Federal Corporate Tax Rates

Federal corporate tax in 2000 for a small business was 13.12% of your profits up to $200,000.  Since January 1, 2001 there is a new tier in this system - income between $200,000 and $300,000 is taxed at 21% (it was at 28%).  The February 18, 2003 federal budget increased the threshold for small business income to $300,000 at the 13.12% rate by 2006 (up to $225,000 in 2003, $250,000 in 2004, $275,000 in 2005).  The 2006 budget further increased the threshold to $400,000 effective January 1, 2007. The corporate surtax will be eliminated in 2008, reducing the federal corporate tax rate for small businesses from 13.12% to 12%. The corporate tax rate will also be reduced to 11.5% in 2008, and on January 1, 2009, to 11%.

Tax reductions for public corporations have also been introduced - from 28% in 2000 to 27% on January 1, 2001, to 21% on January 1, 2004, to 20.5% on January 1, 2008, to 20% on January 1, 2009, to 19% on January 1, 2010.

However, in the February 2000 budget the federal government stated that they felt certain industries have "special tax preferences" - manufacturing & processing and the resource sector, so that corporations in these sectors would not be given the reduced rates, to their considerable distress! Their argument was that the resource industry gets a deduction  for the resource allowance - conveniently overlooking the fact that the resource allowance was brought in to compensate for the fact that resource companies cannot deduct crown royalties at all.  There was much lobbying going on by organizations such as SEPAC on behalf of the resource industry.  The February 18, 2003 budget does propose to reduce the rate for resource corporations from 28% to 21% over 5 years.  A technical paper was to be released shortly after the budget, so that there is now a tax deduction for crown royalties, and the gradual elimination of the resource allowance.  Transitional arrangements are to be proposed regarding the Alberta Royalty Tax Credit.

Alberta Corporate Tax Rates

Since April 1, 2003, the first $400,000 of small business profits is taxed at 3%.  For public corporations, their tax rate was reduced to 8% in 2004. The Alberta government is gradually increasing this to $500,000 by 2009 ($430,000 in 2007, $460,000 in 2008).

British Columbia Corporate Tax Rates

B.C. corporate tax starting on January 1, 2001 for a small business was 4.5% of your profits up to $200,000.  This rate dropped from 9% in 1998.  B.C. offered a two year tax holiday for new businesses incorporated between April 30, 1996 and March 31, 2001.  One of the conditions to qualify was that at least 25% of the wages paid in the year the deduction was claimed must be to employees who were resident in B.C.  For public corporations, their tax rate was reduced from 16.5% from 1993 to 2001 to 13.5% on January 1, 2002.

Ontario Corporate Tax Rates

It was announced in November 2005 that Ontario corporate tax will be administered by the federal government. Ontario corporate tax in 2005 for a small business is 4% of profits up to $400,000.  A difference between Ontario and the federal and Alberta tax structures, is that the Ontario government in effect clawed back the low rate of tax, once your profits were over $400,000 in 2005.  Once your profits reach $1,000,000 in 2005, you pay the top rate of Ontario corporate tax on all your corporate income, including the first $400,000.  For public corporations, their Ontario tax rate is being reduced from a 15.5% rate in 2000 to 8% by 2005.

Information on this website is not intended to be a definitive analysis of tax laws or cases and should not be used in such a manner.  The information provided on this site should not be relied upon to replace professional advice specific to your situation.

Corporate Tax Cuts