business in Quebec: an overview
November 2021
Quebec is the second most populous province in Canada. Its location, within easy reach of important centres such New York, Boston and Toronto, has proved strategically advantageous for foreign investors and businesses.
When contemplating doing business in Quebec, foreign businesses need to consider its language, culture, and legal system, as well as the different business structures that are possible in the province.
Business structuring
There are several forms of business structure possible in Quebec, and each has its own advantages and disadvantages. To make the best choice, you need to consider factors such as tax issues, the investor’s position and the nature of the potential liabilities associated with the proposed business operations.
Business sectors
There are many business sectors operating successfully in Quebec and elsewhere in Canada.
Aerospace
There are more than 700 companies in the aerospace production and distribution chain. Manufacturing and supply companies account for more than 85,000 direct jobs and 109,000 indirect jobs, making Canada the third-largest producer of civil aircraft in the world.
Renewable energy
Canada has almost 10 billion square kilometres of significant renewable resources, comprising water, biomass, wind, solar, geothermal and ocean energy. Generating 89 gigawatts, 64% of electricity comes from renewable sources and ranks Canada fifth globally for renewable energy capacity.
The sector offers opportunities in technology development, fuel supply, production, storage, and distribution.
Bioproducts
Canada has around 190 companies offering biochemicals, biomaterials, biofuels, or bioenergy. Canada’s investment in research and development, a highly skilled workforce, and reserves of biomass feedstocks are among the largest in the world.
Information technology
This industry consists of companies involved in computer systems design, software development, data processing and hosting, and related services.
When compared with the other G7 countries, Canada’s software industry boasts the lowest research and development costs, operating costs, and labour costs. In addition to its highly skilled workforce, Canada has a very successful education system that trains people to meet the demand in this industry.
Prospecting for foreign investment
Montreal, Quebec’s largest city, attracted a record 1.8 billion CAD in foreign investment in the first half of 2021 (representing 40 projects from 13 countries) up 33% on the same period in 2020. Further, this amounted to an increase of 11.9% on the same period in 2019.
Because of the pandemic, meetings with business prospects happened online, with an emphasis on the United States and France. This proved successful, producing 15 projects from the United States and 11 from France.
Consequently, 48.6% of total investment came from North American companies and 47.5% from European companies. ‘Prospecting for foreign investment is part of the solution in order to ensure a rapid and sustainable recovery for the Quebec economy,’ said Pierre Fitzgibbon, Minister of Economic Development and Innovation.
Government grants
To encourage prospecting for foreign investments during the economic recovery, the Government of Quebec announced 8.5 million CAD in financial assistance to Montréal International and Québec International.
Coordinated by Investissement Québec International, these two organisations aim to convince foreign businesses, or their subsidiaries already established in the Montreal and National Capital regions, to invest in Quebec.
For example, Montréal International was able to attract more than 2 billion CAD in foreign investment despite the pandemic, and Québec International secured 736.7 million CAD in economic benefits, including 324 million CAD in foreign direct investment.
Strong currency
Of all the currencies in the G7, the Canadian dollar is 2021’s best performer. Douglas Porter, Chief Economist and Managing Director of BMO Financial Group (Bank of Montreal), believes that the strength of the Canadian dollar will continue to be supported by Canada’s robust trading in certain commodities, such as timber, copper, and wheat, noting that commodity exports recently reached all-time highs.
Two official languages
To conduct business in Quebec it is important to understand the relevant legislation. In Canada companies need to comply with provincial laws, which can differ from one jurisdiction to the next, and federal laws, which apply across the country. Quebec also has a singular law: Bill 101, the Charter of the French Language. Quebec remains the Canadian champion in terms of bilingualism. According to a report by the Conference Board of Canada, bilingualism is an even greater asset outside Quebec.
Tax considerations in Quebec
Businesses looking to operate in Quebec must consider several tax issues. As well as complying with the Canada Business Corporations Act, businesses must observe Quebec’s corporate tax system, governed by the Taxation Act (Quebec) (TA) and its regulations, and the sales tax system governed by the Québec sales tax (AQST) and other Quebec laws. While the TA and the AQST are similar to the corresponding federal tax legislation, they each have their own unique features relating to income tax, sales tax, and payroll deductions.
All things considered, Quebec has much to offer for businesses looking to expand into Canada. However, its unique culture and laws mean expert advice is necessary before proceeding.
About the author
Mylène Pontbriand
Montreal, Canada
Mylène is a tax partner at Russell Bedford’s Montreal member firm, FBL. She joined FBL in 2011 after obtaining her master’s degree in taxation. She is also a lawyer and has been a member of the Barreau du Québec since 2011.
Mylène specialises in corporate and personal tax planning, business transfers and mergers and acquisitions and has particular expertise in trusts. As a partner at FBL, she is responsible for tax and business consulting for middle market private companies in a wide range of industries.