How is corporate tax calculated in Canada?
Tax consultants in Toronto and other Canadian cities follow a dual rate system for corporate income tax. If a business’ corporate income falls below a certain level, it pays less income tax. Let’s take a detailed look at what are the important aspects of calculating corporate tax in different parts of Canada.
Corporate tax rates in Canada
Canadian corporate tax rates usually vary from 11% to 16%, unless for small businesses. For small business, the income limit is $500,000 for most states.
British Columbia, Manitoba & New Brunswick
In British Columbia and Manitoba, the general income tax rate is 12% that every business has to pay, if their earned income exceeds $500,000. In British Columbia, if it’s less than the limit, you have to pay the lower rate of 2%. However, in case of New Brunswick, the general rate is 14% and for small businesses, corporate income tax rates are 2.5%.
In all three regions, tax credits are implied on sectors such as research and development, agriculture industry, etc.
Newfoundland, Labrador and Northwest Territories
Newfoundland and Labrador have identical tax rates of 15% general corporate income tax (CIT) and a 3% rate for small businesses that earn within $500,000. Here, 15% is the rate of Manufacturing and Processing Profits, as well. In the Northwest Territories of Canada, the general rate is as low as 11.5% for corporate. But, small businesses have to pay a 4% tax, if their income is limited.
Nova Scotia and Prince Edward Island
These regions have much higher general CIT rates of 16%. For small businesses earning within $500,000, tax rate is 3% in Nova Scotia and 3.5% in Prince Edward Island. Unlike many other Canadian regions, Nova Scotia offers tax credits for the digital media, film industry, etc
Nunavut and Ontario
They have almost similar general CIT rates and small business rates, with those two being 12% and 11.5%, 4% and 3.5% respectively. The corporate tax credits include book publishing.
Saskatchewan and Yukon
Saskatchewan is the only region where the small business limit is $600,000. Apart from that, in both these regions, the general rate is 12%, while the small business CIT is just 2%. Both these regions offer tax credit for research and development.
At Accounting & Tax, serving for two decades as a tax consultation service in Toronto, we provide thorough tax calculations for our clients, regardless of their stature.
