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No the tax rate isn't 6%, this is incorrect. The 6.4% is the marginal effective tax rate on new investment. Rates are unchanged: 26.5% combined federal/Ontario, or 11.2% for CCPC small-business income. And it's still draft legislation released Sept 15

That is indeed correct, and I'm sorry for framing the 6% rate as if it were the overall general rate.

“You told me these are the best engineers in the world!”

“I said they were the best engineers in Canada.”

(Quote from the BlackBerry movie)

Attracting strong talent in Canada is hard given the massive pay differences gained by moving south of the border.

US hi-tech companies opened branches in Canadian cities. Used to be for H1B hopper but no longer the case: they have been expanding their footprints.

For Google Canada it was never about H1B hopping. They wanted the talent around Waterloo and the U of T.

(Later a large part of our staff was Canadians returning home in 2016 after doing their time in Mountain View)

This is bizarrely self-contradictory. Pay differences are high because in fact there's a glut of talent.

I've worked for many companies over the years that chose to colocate here because of the relative ease of finding talent.

And there's plenty of good talent that doesn't leave. Because we don't want to. Home is home.

There's also lots of us who work remote for US or EU companies these days.

(Blackberry movie also is garbage)

The lack of immigration problems is one reason why the talent is less expensive. The other reason is probably because people in Canada get compensated in other ways. Many of my American friends who left Canada for employment eventually return when their kids reach school age because they can't stomach the harsh reality of the US education system. Or something happens to their health.

It's easy to knock Canada for its personal income tax rate, but compared to European alternatives, it's still quite low, despite offering a whole lot of baseline public goods.

The deal used to be that it cost less to live here, so the lower pay mostly made up for it. Now it doesn't because housing costs hyper-inflated under low interest rates, lax regulation, and high immigration.

That said, while senior SWE salaries here absolutely not even close to competitive with the Bay Area or NYC they are not that far off from other places in the US (like smaller midwest cities etc). While Canadian salary packages are depressed, it's also partially a result of: they're not inflated.

The bigger concern is more the lack of interesting work.

Many countries have federal incorporation, if anything the state-based one in the US is an exception.

In Australia, the R&D credit can be up to a 100 percent of an engineer's salary.

>Canada has the notion of federal incorporation in addition to each province having its own corporate registry. Federal corporations can exist in any province but all the filings are done in one place.

I don't personally think federal incorporation is a huge benefit relative to provincial/state-level incorporation. It mainly provides name protection in every province/federally and makes it marginally easier to expand nationally in Canada. It's main disadvantage is a requirement for Canadian-resident directors which can make it a bit difficult to sell the corporation. The tax laws are the same (though for the most part, if you operate outside of Quebec, you're only dealing with one tax agency), and you still have to file extra-provincially in each province you carry on business, which itself comes with provincial filing requirements (i.e. not a one stop shop).

>The new mega-deduction recently announced [1] results in an effective 6% corporate tax rate, which is among the lowest in the world and certainly in the G-7. Things like the RTR are just one example among many of the efficient infrastructure that Canada is introducing to address a very long term productivity gap (the mega-deduction is another).

This is only for new business investment, though granted since you're discussing startups, it's valid to mention that.

>And, R&D conducted in Canada is always a current-year expense and never capitalized. And there is a refundable tax credit for R&D that works out to about 60% of engineers' salaries (in most provinces). And those salaries are lower than they are in the US (something that engineers in Canada have a right to complain about).

This is true. I do wonder how much of an comparative advantage this is now that engineer salaries are no longer capital deductions in the US. I also recall Canada had a startup visa program to bring co-founders to Canada, but that program is paused and I don't know if it really worked.

More than anything, despite all these advantages, I would imagine access to capital is more important to any startup. You can live in the best regulatory environment in the world, and it would mean nothing if you run out of runway. The investment landscape in Canada is hugely conservative overall, and despite being flagged under successive governments that there's a huge death valley between seed to commercialization, no risk has actually been taken to meaningfully address it. [1]

[1]: https://www.bdc.ca/en/about/analysis-research/canada-venture...

HQ in San Francisco, but everyone works in Canada. That's a reasonable model.

If you are a US citizen, the IRS will likely classify your startup as a Controlled Foreign Corporation (CFC), so be prepared to navigate the many tax pitfalls like PFIC, GILTI (now called NCTI).

> there is a refundable tax credit for R&D that works out to about 60% of engineers' salaries

I really wish Canada told American companies to fuck all the way off with that. I hate that we support foreign corporate profits with our tax money. It seems like such a scam. I am sure initially it was meant to help innovation and give small businesses an edge, but somehow the googles and the metas can freely take advantage of it too.

Getting funding in Canada is significantly more difficult, though. There are fewer investors at every stage of the startup lifecycle here, and those that do exist are more risk-averse. The cheques they write are smaller, too.

Does it have to be Canadian investors though? Why don't Sequoia et al invest in Canadian (or Japanese or German) companies directly? I'm aware that many VC firms have a foreign presence and I'm not talking about that.

It's always struck me as a little weird that a company has to be within driving distance of Sand Hill road to get attention from a Silicon Valley VC. VCs can't hop on a flight to do some due diligence? Video conferencing isn't good enough for monthly status meetings?

In my experience VCs suffer from immensely-inflated senses of self-importance, and think that they possess some unique skill/knowledge to "pick the winners", and so they expect you to come kowtow to them rather than deign to come meet you where you're at. Whether or not that's why there's less VC presence/deal flow in Canada I'm not sure.

Afaik even "come kowtow to them" to get funding isn't enough. A lot of Valley VCs want early stage startups to relocate.

It's not crazy. A VC isn't one person. A VC is a team and a community. Plus you don't really know how that money is tied up and what forces are at play securing it; some of those forces will be immovable or not viable in other countries.

Sure maybe Japanese law and culture are a bit more opaque to your average valley VC. Canada though?

My primary point is that if a particular investor wants to have dinner with a prospect and bring 4 or 5 of his colleagues, he can't easily do that anywhere else. The secondary point may be small or may be massive, nobody can really know since nobody outside of those directly influenced by shadow money could know.

The prospect can fly out to meet the VC and have dinner.

This is what does happen, except "fly out to meet the VC and have dinner" usually means "fly to the Bay Area", rather than "fly to Vancouver or Waterloo", at which point many Canadian founders who want VC funding realize their time is more efficiently spent if they just launch in the US rather than commuting there.

> It's always struck me as a little weird that a company has to be within driving distance of Sand Hill road to get attention from a Silicon Valley VC

Is it actually true as of 2026? Asking because it sounds like a pure cope.

I was under the impression that Silicon Valley VCs have no issues with funding tech companies based in major US tech hubs outside of SV(especially ones like NYC).

Canada/Japan/Germany/etc. is a whole separate story though, and I am not contesting that (given there are plenty of very obvious reasons for why a SV-based VC firm wouldn't want to invest in a company based in one of those places).

What are the obvious reasons?

    > VCs can't hop on a flight to do some due diligence?

I think it's more of an issue of familiarity with the regulatory environment. VCs and PE know how to operate in specific legal and regulatory landscapes. With standard paper.

Asking them to operate in new jurisdictions requires a lot of effort and legal know-how; it's not just a matter of cutting a check, but understanding how to navigate the legal landscape for these financial transactions, rights of the investor, tax implications, legal recourse, etc. There's going to be a lot of friction such that they'll either: 1) not seek those opportunities, 2) ask the founders to move to the US if it's a really promising team (see this a lot; was in one startup where a co-founder moved from AUS to the US).

Melanie Perkins talks a bit about this in the Canva episode of How I Built This[0] and how SV wanted them to relocate. AUS government ended up matching some of the investment through a new program so they reached their target for their raise.

[0] https://www.npr.org/2021/02/26/971813519/canva-melanie-perki...

> Why don't Sequoia et al invest in Canadian (or Japanese or German) companies directly?

Economies of scale. Many investors can review and fund a standard Delaware C corporation without even passing it to outside counsel.

For Canada, not only will you probably special counsel, you may also have additional up front and ongoing accounting costs related to tax treatment, et cetera. You also know that this is potentially a hurdle that start-up will face in every sale and supply-chain contract it signs, unless it relents and just chooses a normal jurisdiction, at which point why don't they just create a Delaware entity and headquarter in Canada?

I take your point, really, and I understand there's more friction. But do the people who authorize the checks also do the beancounting personally?

Accounting and legal stuff is going to be farmed out to licensed professionals regardless of where the company is. And you can't tell me there's a shortage of US + Canada tax or legal specialists.

> do the people who authorize the checks also do the beancounting personally?

There are a lot of small-shop and even one-man private investors. Increasingly as wealth accumulates and AI automates.

> you can't tell me there's a shortage of US + Canada tax or legal specialists

They're usually a different partner at a big, expensive firm. Or, if you use a small firm, it means establishing a brand new engagement.

I make personal investments. That would be a dealbreaker for me. If I really liked the company I might try to talk a cross-border friend into running a fund that makes the investment so I don't have to deal with the B.S.

The trend has been for Canadian startups to find funding outside of Canada. With Cohere the government appears be trying to alter this.

>The trend has been for Canadian startups to find funding outside of Canada.

Yes, this is exactly what I was describing. The deals here tend to suck and are few. Cohere is the exception that proves the rule, if you ask me.

And a govt program to boot. I doubt they get it from non-govt Canadian firms like banks. They usually don't understand startup culture and seem to want close-to-profitability before investment. Risk averse business culture.

Canadian investment naturally gravitates towards real estate. Current systems and colonial history are conducive to this. Striking to see billboards of real estate agents line major roads of Canadian cities. Founders are not allotted the same sort of financial/cultural capital in Canada.

My business was in Ontario for its first 7 years, in the US now. I do not miss collecting and reporting HST.

Other than that, Canada is amazing and I miss a lot of aspects.

Regulatory hell!