Canadian-controlled private corporations earning business income
can enjoy significant tax advantages.
Small business deduction
The small business deduction is the most significant advantage.
The federal tax rate on the first $500,000 of business net income
is reduced to 11 per cent from a general rate of 15 per cent. In
addition, all provinces assess a general business tax rate ranging
from 10 to 16 per cent, depending on the province. Each province
also provides a significant rate reduction on the first $500,000 of
business income (with the exception of Manitoba and Nova Scotia,
which have lower thresholds).
For example, the combined federal/provincial general tax rate on
corporate business income in Ontario is 26.5 per cent, but the
combined rate for income qualifying for the small business
deduction is reduced to 15.5 per cent.
