Canadian corporate tax is not a single number. Every corporation pays a federal rate plus a provincial rate, and the province you operate in changes the total. For foreign founders the surprise is usually that the widely quoted "low" small-business rate rarely applies to them.
1. Federal plus provincial
A Canadian corporation pays federal corporate tax on its taxable income and a separate provincial rate on income earned in that province. Your combined rate is therefore the federal general rate plus the relevant provincial general rate. Where you carry on business in more than one province, income is allocated between them.
2. The small-business rate and why it often does not apply
Canada offers a reduced rate through the small-business deduction, but it is generally available only to a Canadian-controlled private corporation (CCPC). A company controlled by non-residents is usually not a CCPC, so it does not qualify. Model the general combined rate rather than the headline small-business figure.
3. Estimating your rate
Pick the province where you will actually operate, add the federal general rate to that province's general rate, and treat the result as your baseline. Provinces such as British Columbia, Ontario and Alberta differ, so the choice of province has a real cash impact over time.
Discuss your Canadian tax position with StartEase.
4. Filing and payment
A corporation files a T2 return, generally within six months of its fiscal year-end, and may need to pay tax in instalments. GST/HST is separate from corporate tax and has its own registration and filing. Agree who prepares and reviews each before your first year-end.
Official references
Important: This is general educational information, not legal, tax, accounting or exchange-control advice. Rules, rates and thresholds change and depend on your circumstances — confirm the current position with a qualified professional before acting.
Frequently asked questions
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