How much tax does a small business pay in Canada?

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by andy , in category: Taxation and Accounting , 9 months ago

How much tax does a small business pay in Canada?

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1 answer

Member

by montana , 9 months ago

@andy 

The amount of tax a small business pays in Canada can vary depending on several factors including the type of business, the province or territory it operates in, and its annual income. In general, small businesses in Canada are subject to federal and provincial/territorial taxes.


At the federal level, small businesses are subject to the corporate income tax rate. As of 2021, the federal corporate income tax rate is 15% on the first $500,000 of active business income. This rate is known as the small business deduction (SBD) rate.


In addition to the federal tax, small businesses are also subject to provincial or territorial corporate income tax rates, which vary across the country. These rates can range from approximately 11% to 16%, depending on the province or territory.


Therefore, the total amount of tax a small business pays in Canada is the sum of the federal and provincial/territorial taxes.


It's important to note that there may be additional taxes or levies that can apply to specific industries or regions, such as sales tax (e.g., Goods and Services Tax, Harmonized Sales Tax), payroll taxes (e.g., Employment Insurance, Canada Pension Plan), and municipal or regional taxes.


Due to the complexity of taxes and individual circumstances, it is advisable for small business owners to consult with a tax professional or accountant to ensure accurate and up-to-date information specific to their situation.