The displayed figures represent nominal tax rates as of March 28, 2023. Combine federal and provincial/territorial rates to determine the comprehensive rate. Adjustments in rates and amounts are detailed in the notes and should be proportionally applied for tax years spanning the effective dates, unless otherwise specified.
Corporate Tax Rate Chart - Add Federal rates to relevant Provincial Rates to determine corporate tax rate
Note of changes (2022 and later years):
Federal:
The business limit is phased out for Canadian-controlled private corporations (CCPCs) based on the greater of two components:
For corporations with taxable capital employed in Canada exceeding $10 million, the business limit is reduced on a straight-line basis and is eliminated when taxable capital reaches $50 million for taxation years starting on or after April 7, 2022 (the upper limit was $15 million prior to this change). Except for Ontario and Québec, all provinces and territories automatically follow the federal rules regarding the interaction of taxable capital and the small business deduction. Ontario has proposed legislation to parallel the federal change with the same effective date, and Québec has announced plans to make legislative changes to align with this federal change.
For corporations earning more than $50,000 of passive investment income in a year, the business limit is reduced by $5 for every $1 of investment income earned and is eliminated when investment income earned reaches $150,000. Ontario and New Brunswick are not implementing the investment income restriction to the provincial business limit.
The corporate tax rates are temporarily reduced for qualifying companies involved in zero-emission technology manufacturing or process activities. The tax rates on zero-emission technology manufacturing profits are 4.5% where that income would otherwise be taxed at the 9% small business tax rate and 7.5% where that income would otherwise be taxed at the 15% general corporate tax rate. These reduced tax rates apply to taxation years beginning after 2021 and are legislated to be gradually phased out starting in taxation years beginning in 2032 (instead of 2029) and fully phased out for taxation years beginning after 2034 (instead of 2031), as announced in the 2023 federal budget.
30.67% of investment income is eligible for a refund at the rate of 38.33% of dividends paid.
The federal rate on personal services business income is 33.0%.
An additional tax of 1.5% applies to bank and life insurer groups on taxable income over $100 million for taxation years ending after April 7, 2022, increasing the tax rate from 15% (as shown in the chart above) to 16.5%. The $100 million taxable income exemption must be shared among group members. The additional tax is prorated for the taxation year based on the number of days after April 7, 2022.
The Canada Recovery Dividend (CRD) is a one-time 15% tax on bank and life insurer groups based on the corporation's 2020 and 2021 average taxable income exceeding $1 billion. The $1 billion taxable income exemption must be shared among bank and life insurer group members. The CRD liability is imposed in the 2022 taxation year and payable over five years in equal instalments.
Saskatchewan: The rate on ABI up to the business limit temporarily decreased from 2% to 0% effective Oct. 1, 2020. The government extended the 0% small business rate to June 30, 2023, which will increase to 1% effective July 1, 2023 (instead of July 1, 2022), and to 2% effective July 1, 2024 (instead of July 1, 2023).
Québec: Corporations must either meet the minimum number of remunerated hours test or operate in the manufacturing or primary (MOP) industries to access the small business deduction (SBD).
To meet the remunerated hours test, the corporation must have paid its employees for at least 5,500 hours per year in its current or previous taxation year. Where the number of hours worked falls below this threshold, the SBD rate will be reduced linearly when the number of hours paid per year falls between 5,000 and 5,500 hours. Where the hours are less than 5,000, no SBD will be available.
Small and medium-sized businesses (SMBs) in the MOP industries that do not meet the remunerated hours test can benefit from the full SBD rate if 50% or more of their activities are in the MOP sector. Where this proportion is between 25% and 50%, the SBD rate will be reduced.
If a corporation in the MOP sector meets both the minimum proportion of activities test (over 25%) and the minimum number of remunerated hours test (over 5,000 hours), the SBD rate is equal to the greater of the rates calculated under the two tests.
PEI In Prince Edward Island, the rate on Active Business Income (ABI) up to the business limit was reduced from 2.0% to 1.0%, effective January 1, 2022.
The details provided in this publication are accurate as of December 1, 2023. While the publication has been meticulously prepared, it is presented in a general context and serves as broad guidance. It is not intended to address specific situations, and it is crucial not to make decisions or abstain from actions solely based on the information contained herein without seeking personalized professional advice. For a discussion tailored to your individual circumstances, we encourage you to reach out to Osman Accounting.
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