Canada continues to attract international investors thanks to its political stability, strong legal framework, access to natural resources, and diversified economy. Whether you’re planning to invest in real estate, a tech startup, or a manufacturing business, understanding the foreign investment rules in Canada is essential for minimizing risk and maximizing returns.
In 2025, Canada remains open to foreign direct investment, but regulations have tightened in certain sectors. From federal policies to provincial restrictions and tax implications, global investors must navigate a complex legal landscape.
In this guide, we explore the essential things foreign investors need to know before initiating any investment in Canada, including legal compliance, sector-specific rules, and when to consult professionals like lawyers for collections or foreign investment advisors.
Why Invest in Canada?
Before diving into the rules, let’s understand why Canada is a preferred destination for foreign investments:
- Stable Economy: Ranked among the top 10 safest countries for investment
- Resource-Rich: Abundance of natural resources, from oil and gas to agriculture and minerals
- Skilled Workforce: Highly educated, multicultural labor force
- Strong Infrastructure: Advanced transportation, telecommunications, and power networks
- Global Trade Access: Strategic gateway to USMCA (U.S., Mexico), EU (via CETA), and Asia-Pacific (via CPTPP)
Whether it’s tech, real estate, renewable energy, or agriculture, Canada offers diverse avenues for foreign direct investment.
Key Canadian Laws Governing Foreign Investment
1. Investment Canada Act (ICA)
The Investment Canada Act (ICA) is the federal law that regulates the review and approval of significant foreign investments in Canada. It applies to the acquisition or establishment of Canadian businesses by non-Canadians.
Key Provisions:
- All foreign investments must be filed with Innovation, Science and Economic Development Canada (ISED).
- Large transactions may be subject to a “net benefit to Canada” review.
- National security reviews are triggered in sensitive sectors like telecom, AI, defense, and critical minerals.
2. Thresholds for Review
The review thresholds depend on:
- The investor’s country of origin
- Whether the investor is a WTO member
- Type of business (e.g., cultural vs non-cultural)
In 2025, direct acquisitions of Canadian businesses by WTO investors exceeding C$1.2 billion (enterprise value) are generally subject to review.
Sector-Specific Restrictions
Certain sectors are subject to additional scrutiny under the ICA or other Canadian laws:
a) Real Estate
- Residential and commercial real estate has long been a magnet for global investors, particularly in cities like Toronto, Vancouver, and Montreal.
- However, the Prohibition on the Purchase of Residential Property by Non-Canadians Act (2023) banned certain foreign entities from purchasing residential properties until at least 2027.
- Non-residents can still invest in commercial real estate but must comply with provincial tax rules (e.g., Non-Resident Speculation Tax (NRST) in Ontario).
b) Cultural Industries
Investments in cultural industries (publishing, film, broadcasting) face lower review thresholds (C$5M for direct and C$50M for indirect investments).
c) Critical Infrastructure & Technology
- Telecom, energy, and AI are subject to national security reviews.
- Transactions involving state-owned enterprises are more likely to be scrutinized.
Provincial Considerations: Real Estate and Taxation
While the ICA is a federal statute, provinces have their own rules—especially for real estate investments.
Quebec
- In cities like Montreal, foreign investors can buy commercial property with fewer restrictions than residential.
- French language laws and land use zoning must be respected.
- Non-residents face different property transfer taxes and filing requirements.
Ontario & British Columbia
- Provinces impose additional property taxes on foreign buyers (e.g., 25% NRST in Ontario).
- Some areas limit ownership of farmland or natural resource lands by non-residents.
Always consult a real estate attorney in the province you’re targeting before proceeding.
Tax Implications for Foreign Investors
1. Withholding Tax
Non-residents earning income from Canadian sources—like rent, dividends, or capital gains—may be subject to a 25% withholding tax, unless reduced by a tax treaty (e.g., with the U.S. or U.K.).
2. Capital Gains Tax
If a foreign investor sells Canadian property or shares, capital gains may be taxable. A Section 116 Certificate must be filed with the CRA before selling taxable Canadian property.
3. GST/HST & Provincial Taxes
Buying new or commercial real estate may involve GST/HST and provincial sales taxes. You may need a Canadian tax number and potentially register for GST/HST.
Foreign Direct Investment vs Passive Investment
It’s important to distinguish between foreign direct investment (FDI) and portfolio investment:
| Foreign Direct Investment | Portfolio Investment |
|---|---|
| Acquiring a business, real estate, or control stake | Buying stocks, bonds, or mutual funds |
| Involves control or influence | No control—purely passive |
| Regulated by ICA & provincial laws | Less regulatory oversight |
| Requires active legal documentation | Requires brokerage/tax support |
Investors planning an active business presence must go through additional compliance and legal review, while passive investors still need to be aware of their tax obligations.
When to Consult a Lawyer
Whether you’re buying property, investing in a startup, or launching a joint venture, legal risks abound. Here’s when a foreign investor should consult:
Before Signing a Deal
- Have a transaction lawyer or foreign investment attorney review the letter of intent (LOI), offer, or shareholder agreement.
If a Legal Dispute Arises
- Disputes over unpaid rent, debt, or business obligations may require lawyers for collections to recover funds or enforce contracts.
For Tax Structuring and Compliance
- Work with legal and accounting professionals to structure your investment for tax efficiency, especially across borders.
Case Study: Foreign Investor Buys Commercial Building in Montreal
In 2024, a European investor sought to purchase a mixed-use commercial building in Montreal. The investor’s team included a real estate lawyer, accountant, and immigration consultant.
Here’s how the lawyer added value:
- Ensured the purchase complied with Quebec zoning regulations
- Reviewed the title for liens and unpaid taxes
- Helped secure financing with a Canadian bank
- Registered the transaction with the land registry
- Coordinated with lawyers for collections to resolve a dispute with a previous tenant
The investor avoided potential fines and delays, and the property was leased within 3 months—providing a strong return.
Red Flags and Pitfalls for Foreign Investors
Here are common mistakes that global investors should avoid when considering investment in Canada:
- Not checking if the business is in a restricted sector
- Ignoring provincial property taxes or laws
- Failing to file a Section 116 Certificate when selling property
- Entering a joint venture without legal safeguards
- Using unregistered agents or brokers
- Skipping a lawyer when acquiring a Canadian business
Due diligence is your best defense. Canadian laws are investor-friendly—but only when followed properly.
Final Thoughts: Invest with Confidence, Legally
Canada welcomes foreign investment—but not without rules. Whether you’re pursuing foreign direct investment, starting a business, or buying property, understanding the legal and tax implications is crucial.
Work with a residential or commercial real estate lawyer, corporate attorney, and lawyers for collections if needed. The right support can make the difference between a successful Canadian venture and a costly misstep.
Before signing contracts or wiring funds, seek legal advice to ensure your foreign investment in Canada is fully compliant—and profitable.
