CCPCs Canadian-controlled private corporations are entitled to claim a small business deduction on active business income earned in Canada.

As professional Tax Accountants in Toronto downtown, we specialize in dealing with small businesses.

For the past ten years we have helped a lot of clients with their accounting, bookkeeping and corporate tax filing in Toronto. As professional Tax Accountants in Toronto downtown, we are specialized tax accountants for independent contractors servicing clients in Toronto, Mississauga and Oakville

 

What is an active business?

Active business includes a business, as well as an adventure in the nature of trade, it is essentially what it sounds like. Active income is typically anything other than investment income, rental income, leasing income, income from a specified investment business or a personal services business.

 

So Active business Income does not include:

1- A business that derives its income from property (including rent, interest, dividends, or royalties) and has less than six full-time employees (i.e., a “specified investment business”)

2- A business that provides personal services through a corporation, has fewer than six full-time employees and where, were it not for the presence of the corporation, the individuals providing the services would be considered employees or officers of the entity using those services (a “personal services business”).

The small business deduction currently provides a 9 % federal tax rate. The small business rate is available on active business income up to the amount of the Business Limit.  The current federal business limit equals to $500,000

 

Federal rates:

The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.

After the general tax reduction, the net tax rate is 15%.

For CCPCs Canadian-controlled private corporations claiming the small business deduction, the net tax rate is:

9% effective January 1, 2019
10% effective January 1, 2018
10.5% before 2018

 

Provincial Taxes:

In Ontario, corporations carrying on business through a permanent establishment in Ontario are subject to both federal and Ontario corporate income taxes. The tax rates apply to taxable income allocated to Ontario.

The Ontario General corporate income tax rate is currently 11.5%.

The Ontario small business deduction (SBD) reduces the corporate income tax rate on the first $500,000 of active business income of Canadian controlled private corporations (CCPCs). Effective January 1, 2018, the lower rate of Ontario corporate income tax is 3.5 per cent.

The table below shows the general and small business corporate income tax rates federally and for the province of Ontario.  Rates differ from province to province. The small business rates are the applicable rates after deducting the small business deduction (SBD).

General Rate

 Small Business General Rate

Federal

 15% 9%

$500,000
Ontario 11.5% 3.5%

$500,000

 

While the federal government announced in 2018 that it is phasing out the $500,000 small business limit for corporations that earn between $50,000 and $150,000 of passive investment income in a taxation year, Ontario is not paralleling this phase out.

Ontario does parallel the federal SBD phase out where a CCPC’s (and associated groups of CCPCs) taxable capital is between $10 million and $15 million. CCPCs (and associated groups of CCPCs) with taxable capital of $15 million or more are no longer eligible for the lower rate of corporate income tax on the first $500,000 of active business income.

As professional Tax Accountants in Toronto downtown, we work with you to optimize your tax position regardless of the size of your business, Whether you are just starting your corporation, thinking of expanding, or already been operating for years, we Give you customized tax plan to help you save taxes.

Our team of experienced accountants downtown Toronto and Mississauga have a wide range of experience working with businesses of all sizes.

What we can do for you:

  • T2 Corporate Tax Return
  • T4 Slip
  • Incorporation
  • Bookkeeping
  • HST Return
  • T5 Slip
  • T3 Family Trust Return
  • Articles of Incorporation
  • Consultations
  • GST 74
  • CRA Correspondance
  • GST 20
  • T1 Personal Tax Return
  • Payroll

If you have any questions regarding your particular situation, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com

We work with our clients to create effective tax planning strategy that is unique to your business and your particular tax situation. As professional Tax Accountants in Toronto downtown, we are specialized tax accountants for independent contractors servicing clients in Toronto, Mississauga and Oakville.