Incorporating in Canada: subsidiary or branch, BN and NEQ

A French company has two ways to set up in Canada: open a branch, meaning the French company itself registers in a province, or create a subsidiary, a separate Canadian company. A subsidiary can be incorporated online in a day, for C$200 federallySource: Corporations Canada, C$300 in Ontario or C$397 in QuebecSource: Québec.ca. Either way, you then register in each province where you operate and get a business number (BNBusiness NumberThe 9-digit number the federal government assigns to a business for its tax accounts.) from the Canada Revenue Agency (CRACanada Revenue AgencyThe federal tax authority, the equivalent of France’s Direction générale des Finances publiques.).

What follows applies to companies established in France that are opening an office, hiring or holding stock in Canada. If you still sell from France with nothing on the ground, you aren’t there yet: the guide to selling to Canada from France explains how far you can go without a structure. And if you’re moving on your own to work for yourself, sort out your immigration status before the company.

Subsidiary or branch: which one?

A branch isn’t a new company. Your French SAS registers as an “extra-provincial” corporation in the province where it operates, and its Canadian activities form a permanent establishment under the France–Canada tax treaty. Its profits are taxed in Canada like a local company’s, and the after-tax share that isn’t reinvested in Canada is then hit by a branch tax. The standard rate is 25%, but the treaty caps it at 5%Source: French Senate.

A subsidiary is a Canadian company in its own right, owned by your French company. It pays Canadian tax on its profits, and the dividends it pays the parent face a 5% withholding tax if the parent holds at least 10% of the voting rightsSource: French Senate (15% otherwise). In France, those dividends usually qualify for the parent-subsidiary regime (régime mère-fille).

The tax bill ends up the same either way, as the worked example below shows. What tips the choice is liability, losses and credibility:

• Liability: the parent is fully liable for its branch’s debts and disputes. A subsidiary keeps the risk in Canada.
• Losses: French corporate tax is territorial. A Canadian branch’s losses don’t reduce your French tax, which takes away the branch’s usual advantage in the start-up phase.
• Credibility: Canadian banks, landlords and large corporate clients find it easier to deal with a local company that has its own accounts and its own signature.

In practice, a branch suits a trial run or a one-off project. Once you have employees and recurring contracts, go with a subsidiary.

Federal or provincial company: what’s the difference?

In Canada you can incorporate federally, under the Canada Business Corporations Act (CBCA), with Corporations Canada, or in a province, with its registry. Both give you a business corporation equivalent to your SAS. A federal corporation protects its name across the country and costs less, but it still has to register in every province where it does business.

The choice mostly depends on where you’ll operate. A subsidiary that will only have an office in Montreal can be incorporated directly in Quebec: it gets its Quebec enterprise number (NEQNuméro d’entreprise du Québec (Quebec enterprise number)The identification number of a business registered with the Registraire des entreprises du Québec: the equivalent of the French SIREN.) on incorporation and has no further registration to do. A federal corporation based in Montreal pays C$200, then another C$397 to register in Quebec. In Ontario, registering a federal corporation is freeSource: Corporations Canada and can be done when you incorporate.

If you’re aiming at several provinces, or the name matters (a brand you don’t want to see taken in Vancouver), federal incorporation is the simplest choice.

Do you need a director who lives in Canada?

Federally, yes: the CBCA requires at least 25% of directors to be resident CanadiansSource: Justice Laws, and at least one if the board has fewer than four members (section 105). The rule is still in force in 2026, so a federal subsidiary run entirely from Paris has to appoint at least one resident director, such as the local manager.

In the provinces, the rule has almost disappeared. Quebec never had one. Ontario dropped it on July 5, 2021, Alberta on March 29, 2021, and Saskatchewan in March 2023; British Columbia doesn’t impose one. If nobody you trust lives in Canada, incorporate in one of these provinces and the question goes away.

What are the steps, in order?

The longest route is a federal subsidiary setting up in Quebec. If you incorporate directly in the province where you’ll operate, you can skip step 4.

The Canada market entry checklist lays out these steps for your province and your project (hiring, stock, online sales), with what happens before and after your team arrives.

What does a subsidiary cost, and how much tax does it pay?

Government fees are low. Most of the bill is lawyers’ and accountants’ fees, which vary too much from one firm to the next to give a reliable figure; the guide to getting support for a Canadian expansion helps you compare quotes.

Take a Lyon software company, set up as an SAS, that creates a federal subsidiary in 2026 to rent an office in Montreal, with no business in any other province. Its local manager, a Canadian resident, sits on the board.

Now the tax, for the same subsidiary. Assumptions: taxable profit of C$200,000 in 2026, all earned in Quebec, a combined general rate of 26.5% (15% federal and 11.5% Quebec), and all after-tax profit sent back to France.

• As a subsidiary: C$53,000 in Canadian tax, then C$7,350 withholding (5%) on C$147,000 of dividends. Total: C$60,350.
• As a branch: the same C$53,000, then C$7,350 in branch tax (5%) on C$147,000. Total: C$60,350.

Same result: the treaty was written precisely so that the legal form wouldn’t change the tax. What surprises French managers is the rate itself. Because it’s controlled by a non-resident company, their subsidiary isn’t a “Canadian-controlled private corporation” (CCPCCanadian-controlled private corporationA company controlled by Canadian residents, which can claim the reduced small-business tax rate.), so it doesn’t get the small business rate, which cuts federal tax from 15% to 9% on a Canadian small business’s first C$500,000 of profit. On the C$200,000 in the example, the federal share alone costs C$12,000 more than it would for a Canadian-owned competitor, so build that into your budget before you compare your prices with theirs.