Corporate Tax in Canada

Updated on Thursday 18th April 2019

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Starting a business in Canada can bring various benefits to foreign investors based on the type of structure they choose and the industry they decide to operate in. There are several aspects which need to be considered when choosing to open a company in Canada and most entrepreneurs look at the taxation system which in Canada is more complex due to the federal, territorial and provincial division of the country.

The taxation of companies in Canada implies the levy of the income tax on profits at a federal and provincial or territorial level, depending on how the company was registered. Below, our company formation specialists in Canada explain how the corporate tax is levied in this country. We can assist with accounting services in order for clients to choose the best structure and to benefit from as many tax rebates as possible. We can also help those who want to set up businesses in Canada.
 

Corporate tax regulations in Canada


One of the most important aspects to be considered when it comes to the corporate tax in Canada is whether the company is registered at a federal or provincial or territorial level. Foreign investors interested in company registration in Canada should know the following:
 
  • Canadian-based companies will be taxed on their worldwide incomes at a federal and provincial and territorial level;
  • foreign companies with activities in Canada will be taxed on the profits earned here, depending on where they are completing their activities;
  • the federal tax rate is usually reduced by 10% in order for the provincial and territorial governments to levy their corporate taxes;
  • branches of foreign companies in Canada can also be imposed with a corporate tax on their incomes earned in this country;
  • special corporate tax incentives are available for small businesses in Canada (the small business deduction);
  • the withholding and the corporate taxes in Canada can be reduced against special provisions in double taxation agreements.

Our Canadian company formation advisors can offer detailed information on how the corporate tax is levied at national and provincial levels.
 

Corporate tax rates in Canada


Those who want to set up companies in Canada should know that there the rates attached to the corporate tax depend on the territory or province in which the company is registered. Also, if at a federal level the corporate tax is levied at a fixed rate, at a territorial and provincial level, the corporate tax has high and a low rate. The following tax rates need to be considered when it comes to the Canadian corporate tax:
 
Tax  Minimum rate  Maximum rate
Federal tax              - 15%
Small business deduction 0% 10%
Alberta  10% 15%
British Colombia  5.06%  16.8%
Manitoba  10.8%  17.4%
New Brunswick  9.08% 20.3%
Newfoundland and Labrador  8.7%  18.3%
Northwest Territories  5.9%  14.05%
Nova Scotia  8.79%  21%
Nunavut  4%  11.5%
Ontario  5.05%  13.16%
Prince Edward Island  9.8%  16.7%
Quebec  16% 25.75%
Saskatchewan  11% 15%
Yukon Territory  6.4%  15%


At a provincial and territorial level, the small business deduction ranges between 0% and 8%.

Those who want to open companies in Canada should know that corporate tax rates can change during the year. Even if the rates can suffer minor changes, it is best to ask for updated information from our company registration specialists in Canada. We can also help those who need help in registering their businesses in a specific province in Canada.
 

Corporate tax reductions in Canada


One of the most important advantages of the Canadian taxation system relating to the corporate tax is that companies can obtain various tax reductions. Among these, tax credits and income tax deductions apply depending on the industry the Canadian company operates in. For example, companies in the manufacturing sector benefit from tax credits in the province of Ontario.

The small business deduction is the most important corporate tax deductions in Canada, being applied at all levels. It is important to note that this deduction is available for private companies registered in Canada only.

Other corporate tax benefits available for companies in Canada refer to the research and development tax credits and other investment tax credits. Companies also have the possibility of deducting certain expenses of their business activities.

In order obtain these deductions or reductions, companies are required to file specific forms with the Canadian Revenue Agency.

For complete assistance in company taxation and registration matters in Canada, please contact us. We offer tailored accounting services to foreign investors who need help with computing their corporate taxes.