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2018 Corporate Income Tax Rates
The following table shows the general and small business corporate income tax rates federally and for each province and territory for 2018. The small business rates are the applicable rates after deducting the small business deduction (SBD), which is available to Canadian-controlled private corporations (CCPCs). The small business rate is available on active business income up to the amount of the Business Limit. The federal business limit of $500,000 begins to be reduced when a CCPC's taxable capital reaches $10 million, and is eliminated when taxable capital reaches $15 million. This phase-out of the small business deduction is also in effect in some provinces. The federal 2018 budget proposes to reduce the business limit based on the investment income of a CCPC, for taxation years beginning after 2018.
The federal general rate is net of the 10% federal tax abatement and 13% (2012 and later years) general rate reduction. The general rate reduction is disallowed for a personal services business (PSB), for taxation years beginning after October 31, 2011, resulting in a federal corporate tax rate of 28% for PSBs, until the end of 2015. The Federal 2016 Budget increased the corporate tax rate for PSBs from 28% to 33% effective January 1, 2016.
The general corporate tax rate applies to active business income in excess of the business limit.
(1) NL, NT, NU and PE use the federal small business limit.
(2) New Brunswick's 2017 budget lowered the Small Business Income Tax Rate from 3.5% to 3% effective April 1, 2017. Their Bill 23, November 2017, reduces the rate to 2.5% effective April 1, 2018. It also revises the non-eligible dividend tax credit rate.
(3) On October 16, 2017, the Department of Finance announced that the small business tax rate would be reduced to 10% effective January 1, 2018 , and to 9% effective January 1, 2019. On October 24, 2017, in conjunction with their Fall Economic Statement, the Department of Finance tabled a Notice of Ways and Means Motion to reduce the gross-up rate for non-eligible dividends to 16% in 2018, and 15% thereafter, with the non-eligible dividend tax credit revised to 8/11ths of the gross-up for 2018 and to 9/13ths of the gross-up for 2019 and later years.
(4) The BC September 2017 Budget Update lowered the small business corporate tax rate from 2.5% to 2.0% effective April 1, 2017. However, the general corporate income tax rate increases to 12%, effective January 1, 2018.
(5) The Saskatchewan 2017 Budget announced that the general corporate income tax rate would be reduced to 11.5% on July 1, 2017, and to 11.0% on July 1, 2019. Subsequently, on November 7, 2017 they passed Bill 84 (pdf), which sets the general corporate income tax rate at 12% effective January 1, 2018, increases the small business threshold from $500,000 to $600,000 effective January 1, 2018, and sets the enhanced dividend tax credit rate at 11% for 2018. There is no change to the small business corporate income tax rate.
(6) Nova Scotia provides a corporate tax holiday under s. 42 of their Income Tax Act for the first 3 taxation years of a new small business after incorporation. See New Small Business Tax Deduction on the Nova Scotia website.
(7) According to Quebec's Corporate Income Tax Changes page, the general tax rate is reduced each year by 0.1% until 2020. Thus, it will be 11.7% in 2018, 11.6% in 2019 and 11.5% in 2020. The Quebec March 27, 2018 Budget announced an increase in the small business deduction rate for small and medium sized businesses (SMBs) in sectors other than the primary and manufacturing sectors. This will reduce the small business tax rate to 7% effective for the period from March 28 to December 31, 2018, to 6% for 2019 and to 5% for 2020, and to 4% for 2021. See Standardizing Tax Rates for SMBs on the Revenu Quebec website.
(8) Ontario's 2017 Fall Economic Statement indicated that the small business corporate income tax rate is reduced to 3.5% effective January 1, 2018.
(9) The Manitoba 2018 Budget announced that the small business income limit would increase to $500,000 effective January 1, 2019.
(10) The Prince Edward Island 2018 Budget announced that the small business tax rate would be reduced by 0.5% in 2018 - effective January 1, 2018, as per Bill 33. The non-eligible dividend tax credit rate will not change, other than the automatic change due to the change in gross-up rate. PEI's Bill 57 November 2018 reduces the small business tax rate to 3.5% effective January 1, 2019.
Resources:- Canada Revenue Agency (CRA) Federal, Provincial and Territorial corporate income tax rates.
Revised: April 23, 2019
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