Small business tax rate in BC for 2026: 11% on the first $500,000

A Canadian-controlled private corporation in BC pays a combined 11% on its first $500,000 of active business income: 9% federal after the small business deduction plus 2% BC. Income above $500,000 is taxed at the general combined rate of 27% (15% federal plus 12% BC). The $500,000 limit is shared by associated corporations and shrinks when the corporation group earns more than $50,000 of passive investment income.

Updated October 28, 2026. Rates from the CRA corporation tax rates page (modified October 21, 2026) and the BC government corporate tax rates page, linked below.

The rates at a glance

  • Federal small business rate: 9% (after the small business deduction).
  • BC small business rate: 2%, in effect since April 1, 2017.
  • Combined on the first $500,000: 11%.
  • Federal general rate: 15%. BC general rate: 12%. Combined above $500,000: 27%.
  • Business limit: $500,000 federally and in BC.

Worked examples (estimates)

  • Kelowna electrical contractor, $180,000 of taxable active business income: 11% of $180,000 = $19,800 corporate tax.
  • Growing GC, $650,000: $500,000 at 11% = $55,000, plus $150,000 at 27% = $40,500, total $95,500.

The low rate is a deferral, not the final bill. When the money comes out as dividends, personal tax is paid, and the system is designed so the total ends up close to what you would have paid earning it personally. The saving comes from leaving profit in the company to reinvest or pay down debt.

What shrinks the $500,000 limit

  • Associated corporations (for example, two companies controlled by the same owner) share one $500,000 limit.
  • Passive income: once the group's adjusted aggregate investment income passes $50,000, the federal limit drops $5 for every $1 over, and is gone at $150,000.
  • Large corporations: taxable capital over $10 million in the group also reduces it.
  • Short years: the limit is prorated for a tax year under 365 days.
  • Personal services businesses (an incorporated employee) do not get the small business rate.

FAQ

Is the 11% on revenue?
No. It applies to taxable income, after expenses, salaries paid and capital cost allowance.

Do I get the small business rate as a sole proprietor?
No. Sole proprietors pay personal tax rates on business profit. The 11% rate only applies inside a corporation.

When is the corporate tax due?
Generally three months after year end for a CCPC claiming the small business deduction, with the T2 return due six months after year end. Instalments may also apply.

Should I incorporate to get 11%?
Only if you can leave profit in the company. See our page on whether a BC contractor should incorporate.

Every corporation is different, so talk to your accountant about your own numbers.

Sources: CRA: corporation tax rates (modified October 21, 2026); BC government: corporate income tax rates.

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