Foreign direct investment (FDI) in Canada

FDI in Figures

According to UNCTAD's World Investment Report 2024, Canada attracted USD 50.3 billion in FDI in 2023, a 9% increase year-on-year, with the country being the sixth-largest recipient worldwide. At the end of the same period, the stock of FDI stood at USD 1.66 trillion. Canada is also one of the main investors worldwide, with an outward FDI position of USD 2.74 trillion. In 2023, sustainable projects made up 29% of Canada's inbound FDI, while reinvestments accounted for 44%. Mergers and acquisitions were the second-largest sources, at 35.5%, with other FDI flows making up 20.2%. By industry, manufacturing saw a significant rise in FDI to CAD 18.2 billion, above the 10-year average, and other industries received CAD 16.1 billion. Trade and transportation also saw slight growth, while energy and mining, and management of companies experienced declines. The finance and insurance sector remained stable. The U.S. led as the top investor with CAD 697.3 billion, followed by the United Kingdom (CAD 94.6 billion), Japan (CAD 49.3 billion), Germany (CAD 41.5 billion), and China (CAD 37 billion). According to the latest data from the OECD, FDI inflows to Canada increased in the first half of 2024, reaching USD 28.2 billion, compared to 25.5 billion in the same period one year earlier.

Canada actively promotes FDI, offering a favourable environment with its proximity to the U.S., skilled workforce, strong legal protections, and abundant natural resources. Foreign investments are treated on par with domestic ones once established. Factors that may hinder FDI in Canada include heavy dependence on the U.S. economy, fluctuations in energy prices, loss of competitiveness in manufacturing due to low labour productivity, low R&D expenditure, and high household debt. In 2020, the USMCA (Canada-United States-Mexico Agreement, an updated version of NAFTA) came into force, with a potentially decisive impact on the inflows and outflows of investments in Canada, just as the Comprehensive Economic and Trade Agreement (CETA) signed with the EU and currently applied on a provisional basis, as the ratification by the individual EU Member States is still pending. At the same time, Canada enhanced scrutiny of certain foreign investments under the Investment Canada Act (ICA) in sectors related to public health or involved in the supply of critical goods and services. Under the ICA, foreign investors acquiring control of a Canadian business must either undergo a "net benefit" review by the Minister of Innovation, Science and Industry if a financial threshold is exceeded or provide notification within 30 days of closing. The threshold for review depends on the investor's nationality, transaction structure, and type of business. These thresholds are adjusted annually based on changes in Canada's GDP. Overall, Canada has a favourable business climate and the country ranks 14th among the 133 economies on the Global Innovation Index 2024 and 16th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Canada

Strong Points

Advantages for FDI in Canada:

• A qualified workforce
• A welcoming business environment
• Large reserves of gas, oil and ore
• A solid banking sector
• Unparalleled market access (USMCA) and a strong anchor in international trade
• A dynamic economy, with a market of 38 million consumers
• Sophisticated infrastructure, as well as a very modern transportation network.

Weak Points

Disadvantages for FDI in Canada:

• Strong exposure to the United States' economy, namely to exports to the US
• Sensitivity to international commodity prices and to the government revenues that depend on oil
• High household debt (186.2% of disposable income)
• A drop in productivity in manufacturing industry
• A decrease of the active population due to ageing.

Government Measures to Motivate or Restrict FDI

Canada offers low business taxes for companies and a very good business climate. Total business tax costs are by far the lowest among the G7 countries.
Companies investing in Canada can benefit from a range of incentives and tax credit programmes:

• Scientific Research & Experimental Development
• Accelerated Investment Incentive
• Strategic Innovation Fund
• Global Skills Strategy
• Canada’s Pan-Canadian Artificial Intelligence Strategy
• Innovation Superclusters Initiative

For more information, please visit Invest in Canada, which is Canada’s global investment attraction and promotion agency.
Each Canadian province and territory has agencies dedicated to the promotion of investment which list existing measures.

Bilateral investment conventions signed by Canada

Canada has signed 45 bilateral investment treaties (BITs) with several countries.
To see the conventions, click here.