Taxation of Companies in Canada: A Quick Overview
Canada offers a business-friendly tax regime, but understanding corporate taxation is essential for compliance and planning. Whether you’re a Canadian resident company or a non-resident setting up a business here, knowing how corporate income is taxed will help you make informed decisions.
1. Federal and Provincial Corporate Tax
Canadian companies are subject to both federal and provincial/territorial corporate income taxes. The federal tax is levied by the Canada Revenue Agency (CRA), while each province or territory applies its own corporate tax rates, which vary by jurisdiction.
Federal and Provincial Tax Rates (2025)
• Base Federal Rate: 38%
• Federal Abatement: 10%
• Net Federal Tax Rate: 28%
• General Rate Reduction: 13%
• Final Effective Federal Rate: 15%
Small Business Deduction (SBD):
For CCPCs (Canadian Controlled Private Corporations), the first CAD 500,000 of active business income may qualify for a lower federal rate of 9%, plus applicable provincial rates. To read more, click Taxation in Canada for Non Residents – KL Aggarwal
2. Provincial Tax Rates: Vary between 0% and 16%, depending on the province and whether the business qualifies as a small business. Each province and territory apply its own corporate income tax, which generally ranges from:
• 2% to 4% for small businesses
• 8% to 16% for general corporations
Example: Corporate Tax Calculation in Ontario (Fiscal Year 2025)
Let’s assume a Canadian company based in Ontario has a taxable income of CAD 53,342. Here’s how the corporate tax is calculated:
3. Key Tax Filing Requirements
• Corporation Income Tax Return(T2): All corporations must file a T2 return annually, even if there has been no business and hence no tax is payable.
• Filing Deadline: Six months after the end of the corporation’s fiscal year.
• Tax Payment Deadline: Two months (or three for CCPCs) after year-end
4. Other Taxes to Consider
• GST/HST: Goods and Services Tax / Harmonized Sales Tax must be collected and remitted if your taxable revenue exceeds CAD 30,000 annually.
• Withholding Taxes: On payments to non-residents (dividends, interest, royalties), typically 25%, subject to tax treaties.
Conclusion
Corporate taxation in Canada combines federal and provincial obligations. Staying compliant with filing deadlines, understanding tax rates, and taking advantage of available deductions can significantly impact your company’s financial health. Seeking professional guidance is recommended for accurate and timely compliance.
We at KLA offer comprehensive support in calculating taxable profits, determining applicable federal and provincial taxes, and filing the Corporate Tax Return (T2) with the Canada Revenue Agency (CRA). Our service charges start from CAD 250, and the final fee is determined based on the volume of financial data, nature of business transactions, and overall complexities involved.
With our in-depth understanding of Canadian corporate tax laws and filing obligations, we ensure accurate computation, timely filing, and complete compliance.
In case of inquiries, you may write us to mail@klaggarwal.com.