How to Qualify for Small Business Tax Rate in Canada

The business world offers many opportunities. All that is needed are skills, readiness, and courage. The rest will come along with the idea and invested effort and energy. If you start a small business, you may face specific challenges in the beginning, but believe me, it will pass. The first years are the most important when companies are in their infancy and start growing. Fortunately, they can ask for a lot of advice from larger businesses, and they can also ask for advice from consultants, but the state is often there to help them, and excellent proof of that comes from Canada.

Canada is one of the countries that helps small businesses the most. One example of help businesses receive from the Canadian government is the adjustment of the tax they pay in the beginning. It’s a great help that, over the years, has helped many Canadian companies pay the small business tax rate and invest the rest of the money in business and development. Wondering how you can qualify for the small tax business rate? Confused about whether you are eligible to pay the small tax business rate? We bring you much more information in this article, and it remains for you to look at the helpful information we get you.

What type of tax is it, and why is it lower for small businesses?


If you are in the business world and have been part of a small business (yours or as part of another small business), you can imagine how difficult the beginnings are. The state government in Canada is aware of this and has come up with a solution called the small business tax rate. It is a percentage that the company has to pay as tax from its profit. This type of small business tax rate is in compliance with the corporate tax rate rules that have been adopted by the state. This percentage is lower because small companies, in the beginning, can face small profits, problems in operation, lack of qualified staff, and many other circumstances that are not easy.

Which businesses can pay the small business tax rate?

There is a dilemma among businesses about whether they can get help from the state so they can function more easily, especially if they are small businesses. But, of course, you can get it! Any relatively young and small company can get a small business tax rate, but first, you need to meet the conditions:

  • Passive investments that bring in earnings of less than 50,000 Canadian dollars per year.
  • Active investment that brings in earnings of less than 500,000 Canadian dollars per year.
  • The company has capital for taxation with a value of less than 1,000,000 Canadian dollars.

If you meet all these conditions, in that case, you are qualified to receive this symbolic support from the state, that is, the possibility to pay a small business tax rate.

All it takes is making sure you’re eligible to pay the small business tax rate and making it easier for your business

To ensure that your company can pay a lower tax rate, you will need to ensure this is the case. And what to do? Contact the institutions. You can send an email or a letter or go to the offices of the tax authorities, where they will tell you if you are eligible for this rate and what you need to do. That way, you will know exactly whether you can function more easily as a company but also give yourself a chance for growth and development.

Be careful with provincial and territorial taxes in Canada!


If you are part of a foreign company operating in Canada or are unfamiliar with the details of taxes in Canada, we will help you with that. As we all know, Canada is divided into territories and regions. Each of them has its own laws, especially in the area of taxation. Thus, each of the provinces and territories has its own additional tax that is payable if you are a legal entity. Therefore, inform yourself about this part on time, that is, see what is the percentage that small businesses pay in the province or territory in which it is located.

What if you are not eligible for a small business tax rate?

You must have wondered what if you are on the other side and are not eligible for this tax. We have an answer to this question too! If you are not eligible for a small business tax rate, then you must pay the general business tax set by Canada. This rate is 15%. In addition, you are required to pay 15% of your total profits if they are over C$500,000 annually, and your taxable capital exceeds C$1,000,000. In that case, you will need to join a large number of other businesses that regularly pay this rate of 15% per annum.

For any doubts about taxes, it is great to be in coordination with your accountant or have your own advisor


If you are not sure that you have done everything correctly and that you have paid the proper tax, then it might be best if you ask for help. Who can you ask for help? Of course, first of all, you can ask for help from your accountant, but you can also request a counselor or another professional who could help you. Taxes are required to be paid on time in order not to violate the strict rules that Canada has, so do not leave this obligation unfinished. Instead, complete it together with a professional who would know how to help you.


Canada offers many opportunities for businesses, especially those that are considered small companies. Therefore, if you are a small company, you need to know the opportunity offered by the state, and all that is required is to fulfill the conditions and become a small business tax rate payer. You just need to check in time if you meet the conditions and take advantage of this benefit that Canada offers for your business.