BC Corporate Tax Rates

Definition

BC corporate income tax applies to taxable income allocated to a permanent establishment in BC. The CRA administers it alongside federal tax on the T2 return. The provincial calculation uses a small business rate on qualifying income and a higher rate on the remainder. Schedule 5 reports the provincial tax, not a single combined federal/provincial rate.

Key rules

The CRA confirms BC's 2% and 12% rates. For ordinary income with no special deductions or credits:

• For an ordinary CCPC, eligibility depends on qualifying active business income, taxable income, and the available business limit. Personal services business income and specified investment business income do not automatically qualify. Credit unions have separate provincial provisions.
• The $500,000 business limit is shared across associated corporations. Two associated BC corporations must allocate the limit between them on Schedule 23.
• BC's business limit follows the federal limit. For current tax years, the associated group's prior-year taxable capital reduces it between $10 million and $50 million. Adjusted aggregate investment income above $50,000 also reduces it, reaching zero at $150,000; apply the greater reduction rather than adding both reductions.
• BC has no separate manufacturing-and-processing income tax rate. Eligible small business manufacturing income can still receive the 2% rate. Special federal zero-emission manufacturing rates and tax credits need their own calculation.
• The 50 2/3% illustration is for passive interest, not every investment receipt. Taxable capital gains, Canadian dividends, and foreign income can involve different inclusions, credits, or refundable-tax rules.

Example

A BC CCPC has $620,000 of qualifying active business income and $5,000 of passive interest from surplus investments in a full 2026 tax year. All income is allocated to BC. Assume the full $500,000 business limit is available, with no associated corporations, no loss deductions or other credits, prior-year taxable capital below $10 million, and prior-year adjusted aggregate investment income below $50,000. The interest is not incidental to the active business.

• Active business income up to $500,000: taxed at 11% combined = $55,000.
• Active business income from $500,000 to $620,000 ($120,000): taxed at 27% combined = $32,400.
• Passive interest of $5,000: taxed at 50 2/3% = $2,533.33 before any dividend refund.

Total tax before dividend refunds, other credits, and instalments is $89,933.33: federal $64,933.33 plus BC $25,000. The SBD is calculated on the T2 with the supporting schedules; Schedule 1 reconciles accounting income to income for tax purposes. Schedule 427 helps calculate BC tax, which is reported on Schedule 5 line 240.

Common mistakes

• Applying 11% to passive investment income, or automatically calling all operating-account interest passive without examining its connection to the active business.
• Failing to grind the $500,000 limit when aggregate investment income exceeds $50,000, resulting in an over-claim of the small business deduction.
• Forgetting to share the business limit among associated corporations. Both corporations cannot claim the full $500,000.
• Treating the general rate as universal: personal services businesses, investment income, and special federal manufacturing provisions can change the federal component.

Related concepts

• Small Business Deduction
• CCPC Status
• Associated Corporations Rule
• Schedule 5. Provincial Tax Allocation
• BC Holding Company