Canada has a free market mixed economy and open financial markets. There are no legal constraints on the transfer of profits, royalties or fees from Canada, or on the repatriation of invested capital.

As in most other countries, interest, dividends, rents and royalties, and certain other payments to non-residents are subject to a federal withholding tax of 25 per cent, which is generally reduced to 5 to 15 per cent by a tax treaty depending on where the non-resident recipient resides.

The Canadian dollar floats freely on world currency markets and is not subject to exchange controls.

Canada and Ontario welcome and encourage foreign investment. Government programs are, on the whole, available to foreign investors on the same basis as they are to local investors.

The Investment Review Division of Industry Canada examines all large acquisitions of Canadian businesses by non-Canadians. For non-NAFTA participants, a review is required for direct acquisitions with assets exceeding C$5 million and indirect acquisitions with assets exceeding C$50 million. (An indirect acquisition is one in which control of a subsidiary in Canada changes as a result of a transaction abroad.)

For NAFTA participants, the threshold for review of direct acquisitions is C$150 million in constant 1992 dollars (C$153 million for 1994).

Indirect acquisitions by NAFTA participants are not reviewable although notification is required. There are some exceptions to these higher thresholds. For new business start-ups and acquisitions of businesses below threshold asset size, a straightforward notification is all that is required.

Acquisitions by foreign parent corporations with a Canadian subsidiary are generally reviewable only if the Canadian division has assets worth C$150 million or more. Industry Canada does not review amalgamations, mergers, or corporate reorganizations unless control of the Canadian business is affected.

Ontario has long been a favourite location for foreign investment in Canada because of its proximity to markets, highly diversified economic base and sophisticated labour markets.

Foreign investors have many options for organizing their business operations in Ontario, including corporations, sole proprietorships, partnerships (general and limited) and joint ventures. A foreign-owned entity can carry on business in Ontario through a Canadian branch operation or a Canadian subsidiary. A subsidiary can be incorporated (under either federal or Ontario law) or an existing Canadian corporation can be acquired.