What taxes do corporations pay in Canada?

Corporate income tax: federal plus provincial

Every incorporated business pays income tax on its profits at two levels. The federal general rate is 15%, reduced to 9% on the first $500,000 of active business income for a Canadian-controlled private corporation claiming the small business deduction.

Each province adds its own rate on top, from as low as 0% on small business income in Manitoba to double digits at the general rate. Combined small business rates run roughly 9% to 12.2% depending on province, and combined general rates run about 23% to 31%. This is reported annually on the T2 return.

GST/HST: collected, not owned

Once registered, a corporation charges GST/HST on taxable sales, claims input tax credits on the tax it pays on purchases, and remits the difference. This money is collected on the government's behalf and held in trust, which is why the CRA treats failure to remit it far more seriously than late income tax.

The rate depends on the customer's province, from 5% GST in Alberta to 15% HST in several Atlantic provinces. Provinces with separate provincial sales tax add another return and another authority.

Payroll source deductions

If the corporation has employees, including an owner paid by salary, it must withhold income tax, CPP and EI from wages and remit them alongside the employer's share of CPP and EI. Remittances are generally due by the 15th of the following month, with accelerated schedules for larger payrolls.

Like GST/HST, source deductions are trust funds. Directors can be held personally liable for amounts the corporation fails to remit, and incorporation offers no protection against this specific liability.

Provincial payroll and capital taxes

Several provinces levy an employer payroll tax above an exemption threshold: Ontario's Employer Health Tax, BC's Employer Health Tax, Manitoba's Health and Post-Secondary Education Tax Levy, and Quebec's Health Services Fund. These apply to total payroll, not to profit.

Certain financial institutions and large corporations also pay provincial capital taxes. Most small businesses will not, but it is worth confirming if you operate in a regulated sector.

What is not a separate tax but feels like one

Instalments are not an additional tax, they are prepayment of the income tax you already owe. Corporations that owed more than $3,000 in either of the two prior years must generally pay tax in monthly or quarterly instalments rather than in one lump at year-end. Missing instalments triggers interest, so they function like a deadline even though the money was always owed.