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2020 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 2020. 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 implemented changes 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) 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.
Nova Scotia's 2020 Budget announced reductions in the general and small business corporate tax rates, effective April 1, 2020.
(3) 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.
(4) The PEI 2019 Budget reduced the small business tax rate to 3.0% from 3.5% for taxation years that begin on or after January 1, 2020. Their 2020 Budget reduces the rate to 2% effective January 1, 2021.
(5) Alberta's Bill 3 June 2019 reduced the general corporate tax rate to 11% effective July 1, 2019, with subsequent reductions to 10% on January 1, 2020, 9% on January 1, 2021, and 8% on January 1, 2022. However, on June 29, 2020, Alberta announced that the rate would drop to 8% effective July 1, 2020. Bill 35 tabled October 20, 2020 includes the legislative changes for this but it has not yet passed as of November 13, 2020. See the Alberta 2020 Recovery Plan for more information.
(6) The Ontario November 6, 2019 Economic Update announced that the small business Corporate Income Tax rate would be reduced to 3.2% from 3.5% starting January 1, 2020.
(7) Yukon's 2020 Budget announced that the small business corporate income tax rate would be reduced to zero effective January 1, 2021. This automatically reduces their non-eligible dividend tax credit for 2021.
Resources:- Canada Revenue Agency (CRA) Federal, Provincial and Territorial corporate income tax rates.
Revised: December 28, 2020
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