Canadian Corporate Tax Rates by Province: A Complete Guide

Canadian Corporate Tax Rates by Province

Canadian Corporate Tax Rates by Province: A Complete Guide

Sebastien Prost, CPA

Canadian corporate tax rates vary by province, reflecting the diverse economic landscapes and policy priorities across the country. These differential rates play a significant role in the financial decisions made by businesses operating in Canada. As businesses consider expansion, relocation, or new investments, understanding the provincial corporate tax landscapes becomes crucial in optimizing their tax planning strategies and maintaining competitiveness.

Each Canadian province and territory has its own tax rates and regulations, which are levied alongside the federal corporate tax. Both the general corporate income tax rate and the small business tax rate are subject to variation across provinces and territories. Generally, provinces and territories have dual tax rates, with Canadian-controlled private corporations (CCPCs) claiming a small business deduction and enjoying a lower net tax rate.

The corporate tax rates cover a wide range of business activities, such as manufacturing, processing, and even zero-emission technology production. It is essential for businesses to be aware of the specific tax rates and applicable credits and reductions in their respective provinces in order to maximize their economic potential.

Overview of Canadian Corporate Tax Rates

The corporate tax structure in Canada is a combination of federal and provincial/territorial tax rates. The basic federal tax rate starts at 38% of the taxable income, which is then reduced to 28% after the federal tax abatement, and further lowered to 15% after accounting for the general tax reduction. However, for Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 9%.

In addition to the federal tax rates, corporations must also pay provincial or territorial taxes. These rates vary across provinces and territories. Some provinces offer lower tax rates for small businesses, while others apply different rates based on the type of income received. Below is a list of current provincial and territorial corporate tax rates as of January 1, 2024:

  • Alberta: 8% (with a small business rate of 2%)
  • British Columbia: 12% (with a small business rate of 2%)
  • Manitoba: 12% (with a small business rate of 2% from July 1, 2024 onward)
  • New Brunswick: 14% (with a small business rate of 2.5%)
  • Newfoundland and Labrador: 15% (with a small business rate of 3%)
  • Northwest Territories: 11.5% (with a small business rate of 2%)
  • Nova Scotia: 14% (with a small business rate of 3%)
  • Nunavut: 12% (with a small business rate of 3%)
  • Ontario: 11.5% (with a small business rate of 3.2%)
  • Prince Edward Island: 16% (with a small business rate of 1%)
  • Québec: 11.5% (with a small business rate as low as 3.2%)
  • Saskatchewan: 12% (with a small business rate of 2% from July 1, 2024 onward)
  • Yukon: 12% (with a small business rate of 0%)

Please note that these rates may change from year to year, and corporations should stay updated on any legislative changes in their respective provinces or territories. It is essential for businesses to be aware of these rates and to properly plan their tax strategies to minimize their tax burden.

Keep it in mind that several tax credits, incentives, and deductions may be available to businesses in different provinces and territories. These programs can help reduce the overall tax liability for corporations and encourage business growth. It is advisable to consult a tax professional to ensure compliance with all federal and provincial regulations, maximize tax savings opportunities, and maintain accurate financial records.

Federal Corporate Tax Rates

The Canadian federal corporate tax system applies a consistent set of tax rates across all provinces and territories. The basic rate of Part I tax is 38% of a corporation’s taxable income. Following a federal tax abatement, this rate reduces to 28%. After applying the general tax reduction, the net tax rate is 15% for general corporations.

For Canadian-controlled private corporations (CCPCs) that claim the small business deduction, the net tax rate is 9%. Let’s briefly discuss some federal tax rates and their components.

  • Basic Rate: The initial tax rate of 38% on taxable income is what a corporation must initially consider.
  • Federal Tax Abatement: Meant to recognize provinces and territories’ responsibility in corporate taxation, the abatement reduces the basic tax rate by 10%, resulting in 28%.
  • General Tax Reduction: This reduction further brings down the corporate tax rate to 15% for general corporations.
  • Small Business Deduction: CCPCs can access an even lower tax rate of 9% by claiming this deduction.

It is essential to note that these federal corporate tax rates are just one part of the overall taxation landscape. Each province and territory implements its own corporate tax rates, which must be considered alongside federal rates when determining a corporation’s total tax liability.

Alberta Corporate Tax Rates

Alberta, known for its business-friendly environment, offers competitive corporate tax rates in Canada. The province has a flat corporate income tax rate structure applicable to all corporations, reflecting its commitment to economic growth.

The current corporate income tax rate in Alberta is 8%, the lowest of all Canadian provinces. Meanwhile, the small business tax rate available to CCPCs on income of $500,000 or less is 2%.

Alberta’s tax policy aims to support small businesses and innovation by offering additional tax incentives. One such incentive is the Innovation Employment Grant (IEG), which encourages businesses to invest in research and development. Eligible corporations can receive a refundable tax credit of up to 20% on qualifying expenditures, based on various factors such as size, growth, and industry.

In summary, Alberta’s corporate tax structure is designed to create a business-friendly environment, with a focus on supporting small businesses and encouraging innovation. The 8% corporate income tax rate (2% for small businesses), combined with additional incentives such as the IEG, makes the province an attractive destination for corporations looking to establish or expand their operations in Canada.

British Columbia Corporate Tax Rates

British Columbia offers a competitive corporate tax environment to encourage business growth. The province has two primary corporate income tax rates: the general rate and the lower small business rate.

Canadian-controlled private corporations (CCPCs) with active business income eligible for the federal small business deduction can take advantage of the lower small business rate. For the year 2024, the tax rate for CCPCs at the provincial level is 2%.

The general rate of corporate tax applies to businesses not eligible for the small business rate. The provincial tax rate for these corporations stands at 12%.

BC also offers tax incentives such as the BC Interactive Digital Media Tax Credit which provides a tax credit of 17.5% of eligible salary and wages incurred for the development of digital media products.

Manitoba Corporate Tax Rates

Manitoba has a two-tiered corporate tax system with distinct rates for small businesses and for general corporations. Effective as of January 1, 2019, the small business limit in Manitoba is set at $500,000.

Small businesses benefited from the elimination of provincial corporation income tax in Manitoba until July 1, 2023. Beginning, July 1, 2023, the small business tax rate was increased to 1% and the elimination will be completely phased out when the rate moves back to 2% on July 1, 2024. Small businesses are usually defined as Canadian-controlled private corporations (CCPCs) having an annual taxable income less than the limit.

As for general corporations, they are subjected to a provincial corporation tax rate of 12%. This rate is applied to taxable corporate income allocated to Manitoba, which is not eligible for the small business deduction.

Here’s a breakdown of Manitoba’s corporate tax rates:

Corporation Type
Tax Rate (Provincial)
Taxable Income Limit
Small Business (CCPCs)
2% (from July 1, 2024 onward)
Up to $500,000
General Corporations
12%
No Limit

 

It is essential for businesses operating in Manitoba to take into account these tax rates when planning their financial affairs. Keep in mind that corporations must also consider the federal corporate income tax rates in Canada. The current basic federal tax rate stands at 15%, after considering factors like federal tax abatement and the general tax reduction. This stands at 9% for small CCPCs.

In conclusion, Manitoba-based businesses will need to comply with both provincial and federal corporate tax rates, depending on their specific income category and size.

New Brunswick Corporate Tax Rates

New Brunswick’s corporate tax rates are administered and collected by the federal government through the Canada Revenue Agency. The province applies two different tax rates, depending on the nature of the income generated by a corporation.

Lower rate: New Brunswick offers a lower tax rate of 2.5% for Canadian-controlled private corporations (CCPCs) that claim the small business deduction. This rate is applied to the corporation’s active business income up to a certain threshold.

Higher rate: The higher tax rate in New Brunswick is 14%, applicable to all other taxable income not eligible for the lower rate. This includes income earned by general corporations operating within the province.

An overview of New Brunswick’s corporate tax rates is presented in the following table:

Type of Corporation
Tax Rate
CCPCs (lower rate)
2.5%
General corporations
14%

 

It is important for corporations to familiarize themselves with the specific tax rules and requirements that apply to their business operations in New Brunswick. Proper tax planning and compliance can help businesses successfully navigate the province’s tax landscape while maximizing their benefits and minimizing potential risks.

Newfoundland and Labrador Corporate Tax Rates

In Newfoundland and Labrador, corporate tax rates vary depending on the size and type of business. There are two main corporate tax rate categories: the lower rate for small businesses and the higher rate for general corporations.

Eligible small businesses in Newfoundland and Labrador pay a corporate income tax rate of 3%. This lower rate is applicable to the taxable income that qualifies for the federal small business deduction. Canadian-controlled private corporations (CCPCs) usually benefit from this lower rate, which is designed to drive economic growth and support local entrepreneurship.

On the other hand, general corporations in Newfoundland and Labrador are subject to a corporate income tax rate of 15%. This rate applies to the remaining taxable income of businesses that doesn’t qualify for the small business rate. Since January 1, 2016, the corporate tax rate for these businesses increased by 1% from the previous 14%.

To further understand the corporate tax rates in Newfoundland and Labrador:

Corporate Type
Tax Rate (%)
Small Businesses
3
General Corporations
15

 

It is essential to note that these provincial tax rates are applied to the same taxable income as calculated for the federal corporate income tax system. Additionally, businesses operating in the province also need to consider the federal corporate tax rate, which is 15% for corporations after the general tax reduction. For Canadian-controlled private corporations claiming the small business deduction, the net federal tax rate is 9%.

Considering both federal and provincial taxation, a small business operating in Newfoundland and Labrador can expect a combined corporate tax rate of 12%, while general corporations face a combined tax rate of 30%.

Nova Scotia Corporate Tax Rates

The corporate tax structure in Nova Scotia comprises two income tax brackets, the lower rate and the higher rate. For businesses operating in the province, understanding these rates is crucial for accurate tax planning and compliance.

Lower rate: Nova Scotia imposes a lower corporate income tax rate of 2.5%. This reduced rate applies to income eligible under the $500,000 Nova Scotia business limit. The majority of small businesses and Canadian-controlled private corporations (CCPCs) claiming the small business deduction benefit from the lower tax rate.

Higher rate: For income that does not qualify for the lower rate, a corporate tax rate of 14% is applicable. This higher rate affects the taxable income of corporations not eligible for the small business deduction.

In addition to the provincial tax rates, corporations in Nova Scotia are subject to the federal corporate income tax. The baseline federal tax rate is 38% of taxable income, reduced to 28% after the federal tax abatement. After considering the general tax reduction, the net federal tax rate is 15% for general corporations, while CCPCs claiming the small business deduction face a reduced rate of 9%.

Here’s a summary table of the corporate tax rates in Nova Scotia:

Income Type
Federal Rate
Provincial Rate
General Corporation
15%
14%
Small Business Deduction (CCPCs)
9%
2.5%

 

Keep in mind that these tax rates are subject to changes, and it’s essential to stay up-to-date with the latest information from both federal and provincial tax authorities.

Ontario Corporate Tax Rates

In Ontario, corporations are subject to both federal and provincial tax rates. The federal corporate income tax rate in Canada is 15% for the general rate and 9% for the small business rate. In addition to the federal tax, Ontario imposes its own corporate tax rates.

The basic income tax rate in Ontario is 11.5% for the general rate that applies to large corporations. However, there is a lower rate of 3.2% for small businesses, thanks to the Ontario small business deduction. This deduction helps reduce the provincial basic income tax, making it more favorable for small corporations.

Small Canadian-controlled private corporations (CCPCs) may be eligible for the small business deduction if they meet specific criteria. Some of these criteria include:

  • The corporation must be a CCPC throughout the tax year.
  • The corporation must not be controlled by non-resident individuals or public corporations.

To summarize, for corporations operating in Ontario, the following corporate tax rates apply:

  • Federal tax: 15% for the general rate, and 9% for small businesses.
  • Provincial tax (Ontario): 11.5% for the general rate, and 3.2% for small businesses.

Always consult with a tax professional or visit the Canada Revenue Agency‘s website for the latest information on corporate tax rates and regulations.

Prince Edward Island Corporate Tax Rates

In Prince Edward Island (PEI), the corporate tax rates vary based on factors such as the type of income and the eligibility for the small business deduction. The following paragraphs provide an overview of the general and small business corporate tax rates in PEI.

The general corporate income tax rate in PEI is 16%. This rate is applicable to taxable income earned by corporations operating in the province that do not qualify for the federal small business deduction. These corporations may include both Canadian-controlled and foreign-controlled businesses.

On the other hand, for Canadian-controlled private corporations (CCPCs) claiming the federal small business deduction, Prince Edward Island offers a lower income tax rate. The lower rate has been subject to changes in recent years, as follows:

  • 1% effective January 1, 2022
  • 2% effective January 1, 2021
  • 3% effective January 1, 2020

These rates apply specifically to taxable income earned in PEI that qualifies for the federal small business deduction.

In summary, corporate tax rates in Prince Edward Island depend on the nature of the income and the corporation’s eligibility for federal small business deductions. With the general corporate tax rate at 16% and a lower rate for qualifying small business income, it’s essential for corporations operating in PEI to stay updated on the most recent rates and requirements.

Quebec Corporate Tax Rates

Quebec’s corporate tax rates differ for small businesses and general corporations. As of March 26, 2021, the small-business tax rate in Quebec is 3.20%. This rate applies to Canadian-controlled private corporations (CCPCs) with an annual active business income of up to $500,000 but is subject to certain criteria.

For general corporations, Quebec’s corporate tax rate is 11.5%. This rate may be combined with the federal corporate tax rate, resulting in a total tax rate for these corporations. It is important to note that Quebec’s corporate tax system is separate from the federal system, and businesses must file individual tax returns for both systems.

Some additional tax credits and deductions are available for specific industries or types of businesses in Quebec. These incentives are designed to encourage investment in the province, foster job creation, and promote the growth of key economic sectors.

In summary, Quebec’s corporate tax rates are as follows:

  • Small businesses: 3.20%
  • General corporations: 11.5%

When planning business operations in Quebec, it is crucial to understand the province’s tax rates and applicable tax credits. This knowledge will help business owners make informed decisions regarding their corporate tax strategies and optimize their financial performance in the long run. Remember to consult with a tax professional for personalized guidance and up-to-date information on tax rates and regulations.

Saskatchewan Corporate Tax Rates

The corporate tax rates in Saskatchewan can be divided into two categories: the general rate and the manufacturing and processing (M&P) rate reduction. Both rates are subject to changes from time to time.

As of January 1, 2018, the general rate of corporation income tax in Saskatchewan increased from 11.5% to 12%. This rate is applicable for corporations operating in the province. It is important to note that tax rate changes are pro-rated for corporate taxation years that straddle the effective dates.

Like in Manitoba, small businesses temporarily benefited from the elimination of provincial corporation income tax in Saskatchewan until July 1, 2023. Beginning, July 1, 2023, the small business tax rate was increased to 1% and the elimination will be completely phased out when the rate moves back to 2% on July 1, 2024.

It is important for corporations operating in Saskatchewan to be aware of these tax rates and their corresponding criteria. By understanding the tax implications, businesses can make informed decisions and optimize their tax strategies. Remember, provincial taxes are just one aspect of the overall Canadian corporate tax system, as federal taxes also apply to corporations operating within the country.

Small Business Tax Rates by Province

Canadian corporate tax rates vary based on the province in which a business operates. For Canadian-controlled private corporations (CCPCs) claiming the small business deduction, the federal net tax rate is 9%. In addition to federal taxes, each province or territory also imposes its own rates. Generally, provinces and territories have two rates, a lower rate, and a higher rate for small businesses. This section will provide an overview of the lower rates, which apply to income eligible for the federal small business deduction.

Province/Territory
Lower Tax Rate (as of July 1, 2024)
Alberta
2%
British Columbia
2%
Manitoba
2%
New Brunswick
2.5%
Newfoundland & Labrador
3%
Northwest Territories
2%
Nova Scotia
2.5%
Nunavut
3%
Ontario
3.2%
Prince Edward Island
1%
Quebec
3.2%
Saskatchewan
2%
Yukon
0%

 

It is important to note that these tax rates are subject to change. While generally consistent, provinces may undergo rate revisions and updates that may affect these figures. It is advisable to keep updated on the latest tax rates by visiting the official government sources, such as the Canada Revenue Agency (CRA) and provincial tax authorities.

In conclusion, it is essential for small business owners to be aware of the federal tax rate as well as the respective provincial tax rates that apply to their specific jurisdiction. By staying informed and up-to-date, businesses can ensure accurate reporting and compliance with Canadian tax laws and regulations.

Tax Credits and Incentives by Province

Canada offers a variety of tax credits and incentives for businesses operating in different provinces. Each province aims to attract and retain businesses by providing unique tax relief and incentive programs that cater to their specific economic conditions and industry sectors.

British Columbia offers competitive tax rates for corporations and has a Scientific Research & Experimental Development (SR&ED) tax credit, which provides a refundable credit of up to 10% for eligible research and development expenditures.

In Ontario, the Ontario Innovation Tax Credit (OITC) is a notable incentive that encourages investments in R&D. The OITC is a refundable tax credit calculated at 8% of eligible R&D expenditures.

Quebec offers the Investissement Québec program, which provides tax credits and financial incentives for various business sectors, such as technology, aerospace, and green energy. The province also has an R&D Tax Credit offering up to 30% in tax savings for eligible R&D expenditures.

Smaller provinces and territories also offer competitive tax credits and incentives tailored to their local economies. For instance, Manitoba has an Interactive Digital Media Tax Credit, which provides a 40% tax credit on eligible labor costs for companies involved in interactive digital media.

In conclusion, Canadian provinces offer a variety of tax credits and incentives designed to attract and retain businesses in their regions. By carefully considering the available incentives, companies can optimize their tax strategies and make informed decisions related to expansion and investment in specific provinces.

Interprovincial Tax Comparisons

When it comes to corporate tax rates in Canada, there are variations across provinces and territories. These differences may affect business owners when choosing where to establish their enterprises.

The basic rate of Part I tax in Canada is 38% of taxable income. After applying the federal tax abatement of 10%, the rate becomes 28%. Following the general tax reduction, the net tax rate amounts to 15% for most corporations. However, Canadian-controlled private corporations (CCPCs) claiming the small business deduction enjoy a lower net tax rate of 9%. Note that these rates are applicable at the federal level and do not include provincial or territorial rates.

Provincial and territorial income tax rates are added to the federal rate, creating a combined corporate income tax rate. These rates differ significantly from one province or territory to another. For example, as of September 30, 2023, the following combined general corporate tax rates are applied:

  • Alberta: 23%
  • British Columbia: 27%
  • Manitoba: 27%
  • New Brunswick: 29%
  • Newfoundland and Labrador: 30%
  • Northwest Territories: 26.5%
  • Nova Scotia: 29%
  • Nunavut: 27%
  • Ontario: 26.5%
  • Prince Edward Island: 31%
  • Quebec: 26.5%
  • Saskatchewan: 27%
  • Yukon: 27%

Note: These rates are subject to change and must be verified for the current taxation year.

These interprovincial tax rate variations occur due to the different economic priorities and budgetary needs of each province or territory. Entrepreneurs planning to start or expand a business should consider the specific tax rates for each jurisdiction in which they operate.

In conclusion, interprovincial tax rate differences occur in Canada, led by each province or territory’s unique economic situation and objectives. As a result, business owners should remain aware of these discrepancies and base their corporate strategies on the tax rates in their respective locations.

Frequently Asked Questions

What are the current corporate tax rates for small businesses in each Canadian province?

The corporate tax rates for small businesses vary across Canadian provinces, with some offering reduced rates for qualifying small business corporations. These rates are subject to change, so it is essential to consult up-to-date government sources or professional tax services for the latest information.

How are capital gains taxed for corporations in Canada?

In Canada, 50% of the capital gains realized by corporations are subject to tax at the rate applicable to aggregate investment income. It’s essential to be aware of the specific rates and taxation methods applicable to your particular jurisdiction.

What is the difference in corporate tax rates between provinces for companies earning over $500k?

Corporate tax rates will usually increase for companies with taxable income over $500,000, transitioning from the small business rate to the general corporate tax rate. The specific rates and thresholds can vary by province, which makes it crucial for companies to understand the tax implications based on their jurisdiction.

How is the Canadian Controlled Private Corporation (CCPC) tax rate determined across provinces?

The tax rate for a CCPC depends on the federal tax rate, the provincial/territorial tax rate, and the size of the corporation. These rates can differ by province, so it’s essential to compare the available information to ensure your business is compliant with the relevant regulations.

Which Canadian province offers the lowest tax rates for corporations?

The lowest corporate tax rates in Canada can vary based on factors such as the type of corporation, eligible tax credits, and current rates in each province. It’s crucial to consider these factors when seeking the most advantageous tax environment for your corporation.

How do dividend tax rates vary by province for Canadian corporations?

Dividend tax rates depend on the type of dividend and the province in which they are received. Generally, dividends are taxed at both the federal and provincial levels, with rates differing by province. It’s important to consult the tax regulations in each province to determine the specific dividend tax rates that apply to your corporation.

Sebastien Prost, CPA

Written by Sebastien Prost, CPA

Seb Prost, a CPA with over 10 years of experience in taxation and accounting, offers a unique blend of insights from his time at the CRA and his experience in public practice. Originally from QC and now based in Nelson, BC, he specializes in guiding Canadian startups, SaaS companies and other online businesses for all of their accounting and taxation needs.

Looking for an Accounting Partner for your Business?

You May Also Like…