One of the most common concerns among immigrants planning to do business in Canada is the Canada tax system. Foreign nationals can attain permanent residence by purchasing an existing company or starting their venture in Canada. Understanding the country’s tax system is essential for planning and running a successful business for these immigrants.
Businesses have to pay the corporation tax according to the federal government’s rates and the province’s rates or territory where the company is located. Before applying for a Canada Business Visa, it is essential to calculate the tax you are likely to pay – and check if the business plan is sustainable.
Federal Corporation Tax Rates
- The primary federal corporate tax rate is 38% of your taxable income. If you get a federal tax abatement of 10% on the taxable annual income earned within Canada, this rate will be 28%
- Additionally, you can claim a 13% general tax reduction on the qualifying income. After availing of this reduction, the net tax rate will be 15%.
- On the other hand, the net tax rate for Canadian-controlled private corporations that claim a small business deduction would be 9%, 10%, or 10.5%, depending on the date of effect.
Provincial/Territorial Corporation Tax Rates
Suppose you are seeking to invest in a business or apply for a Startup Visa Canada. In that case, you must also consider the provincial/territorial tax rates, which vary across the different regions. Provinces and territories generally have two income tax rates:
- The lower rate applies to the income that is eligible for claiming a federal small business deduction. One component of this deduction is the business limit. Some provinces/territories use the federal business limit, while others set their limit.
- For all other income, the higher rate is applicable.
The Quebec and Alberta provinces do not have a corporate tax collection agreement with the Canada Revenue Agency. The rates in effect for all other provinces and territories as of 1st January 2020 are listed below. The provincial/territorial governments can update these rates.
- Ontario – Lower rate 3.2%; Higher rate 15%
- British Columbia – Lower rate 2%; Higher rate 12%
- Saskatchewan – Lower rate 2%; Higher rate 12%
- Manitoba – Lower rate nil; Higher rate 12%
- Nova Scotia – Lower rate 3%; Higher rate 16%
- Newfoundland and Labrador – Lower rate 3%; Higher rate 15%
- New Brunswick – Lower rate 2.5%; Higher rate 14%
- Prince Edward Island – Lower rate 3%; Higher rate 16%
- Northwest Territories – Lower rate 4%; Higher rate 11.5%
- Nunavut – Lower rate 3%; Higher rate 12%
- Yukon – Lower rate 2%; Higher rate 12%
To find out more about the Canada tax system for individuals and businesses, identify the ideal location and industry for business investment or establishment, plan your immigration journey, and consult our seasoned consultants by contacting 8595338595 [email protected].