How corporate tax works in Canada
A corporation resident in Canada is generally taxed federally and in the province or territory where it carries on business. The federal general corporate rate is 15% after the general tax reduction, with provincial or territorial corporate tax added on top.
A qualifying Canadian-controlled private corporation can claim the small-business deduction. The federal rate is 9% on eligible active-business income within the business limit, generally CAD 500,000 before associated-corporation, capital and passive-income restrictions are considered.
Provincial rates vary materially. Alberta, for example, publishes an 8% general rate and a 2% small-business rate, while other provinces and territories use their own lower and higher rates and business limits. Quebec and Alberta administer their corporate tax outside the ordinary CRA collection agreement.
Canadian corporate tax applies to taxable income after deductions, capital-cost allowance, loss utilisation and other adjustments rather than simply to accounting profit. Transfer pricing, foreign affiliates, controlled foreign corporations and withholding taxes matter for cross-border groups.
Canada has a global minimum-tax framework for large multinational groups within the OECD Pillar Two scope. Banks and life insurers can also face an additional federal tax, and ordinary businesses still need to model GST or HST, payroll, provincial sales and local taxes.
Tax rates at a glance
- Corporate tax
- 23% - 30%
- Federal general corporate tax
- 15%Headline
- Federal CCPC small-business rate
- 9%
- Alberta general corporate tax
- 8%
- Alberta small-business tax
- 2%
- Large-group minimum tax
- 15%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersOperating companiesHolding companiesCross-border groupsInvestors
Watch out for
- There is no single Canadian combined corporate rate. The federal rate, provincial rate, business location, income type and tax year all need to be identified before comparing incorporation jurisdictions.
- The 9% federal CCPC rate is not a general start-up rate. Canadian control, active-business income, the business limit, associated corporations, taxable capital and passive investment income can restrict or eliminate the deduction.
- A Canadian company can be resident where its central management and control is exercised, not only where it was incorporated. A foreign company can also create a Canadian permanent establishment through its activities.
- Corporate tax is only the first layer for an owner. Salary, bonuses, CPP or QPP, EI, dividends, withholding, shareholder loans and the owner's residence can change the all-in extraction cost.
- Pillar Two does not replace ordinary Canadian corporate tax. In-scope groups need jurisdictional effective-rate calculations, minimum-tax filings and data from all Canadian and foreign entities.
Frequently asked questions
What is the corporate tax rate in Canada?
The federal general corporate rate is 15%. A qualifying Canadian-controlled private corporation can generally use a 9% federal rate on eligible active-business income within the business limit, but provincial or territorial corporate tax is added in both cases.
Is Canada good for a small business?
Canada can be competitive for a qualifying CCPC that earns active business income and can use the small-business deduction, especially in a lower-rate province. The result depends on provincial tax, payroll, GST or HST, compliance, association rules and how profits are eventually extracted.
Does Canada apply a 15% global minimum tax?
Canada has implemented a Pillar Two framework for in-scope large multinational groups. The ordinary 15% federal corporate rate for a small or mid-sized company is not the same thing as the jurisdictional effective-rate calculation used for Pillar Two.