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.
For example, the combined federal/provincial general tax rate on
corporate business income in Ontario is 26.5%, but the combined
rate for income qualifying for the small business deduction is
reduced to 15%. In Quebec, the rates are reduced from 26.9% to
18.5%. The reduced tax rates for small businesses by province are
provided in the table below.
Thus, in most cases, the regular rates on the amount of eligible
business income are reduced in half for small companies carried on
business in Canada. In comparison, in the Unites States a small
business will generally pay corporate tax at the rate of
approximately 40% and in France at the rate of approximately
Interested employers: Kindly contact us
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The content of this article reflects the personal insight of
Attorney Colin Singer and needs no disclaimer
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