Understanding corporate taxes in Canada is more than just checking your tax rate. Whether you’re a startup founder, CFO of a cross-border business, or an accountant managing a growing entity, navigating Canadian tax laws requires attention to detail, from knowing your federal and provincial corporate tax obligations to filing the correct corporation income tax return and differentiating between resident and non-resident corporations.
What Is the Canadian Corporate Tax Rate?
As of 2025, Canada’s corporate tax rate is structured in two layers:
| Level | Tax Rate Type | Rate |
| Federal | General Corporate Rate | 15% |
| Federal | Small Business Rate (CCPCs) | 9% on first $500,000 of active income |
| Provincial/Territorial | Varies by region | 0% to 16% depending on business type and location |
Total Combined Rates:
The combined federal and provincial rates range from as low as 11% (for CCPCs in Manitoba, Yukon, or Saskatchewan) to over 30% for larger corporations in provinces with higher rates.
This makes Canada a competitive jurisdiction, especially for private companies that qualify as Canadian-Controlled Private Corporations (CCPCs).
Resident vs. Non-Resident Corporations: Who Pays What?
Understanding your residency status for tax purposes is critical to determining how Canadian corporate tax rules apply to your business.
Resident Corporations
A resident corporation is-
- Incorporated in Canada, or
- Managed and controlled in Canada (even if incorporated elsewhere)
Tax obligations-
- Taxed on worldwide income
- Must file a T2 Corporation Income Tax Return
- May qualify for benefits such as the Small Business Deduction (SBD) if they are a CCPC
Non-Resident Corporations
A non-resident corporation is:
- Incorporated and managed outside of Canada, but
- Has a permanent establishment (PE) or earns income in Canada
Tax obligations:
- Taxed only on Canadian-source income
- Subject to Part I tax on business income and Part XIII withholding tax on passive income (e.g., dividends, rent, royalties)
- Required to file a non-resident T2 return, and possibly NR4 slips for withholding tax reporting
Common scenarios:
- US or international SaaS firms with Canadian clients
- E-commerce companies with Canadian warehousing
- Multinationals with Canadian subsidiaries or branch offices
Non-residents often have withholding tax obligations, and must comply with treaty relief provisions if they are based in a country with a tax treaty with Canada.
Filing the Corporation Income Tax Return (T2)
What Is a T2 Return?
All resident and certain non-resident corporations must file the T2 Corporation Income Tax Return, even if they:
- Owe no taxes
- Operate at a loss
- Are inactive
Filing Deadlines
| Return Type | Filing Deadline | Payment Deadline |
| T2 Return | 6 months after fiscal year-end | 2 or 3 months after year-end, depending on size and type |
Example: If your fiscal year ends December 31, your T2 is due by June 30, and taxes may be due by March 31 (or April 30 if you’re a CCPC).
What to Include in the T2
- Financial statements (income, balance sheet)
- Schedules for capital cost allowance (CCA), foreign affiliates, related parties
- Sales tax and payroll summaries (if applicable)
- Any elections (e.g., functional currency, small business deduction claims)
Filing Method
- Most businesses file T2 returns electronically using CRA-certified software
- Large corporations are required to file online
Federal and Provincial Corporate Tax Rates (Detailed)
Federal Rates
- General Corporate Rate: 15%
- Small Business Rate (CCPCs): 9% on first $500,000 of active business income
Investment income and personal services business income are excluded from the small business rate.
Provincial/Territorial Tax Rates (2025)
| Province/Territory | General Rate | Small Business Rate |
| Alberta | 8% | 2% |
| British Columbia | 12% | 2% |
| Ontario | 11.50% | 3.20% |
| Quebec | 11.50% | 3.20% |
| Manitoba | 12% | 0% |
| Yukon | 12% | 0% |
| PEI | 16% | 1% |
The provincial portion is added to the federal rate, and rates vary depending on whether you qualify for the SBD.
Small Business Deduction (SBD)
The SBD is one of Canada’s most significant tax advantages for private companies.
Eligibility
- Must be a CCPC
- Have taxable capital under $15 million
- Earn active business income
Business Limit
- $500,000 per associated group
- Phased out between $10M–$15M in taxable capital
Planning Note
Multiple corporations under common control are associated for SBD purposes, structuring matters.
Other Corporate Taxes to Know in Canada
Beyond income tax, Canadian corporations are also responsible for:
1. Sales Taxes (GST/HST/PST/QST)
- GST: 5% federal tax (nationwide)
- HST: Combined GST + provincial tax (used in ON, NS, PEI, NB, NL)
- PST/QST: Separate in BC, SK, MB, QC
Registration: Required if revenues exceed $30,000 annually
Filing: Monthly, quarterly, or annually based on volume
2. Payroll and Employer Taxes
- CPP, EI, and income tax withholdings must be remitted for employees
- Provincial health taxes may apply (e.g., Ontario EHT, Quebec HSF)
3. Excise and Industry-Specific Taxes
- Alcohol, fuel, insurance, and air travel may be subject to excise duties.
Taxation of Income by Type
| Type of Income | Tax Rate or Rule | Eligible for SBD? |
| Active Business Income | 9% (CCPC) or 15%+ | Yes |
| Investment Income | ~38.67% (refundable in part) | No |
| Foreign Business Income | Eligible for foreign tax credit | Depends |
| Specified Investment Business | No access to SBD | No |
| Capital Gains | 50% taxable portion | No |
Compliance Obligations for Canadian Corporations
All corporations must:
- Maintain proper records for 6 years
- File accurate T2 returns
- Register and remit sales tax, payroll tax, and installments
- Disclose foreign affiliates and transfer pricing (Form T106, if applicable)
- File T1134 for foreign subsidiaries
CRA Audit Risks Increase If:
- Large intercompany payments are unsubstantiated
- Transfer pricing policies are undocumented
- Income attribution between provinces is inconsistent
Recent Updates for 2025
- BC small business tax rate cut to 2%
- Increased CRA scrutiny of non-resident filings and foreign affiliate disclosures
- Push for harmonization of digital services taxes (DST) may affect international SaaS providers
Tax Planning Strategies
- Incorporate in low-tax provinces for better rates
- Set up holding companies for dividends and asset protection
- Max out Capital Cost Allowance (CCA)
- Claim all eligible R&D and innovation credits
- Use income deferral and splitting strategies (with TOSI rules in mind)
Why Choose Commenda for Your Corporate Tax and Compliance Needs?
Navigating Canada’s corporate tax system is complex, especially if you’re scaling internationally, juggling multiple jurisdictions, or dealing with both federal and provincial obligations. Between T2 returns, GST/HST registration, payroll remittances, and staying on top of filing deadlines, managing corporate compliance can quickly overwhelm founders and finance teams.
That’s where Commenda comes in.
Commenda: Your Global Compliance Platform for Cross-Border Businesses
Whether you’re incorporating a Canadian subsidiary, managing sales tax across provinces, or preparing for a CRA audit, Commenda provides a single platform to help you:
- Incorporate in Canada and 12+ countries with expert legal support
- Manage federal and provincial corporate tax filings (T2 returns, SBD eligibility, and more)
- Register and file for GST/HST/QST/PST in every Canadian province or territory
- Track compliance deadlines automatically with an integrated filing calendar
- Handle payroll remittances and employer health taxes
- Store and access entity documents securely, including CRA notices and annual returns
- Coordinate with vetted tax advisors and legal experts in our services marketplace
- Expand globally with a compliance foundation built for scale
Built for Founders, CFOs, and Global Operators
Commenda isn’t just software. It’s a strategic advantage for startups, e-commerce brands, SaaS companies, and multinationals that need speed, clarity, and control across borders. From tax exposure analysis to automated filing support, Commenda is how modern businesses simplify compliance without sacrificing accuracy.
FAQs
1. What is the corporate tax rate in Canada in 2025?
The federal rate is 15% for general corporations and 9% for CCPCs on the first $500,000 of active income. Provincial rates range from 0% to 16%.
2. What is the T2 Corporation Income Tax Return?
The T2 is the official tax return all resident corporations — and certain non-residents — must file. It includes financial data, elections, and tax schedules.
3. Who is considered a resident corporation in Canada?
Corporations incorporated in or effectively managed from Canada. They’re taxed on global income.
4. What taxes do non-resident corporations pay in Canada?
Non-residents are taxed only on Canadian-source income, and may face withholding taxes on dividends, interest, and royalties.
5. Do I need to file a T2 if I had no income?
Yes. All corporations, including inactive ones, must file a T2 return annually, unless specifically exempted.
