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See how much corporate tax your company pays on active business income, how much falls under the small business rate, and what you keep after tax.
A Canadian-controlled private corporation pays a much lower rate on its first $500,000 of active business income thanks to the small business deduction. Income above that is taxed at the general corporate rate.
Both rates combine a federal and a provincial portion, which is why the province you operate in changes the result.
The $500,000 limit is shared among associated companies. It shrinks when passive investment income in the group goes above $50,000, and when taxable capital goes above $10 million. Planning around those thresholds is often worth more than the rate itself.
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It lowers the federal rate on the first $500,000 of active business income earned by a Canadian-controlled private corporation. Provinces offer their own reduced rate on the same income.
Investment income, such as interest, rent and most dividends from portfolio holdings, is taxed differently and does not get the small business rate.
Leaving profit in the company defers personal tax until you pay it out. Whether that makes sense depends on your cash needs, passive-income limits and long-term plans.
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