Your corporate taxes are based on your business’ net income, not the actual sales. The federal corporate tax rate, for small businesses is 11%, for up to $500 000 in net income. If your company’s income is above $500,000 then the general rate is 16.5%.
The table below specifies the tax rate that applies for each province, as it varies from one to the other:
|
Corporation tax rates (2014) |
|||
|
General |
Small Business |
Business Threshold |
|
| Federal | 15% | 11% | $500,000 |
| Alberta | 10% | 3% | $500,000 |
| BC | 11% | 2.5% | $500,000 |
| Manitoba | 12% | 0% | $425,000 |
| New Brunswick | 12% | 4.5% | $500,000 |
| Newfoundland & Labrador | 14% | 4% / 3% | $500,000 |
| Nova Scotia | 16% | 3% | $350,000 |
| Northwest Territories | 11.5% | 4% | $500,000 |
| Nunavut | 12% | 4% | $500,000 |
| Ontario | 11.5% | 4.5% | $500,000 |
| Prince Edward Island | 16% | 4.5% | $500,000 |
| Québec | 11.9% | 8% | $500,000 |
| Saskatchewan | 12% | 2% | $500,000 |
| Yukon | 15% | 4%/ 3% | $400,000 |
If you’re paying/ earning a salary or receiving/ distributing dividends from the corporation, you are required to pay personal income taxes on all the funds withdrawn. Salaries are an expense to your business, thus could be deducted for your corporate taxes. Dividends are paid out of your company’s net earnings, AFTER taxes. On a personal level, salary and dividends are taxed at different rates. A wide variety of accounting softwares are readily available via Canadian accounting software deals to help you manage everything efficiently.
