# Small Business Tax Rates (Canada)

**Category:** [Tax Basics](https://community.mycartracks.com/c/small-business-tax-basics/43)
**Created:** 2026-05-15 10:44 UTC
**Views:** 5
**Replies:** 0
**URL:** https://community.mycartracks.com/t/small-business-tax-rates-canada/413

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## Post #1 by @MyCarTracks_support

For small-business tax rates in Canada, first separate the rate you mean. A sole proprietor usually pays personal income tax on business profit. A Canadian-controlled private corporation (CCPC) may pay corporate tax, possibly with the small business deduction. A GST/HST registrant charges goods and services tax or harmonized sales tax on taxable supplies. An employer withholds payroll deductions, Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions, and employment insurance (EI) premiums. These are related cash-flow items, but they are not one small-business tax rate.

The Canada Revenue Agency (CRA), the federal tax agency, gives the federal corporate rates and many provincial or territorial corporate rates on its [corporation tax rates](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html) page. Self-employed people and sole proprietors should start from the CRA's [small businesses and self-employed income](https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income.html) guidance because their business profit flows through a personal tax return rather than a T2 corporation income tax return.

This article is educational and is not tax, legal, accounting, payroll, GST/HST, Quebec sales tax (QST), or provincial tax advice. Rates, limits, instalments, credits, and payroll obligations can change by tax year, fiscal period, province or territory, business structure, associated corporations, taxable capital, passive investment income, GST/HST status, QST status, payroll status, and employee facts. Confirm current rates before filing or remitting.

## Quick answer

There is no single small-business tax rate in Canada. For 2026 planning, the federal corporate small-business rate is 9% for qualifying CCPC active business income that can use the small business deduction, while the federal general corporate rate after abatement and reduction is 15%. Provincial and territorial corporate rates are added separately. Sole proprietors and partners do not use corporate rates for their business profit; they report business or professional income through their personal tax return and pay personal federal and provincial or territorial income tax.

GST/HST is separate. The general GST/HST small supplier threshold for many businesses is more than $30,000 in taxable supplies in one calendar quarter or over the previous four consecutive calendar quarters, but that threshold is not an income-tax-free amount. Payroll is separate again: if you have employees, use the current CRA payroll tables and remittance schedule instead of estimating from business profit.

## Small-business tax rates in Canada by tax type

Before you compare rates, identify which tax account or return is involved.

| Tax type | Who usually deals with it | Rate or amount to check |
| --- | --- | --- |
| Personal income tax on business profit | Sole proprietors, partners, many self-employed people | Federal and provincial/territorial personal rates for the owner |
| Corporation income tax | Incorporated businesses | Federal corporate rate plus provincial/territorial corporate rate |
| Small business deduction | Qualifying CCPCs with eligible active business income | Federal and provincial/territorial small-business treatment and business limits |
| GST/HST | Registrants making taxable supplies | GST/HST rate by province or territory and reporting-period rules |
| QST | Québec businesses where QST applies | Revenu Québec registration, rate, filing, and input tax credit/input tax refund (ITC/ITR) treatment |
| Payroll deductions | Employers | Income tax withholding, CPP or QPP, EI, and remittance due dates |
| Self-employed CPP/QPP and optional EI | Self-employed owners | CPP or QPP contribution rules; EI special benefits if opted in |

This distinction prevents two common mistakes: treating the GST/HST threshold as a tax-free profit threshold, and using corporate rates for an unincorporated business.

## Federal corporate tax rates and the small business deduction

The federal corporate tax calculation starts from a 38% basic Part I tax rate. After the 10% federal tax abatement, the rate is 28%. After the general tax reduction, the federal general corporate rate is 15%.

For qualifying Canadian-controlled private corporations, the federal small business deduction can reduce the federal rate to 9% on eligible active business income within the business limit. The federal business limit is generally $500,000, but it can be reduced or shared. Associated corporations, taxable capital, passive investment income, short fiscal periods, and other facts can change how much of the limit is available.

Do not assume incorporation automatically gives every business a 9% tax result. The corporation must qualify, the income must be eligible, provincial or territorial tax still applies, and money paid out to owners can create separate salary, dividend, payroll, or personal tax consequences.

## Provincial and territorial corporate rates

Provincial and territorial corporate rates are added to the federal rate. The lower rate generally applies to eligible income that can use a provincial or territorial small-business rate. The higher rate applies to income that does not qualify for the lower rate.

Rates below are a planning map, not a filing calculation. Check the province, territory, fiscal period, business limit, and eligibility rules before using them.

| Jurisdiction | Lower corporate rate | Higher corporate rate | Notes |
| --- | ---: | ---: | --- |
| Alberta | 2% | 8% | Alberta administers its own corporation tax; $500,000 small-business threshold. |
| British Columbia | 2% | 12% | CRA-administered rate table. |
| Manitoba | 0% | 12% | CRA-administered rate table. |
| New Brunswick | 2.5% | 14% | CRA-administered rate table. |
| Newfoundland and Labrador | 2.5% | 15% | CRA-administered rate table. |
| Northwest Territories | 2% | 11.5% | CRA-administered rate table. |
| Nova Scotia | 1.5% | 14% | Lower rate and $700,000 business limit effective April 1, 2025. |
| Nunavut | 3% | 12% | CRA-administered rate table. |
| Ontario | 3.2% | 11.5% | CRA-administered rate table. |
| Prince Edward Island | 1% | 15% | Higher rate and $600,000 business limit effective July 1, 2025. |
| Saskatchewan | 1% | 12% | CRA-administered rate table. |
| Yukon | 0% | 12% | CRA-administered rate table. |
| Québec | See note | 11.5% | Revenu Québec administers Québec corporation tax. Eligible CCPC income can receive a Québec small business deduction; for taxation years beginning after April 29, 2026, Revenu Québec says the small business deduction (SBD) rate increases from 8.3% to 9.3%, reducing the minimum tax rate on eligible income from 3.2% to 2.2%. |

For example, an Ontario CCPC with $55,000 of eligible active business income and access to the small business deduction may start with 9% federal plus 3.2% Ontario, or 12.2% before other adjustments. That simple example does not handle credits, instalments, associated corporations, owner pay, passive income, taxable capital, or non-eligible income.

## Non-incorporated businesses use personal rates

If you are self-employed, a freelancer, a contractor, a sole proprietor, or a partner, your business profit is usually reported on your personal tax return. Your taxable result depends on business income, deductible business expenses, other personal income, credits, province or territory, CPP or QPP, instalments, and losses.

Use Form T2125, the business income and expenses form, or the relevant self-employed business workflow when it applies. Keep the income and expense records that support the calculation: invoices, receipts, bank deposits, platform statements, contracts, business-use allocations, and kilometre logs where vehicles are used.

Self-employed CPP is separate from income tax. Outside Québec, self-employed workers generally pay both the employee and employer portions of CPP on pensionable self-employment earnings. Québec uses QPP, so Québec readers should confirm the QPP treatment with the Québec sources that apply to them. Self-employed EI is generally optional through the EI special benefits program, not a default payroll withholding item.

## GST/HST rates and registration threshold

GST/HST rates are sales-tax rates, not income-tax rates. The current CRA rate map is:

| Province or territory | GST/HST rate |
| --- | ---: |
| Alberta | 5% GST |
| British Columbia | 5% GST |
| Manitoba | 5% GST |
| Northwest Territories | 5% GST |
| Nunavut | 5% GST |
| Québec | 5% GST, plus QST where applicable |
| Saskatchewan | 5% GST |
| Yukon | 5% GST |
| Ontario | 13% HST |
| New Brunswick | 15% HST |
| Newfoundland and Labrador | 15% HST |
| Nova Scotia | 14% HST |
| Prince Edward Island | 15% HST |

Many businesses must register for GST/HST when they are no longer small suppliers and make taxable supplies in Canada. Under CRA [registration guidance](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/when-register-charge.html), the general threshold for many businesses is more than $30,000 in taxable supplies in one calendar quarter or over the previous four consecutive calendar quarters.

If you exceed the threshold in a single quarter, registration and charging can start on the supply that pushed you over. If you exceed it over four consecutive quarters but not in one quarter, the effective date can be later. Taxi and commercial ride-sharing businesses have special registration rules. If you are in Québec, review QST and Revenu Québec administration separately.

## Payroll, CPP, QPP, and EI rates

If you have employees, you generally need a payroll account, TD1 forms, current payroll deduction tables, payroll records, and remittance dates. The CRA's [T4032 payroll deduction tables](https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4032-payroll-deductions-tables.html) are the practical starting point because withholding depends on the employee, province or territory of employment, pay period, credits, and benefit facts.

For 2026 CPP outside Québec, the CRA lists:

| CPP item for 2026 | Amount or rate |
| --- | ---: |
| Maximum annual pensionable earnings | $74,600 |
| Basic exemption | $3,500 |
| Maximum contributory earnings | $71,100 |
| Employee and employer CPP rate | 5.95% each |
| Maximum employee or employer CPP contribution | $4,230.45 each |
| Maximum self-employed CPP contribution | $8,460.90 |

The second additional Canada Pension Plan contribution (CPP2) also applies above the first earnings ceiling up to the second ceiling:

| CPP2 item for 2026 | Amount or rate |
| --- | ---: |
| Additional maximum annual pensionable earnings | $85,000 |
| Employee and employer CPP2 rate | 4% each |
| Maximum employee or employer CPP2 contribution | $416 each |
| Maximum self-employed CPP2 contribution | $832 |

For 2026 EI, the CRA lists:

| EI item for 2026 | Federal rate | Québec rate |
| --- | ---: | ---: |
| Maximum insurable earnings | $68,900 | $68,900 |
| Employee premium rate | 1.63% | 1.30% |
| Maximum employee premium | $1,123.07 | $895.70 |
| Maximum employer premium | $1,572.30 | $1,253.98 |

Québec has QPP and separate Québec payroll considerations. Do not apply CPP numbers to Québec employees or Québec self-employed income without checking QPP.

## Payroll remittance dates are not one universal deadline

The 15th of the next month is common for regular remitters, but it is not the only payroll remittance rule. CRA remitter type usually depends on average monthly withholding amount, called AMWA, from two calendar years ago.

| Remitter type | Basic timing |
| --- | --- |
| Quarterly remitter | April 15, July 15, October 15, and January 15, when eligible |
| Regular remitter | 15th day of the month after the month you paid employees |
| Accelerated threshold 1 | Two remittances per month, based on the first and second half of the month |
| Accelerated threshold 2 | Up to four remittances per month, due within three working days after each remitting period |

If you have no employees, seasonal workers, a new payroll account, or a change in business status, confirm the payroll account treatment before assuming a nil remittance or final remittance date.

## Filing and payment dates to keep separate

Corporations generally file the T2 return within six months after the end of the tax year. The balance-due date is usually earlier than that: generally two months after year-end, or three months after year-end for certain eligible corporations.

Self-employed individuals generally have a June 15 filing deadline, but an April 30 balance-due date. GST/HST filing and payment deadlines depend on the reporting period and fiscal year-end. Payroll remittances follow the remitter type. These dates belong on one calendar, but they should not be treated as one obligation.

## How to use these rates in planning

Use rates to estimate cash flow, not to guess a final tax bill.

1. Identify your structure: sole proprietor, partnership, corporation, or more than one entity.
2. Separate income tax from GST/HST, QST, payroll, CPP/QPP, EI, credits, and ITCs.
3. Estimate profit after supported business expenses, not just gross revenue.
4. Check whether any corporate small business deduction limit is reduced or shared.
5. Review GST/HST registration and reporting periods before crossing a threshold.
6. Use CRA payroll tables for employees instead of hand-calculating from annual rates alone.
7. Keep records that support income, deductions, credits, ITCs, payroll, and vehicle use.

For the broader Canada tax workflow, start with [Self-Employed and Small Business Tax Guide (Canada)](https://community.mycartracks.com/t/self-employed-and-small-business-tax-guide-canada/410). If vehicles are part of your business, pair this article with [CRA Mileage Log Requirements (Canada)](https://community.mycartracks.com/t/cra-mileage-log-requirements-canada/354) so your business-use percentage and kilometre records support the expense side of the calculation.

## MyCarTracks workflow

Rates help with planning, but the vehicle-expense side still depends on records. [MyCarTracks automatic mileage tracking](https://www.mycartracks.com/products/automatic-mileage-tracking) can capture trips, help separate business and personal kilometres, keep vehicle records organized, and export reports for tax, reimbursement, payroll, or accountant review.

The app does not calculate Canadian tax rates, payroll rates, GST/HST rates, instalments, credits, or corporation tax. It supports the kilometre-log and reporting part of the business file when vehicle use affects your rate planning.

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## FAQ

### What is the federal small business tax rate in Canada?

For qualifying CCPC active business income that can use the federal small business deduction, the federal corporate rate is 9%. Provincial or territorial corporate tax is added separately, and eligibility can be reduced by several factors.

### What is the general federal corporate tax rate?

The CRA lists the general federal corporate rate as 15% after the federal tax abatement and general tax reduction.

### Do sole proprietors use corporate tax rates?

No. Sole proprietors and many self-employed people report business profit through their personal tax return. Personal federal and provincial or territorial tax rates, credits, CPP or QPP, instalments, and other income can affect the final result.

### Does the $30,000 GST/HST threshold mean profit below $30,000 is tax-free?

No. The $30,000 threshold is a GST/HST small supplier rule for taxable supplies. It is not an income-tax exemption.

### Can business expenses reduce taxable income?

Yes, when the expense is deductible and supported. You still need to separate current expenses, capital expenses, personal-use portions, GST/HST ITCs, credits, rebates, and refunds.

## What to read next

- [Self-Employed and Small Business Tax Guide (Canada)](https://community.mycartracks.com/t/self-employed-and-small-business-tax-guide-canada/410)
- [How Much Can a Small Business Make Before Paying Taxes? (Canada)](https://community.mycartracks.com/t/how-much-can-a-small-business-make-before-paying-taxes-canada/412)
- [GST/HST for Self-Employed People and Small Businesses (Canada)](https://community.mycartracks.com/t/gst-hst-for-self-employed-people-and-small-businesses-canada/411)
- [Tax Deadlines for Self-Employed People and Small Businesses (Canada)](https://community.mycartracks.com/t/tax-deadlines-for-self-employed-people-and-small-businesses-canada/409)
- [Small Business Tax Credits (Canada)](https://community.mycartracks.com/t/small-business-tax-credits-canada/405)
- [How Long to Keep Business Records (Canada)](https://community.mycartracks.com/t/how-long-to-keep-business-records-canada/407)
- [CRA Mileage Log Requirements (Canada)](https://community.mycartracks.com/t/cra-mileage-log-requirements-canada/354)

## Sources

- [CRA corporation tax rates](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html)
- [Alberta tax and levy rates](https://www.alberta.ca/about-tax-levy-rates-prescribed-interest-rates)
- [Revenu Québec small business deduction rate change](https://www.revenuquebec.ca/en/press-room/tax-news/details/2026-05-04/increase-in-the-small-business-deduction-rate/)
- [CRA small businesses and self-employed income](https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income.html)
- [CRA when to register for and start charging GST/HST](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/when-register-charge.html)
- [CRA GST/HST calculator and rates](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-which-rate/calculator.html)
- [CRA T4032 payroll deductions tables](https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4032-payroll-deductions-tables.html)
- [CRA CPP contribution rates, maximums and exemptions](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/canada-pension-plan-cpp/cpp-contribution-rates-maximums-exemptions.html)
- [CRA CPP2 contribution rates and maximums](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/calculating-deductions/making-deductions/second-additional-cpp-contribution-rates-maximums.html)
- [CRA EI premium rates and maximums](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/employment-insurance-ei/ei-premium-rates-maximums.html)
- [CRA payroll remitter types](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-more-information.html)
- [CRA payroll remittance due dates](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html)
- [CRA when to file your corporation income tax return](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/when-file-your-corporation-income-tax-return.html)
- [CRA corporation balance-due day](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/paying-your-balance-corporation-tax/balance-day.html)

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