Business Immigrants: How Canada Reduces Tax For Small Businesses

Immigrants to Canada have access to one of the world's most competitive tax regimes for starting a new business. An important advantage enjoyed by business owners is a low tax rate applicable to active business income earned in Canada. This is called the "small business deduction".

Generally, business income earned in Canada is subject to a general federal tax rate of 15%. In addition, all provinces tax business income at rates ranging from 10 to 16%, depending on the province. As a result, the total combined rate may vary from 25 to 31%, depending on the province. The small business deduction reduces the tax rate applicable to the first $500,000 of business income from 15% to 10.5% at the federal level, and significant reductions also apply to rates charged by provinces.