What Are Provincial and Territorial Corporate Tax Rates?

by Craig Anthony

1 min read

Provincial or territorial corporate tax rates refer to tax rates levied on corporate profits by provincial or territorial governments. These taxes are applied on top of federal corporate taxes. For example, if the federal government taxes your corporation at 15% and your province taxes your corporation at 14%, your business has an effective income tax rate of 29%. To illustrate these tax rates in simple terms, if your corporation has $1 million of profits, it pays the federal government $150,000 in tax and the province $140,000. Aside from Quebec and Alberta, every province and territory has both a lower corporate tax rate and a higher corporate tax rate. For instance as of 2017, Nova Scotia’s lower rate is 3% and its higher rate is 16%. Qualifying for the lower rate can substantially help your business save money. For example, if your corporation has $100,000 in profits, it owes $16,000 if it’s subjected to Nova Scotia’s higher rate. If the same profits are taxed at the lower rate, that reduces the provincial tax bill to only $3,000.To receive the lower provincial or territorial rate, businesses must be eligible for the federal small business deduction. To qualify for the small business deduction, the business must be a Canadian-controlled private corporation, and its income must be under the business limit. As of 2017, the federal business limit is $500,000. Most provinces or territories use the same business limit as the federal government, but in some cases, provinces and territories set their own limits. If you own a corporation, it’s important to understand federal taxes as well as provincial and territorial taxes. In addition to these taxes, your province or territory may also charge unique sales taxes, and you may also have to deduct provincial or territorial income tax from your employees’ wages. The right accounting software designed for businesses in your area can help you pull all these taxation elements together.

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