Understanding Corporate Tax Rates in Canada: A Guide
Whether you’re running a growing enterprise or managing a family-owned operation, understanding corporate tax rates in Canada can save you money, keep your business compliant, and help you plan ahead.
At Avisar Chartered Professional Accountants, we know that navigating tax rules can feel overwhelming. That’s why we’re breaking it down for you—clear, concise, and actionable. By the end of this article, you’ll have a strong understanding of:
- How corporate tax rates work in Canada.
- The differences between federal and provincial rates.
- Tax credits and deductions that can benefit your business.
- Filing deadlines to keep your business in good standing.
Contents
Overview of Corporate Tax Rates in Canada
Corporate Tax Rates for Investment Income
Filing Deadlines for Corporate Tax Returns
Overview of Corporate Tax Rates in Canada
In Canada, corporations are subject to both federal and provincial/territorial tax rates. This applies to incorporated businesses, not sole proprietors or partnerships. Whether you run a small business or a medium-sized enterprise, you’re required to pay corporate income tax at both the federal and provincial levels.
Federal Corporate Tax Rates in Canada
At the federal level, there are two main categories:
- Small Business Tax Rate: 9% on the first $500,000 of active business income. This applies to Canadian-Controlled Private Corporations (CCPCs).
- General Corporate Tax Rate: 15% on income above $500,000 or income from non-qualifying businesses.
The Small Business Deduction makes this lower rate possible for small businesses. To qualify:
- Your business must be a Canadian-Controlled Private Corporation (CCPC).
- Your income must come from active business operations, not investments or specified activities.
Provincial Corporate Tax Rates in British Columbia
In addition to federal rates, businesses in BC are subject to provincial corporate taxes:
- Small Business Rate: 2% on the first $500,000 of taxable income.
- General Corporate Rate: 12% on income exceeding $500,000.
When combined with federal rates, the total tax burden for small businesses in BC is 11%—one of the lowest rates in Canada.
Example Calculation for Small Businesses in BC:
If your small business earns $450,000 in active income:
- Federal tax = 9% of $450,000 = $40,500
- Provincial tax = 2% of $450,000 = $9,000
- Total tax = $49,500
By understanding these rates, you can estimate your tax liabilities and prepare accordingly.
Corporate Tax Rates in Canada By Province/Territory in 2025
| Province/Territory | Small Business Rate | General Corporate Rate |
| Alberta | 2% | 8% |
| British Columbia | 2% | 12% |
| Manitoba | 0% | 12% |
| New Brunswick | 2.5% | 14% |
| Newfoundland & Labrador | 3% | 15% |
| Northwest Territories | 2% | 11.5% |
| Nova Scotia | 2.5% | 14% |
| Nunavut | 3% | 12% |
| Ontario | 3.2% | 11.5% |
| Prince Edward Island | 1% | 16% |
| Quebec | 3.2% | 11.5% |
| Saskatchewan | 1% | 12% |
| Yukon | 0% | 12% |
Corporate Tax Rates for Investment Income
Corporate investment income, such as interest, dividends, and capital gains, is taxed differently:
- Investment Income: 38.67% (federal) before refundable tax provisions.
- A portion of the tax paid can be refunded when taxable dividends are distributed to shareholders.
For capital gains, only 50% of the gain is included in taxable income, creating a favorable scenario for long-term investments.
Tax Credits and Deductions
Corporate tax rates are only part of the equation. To reduce your taxable income (and ultimately your taxes), you can take advantage of various tax credits and deductions.
1. Small Business Deduction (SBD)
As mentioned earlier, the SBD lowers the federal tax rate to 9% on the first $500,000 of income for CCPCs. This deduction is a major incentive for small businesses to incorporate.
2. Scientific Research & Experimental Development (SR&ED) Tax Credit
If your business invests in research and development, you may qualify for the SR&ED tax credit. This program allows businesses to:
- Claim a refundable or non-refundable tax credit on eligible R&D expenses.
- Reduce taxes or receive refunds for qualifying expenditures.
3. Capital Cost Allowance (CCA)
The CCA lets businesses claim depreciation on assets like equipment, machinery, and buildings. This deduction helps reduce your taxable income by spreading the cost of assets over multiple years.
4. Input Tax Credits (ITCs)
If your business is registered for GST/HST, you can claim Input Tax Credits to recover the GST/HST paid on eligible business expenses. This reduces your overall tax burden and improves cash flow.
5. Business Expenses
Don’t overlook day-to-day expenses that are deductible, including:
- Salaries and wages
- Rent and utilities
- Professional fees (like accounting services)
- Advertising and marketing
- Office supplies
By tracking and categorizing expenses properly, you can ensure you’re maximizing deductions.
Filing Deadlines for Corporate Tax Returns
Staying on top of tax deadlines is critical to avoid interest charges and penalties. Here are the key dates for businesses in Canada:
- Corporate Tax Return Deadline: Your business must file a T2 Corporation Income Tax Return 6 months after your fiscal year-end.
- For example, if your fiscal year ends on December 31, your tax return is due June 30.
- Payment Deadline: Taxes owed must be paid 3 months after your fiscal year-end if you qualify as a small business (CCPC).
Pro Tip: Plan Ahead
The end of your fiscal year can sneak up quickly, especially when you’re focused on running your business. Partnering with a trusted accountant, like Avisar Chartered Professional Accountants, ensures your books are organized, tax filings are timely, and your liabilities are minimized.
How Avisar Can Help Your Small Business Thrive
Understanding corporate tax rates in Canada is key to effective financial management for your small business. By staying informed about federal and provincial rates, leveraging available credits and deductions, and meeting deadlines, you’ll position your business for success.
At Avisar Chartered Professional Accountants, we’re here to help. Whether you’re planning for year-end or looking to optimize your tax strategy, our team is ready to support you every step of the way.
If you’re ready to get the most out of your business’s finances, book a free consultation for personalized accounting and tax solutions.
Your success is our business.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
