What is the Small Business Tax Rate in Canada in 2025?

Starting a business in Canada? Know your tax rates for 2025.

Q: What is the small business tax rate in Canada in 2025?

A: Canadian‑controlled private corporations pay 9 % federal tax on the first $500,000 of active business income. Provincial small‑business rates add 0–8 %, so combined rates usually fall between 12 % and 15 %.

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The small business deduction (SBD) lowers the corporate tax rate on the first $500,000 of active business income - this is known as the business limit. If your company earns passive income (like from investments) or is part of an associated group, your limit may be reduced. Each province or territory adds its own small business rate: Ontario: 3.2% (total ~12.2%) Alberta: 2% (total ~11%) Quebec: 3.2% (some rules apply) These rates apply only to active income, not investment income or capital gains, which are taxed differently.

Tip: If your corporation earns more than $500,000 or you’re unsure if you qualify, it’s smart to talk to a CPA (Chartered Professional Accountant) to avoid surprises.

A CPA knows all the tax laws and benefits, and it's important to consult a professional for your business tax needs.

Hire a Chartered Professional Accountant for your business tax needs.