Small Business Corporate Tax Rates in Canada (2024): Federal and Provincial
Canada offers a preferential small business tax rate on active business income up to a certain limit. Understanding these rates is essential for private corporation tax planning.
Small Business Limit (2024)
The federal small business limit is $500,000 of active business income. This limit is reduced when taxable capital exceeds $10 million.
Federal Small Business Rate
| Year | Federal Rate |
|---|---|
| 2024 | 9% |
| 2023 | 9% |
| 2022 | 9% |
Combined Federal-Provincial Rates (2024)
| Province | Small Business Rate | General Rate |
|---|---|---|
| Ontario | 12.2% | 26.5% |
| British Columbia | 12.0% | 27.0% |
| Alberta | 12.0% | 26.0% |
| Quebec | 17.5% | 26.5% |
| Manitoba | 13.5% | 27.0% |
| Saskatchewan | 13.0% | 27.0% |
| Nova Scotia | 14.0% | 29.0% |
| New Brunswick | 14.0% | 29.0% |
Example Calculation
Ontario CCPC with $400,000 active business income:
- Tax at small business rate: $400,000 × 12.2% = $48,800
Ontario CCPC with $600,000 active business income:
- First $500,000 × 12.2% = $61,000
- Excess $100,000 × 26.5% = $26,500
- Total tax: $87,500
Additional Refundable Taxes
Private corporations also pay:
- Part I tax: Based on above rates
- Part IV tax: 38⅓% on dividends received from connected corporations
- REF (Part I.3): 10⅔% on aggregate investment income
Income Splitting (SRD)
Canada's Tax on Split Income (TOSI) rules limit income splitting with family members. Adult children must earn income from the business to receive dividends.
Key Takeaways
- Small business limit: $500,000
- Federal rate: 9%
- Combined rates vary by province (12-17.5%)
- Excess business income taxed at general corporate rate
