Canada small business tax rate

In Canada, the small business tax rate is the tax rate paid by a small business at the federal level. There are a plethora of additional taxes that a small business owner in Canada has to pay. As of 2019, the small business tax rate is 9%.[1] The general corporate tax rate is 28%.[2] If you plan to do business in Canada, please be advised that there is an additional corporate tax imposed by the provinces, therefore search for the province tax rate that adds up to the bill. In addition to provincial taxes, there are business taxes related to healthcare that is public in Canada. Moreover, the Canadian Government created an ingenious clawback mechanism that penalizes small businesses when they make passive investments. The legislation is designed to prevent the accumulation of any significant capital in a Small Business, therefore, the owner must take the money out of the corporation and be taxed at a huge additional marginal tax for himself (to have an idea the marginal tax rate in Ontario can go above 50%). As it stands as an owner of a Small Business in Canada, tax yourself first under the small business tax both federal and provincial, calculate your clawback on tax rate depending on your passive investments, add additional corporate taxes related to healthcare, finally, tax again at a marginal 50% personal tax rate. The owner of the small business remains with a marginal value of 30 cents for every dollar earned while 70 cents is attributed to a plethora of ingeniously designed Canadian taxes. This Wikipedia article may be misleading if it creates the false idea that you can invest in small businesses in Canada at a competitive low tax rate which is not true, therefore, some of the other mandatory taxes were briefly mentioned above. The tax rates below are the Federal tax rates for the Profit of Small Businesses in Canada and represent only a fraction of the total tax paid by the small businesses in Canada and are almost negligible compared with the total tax the owners of the Small Business end up paying to get access to their money.

Definitions

A small business in Canada is defined as a Canadian-based corporation with fewer than 100 employees and under $500,000 in annual income.[3]

Small businesses are allowed to claim a "small business deduction" under the Income Tax Act;[4] the deduction enumerated in that Act is deducted from the 28% general tax rate, and means the net small business tax rate is as follows:

Tax rate by year
YearTax Rate (%)
200612
200712
200811
200911
201011
201111
201211
201311
201411
201511
201610.5
201710.5
201810
20199

References
  1. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html
  2. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html
  3. http://www.fin.gc.ca/taxexp-depfisc/2013/taxexp1303-eng.asp
  4. http://laws-lois.justice.gc.ca/eng/acts/i-3.3/FullText.html
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