BC Corporate Tax Rates
BC imposes a 2.0% small business rate on the first $500,000 of active business income for CCPCs and a 12% general corporate rate; combined with federal rates, the effective BC rates for 2026 are 11% (small business) and 27% (general).
Definition
BC corporate income tax is levied under the Income Tax Act (BC) and administered by the Canada Revenue Agency alongside the federal T2 return. A BC corporation pays two tax rates: a reduced small business rate on active business income up to the federal small business deduction limit, and a general rate on income above that limit and on most investment and passive income. The provincial rate combines with the federal corporate rate to give a single blended rate reflected on Schedule 5 of the T2.
Key rules
2026 BC corporate tax rates (subject to confirmation in Budget 2026):
- The 2.0% small business rate applies only to Canadian-Controlled Private Corporations (CCPCs) that are eligible for the federal Small Business Deduction under ITA s. 125. Non-CCPCs (public companies, foreign-controlled corporations) pay the 12% general rate on all income.
- The $500,000 business limit is shared across associated corporations. Two associated BC corporations must allocate the limit between them on Schedule 23.
- The business limit is reduced when taxable capital employed in Canada (prior year) exceeds $10 million and eliminated at $50 million, and when adjusted aggregate investment income exceeds $50,000, reducing to zero at $150,000.
- BC does not provide a separate M&P rate; manufacturing income is taxed at the 12% general rate.
- BC does not have a provincial minimum tax on corporations.
Integration with personal tax: income taxed at 11% in the corporation and distributed as a non-eligible dividend is roughly integrated with salary taxed at typical BC marginal rates. Income taxed at 27% generates General Rate Income Pool (GRIP) and flows out as eligible dividends with higher gross-up and credit.
Example
A BC CCPC consulting corporation has 2026 fiscal year active business income of $620,000 and $5,000 of interest on its operating cash balance. Assume no associated corporations and taxable capital below $10 million.
- 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.
- Interest income (aggregate investment income) of $5,000: taxed at 50.67% = $2,533 (a portion refundable through RDTOH when dividends are paid).
Total federal plus BC tax before instalments: approximately $89,933. The corporation allocates $500,000 to the SBD line on Schedule 1 and the remaining $120,000 to the general rate line. BC's share is reported on Schedule 5.
Common mistakes
- Applying the 11% combined rate to passive investment income. Investment income is taxed at the high aggregate investment income rate and does not qualify for the SBD.
- 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.
- Relying on prior-year BC rates. The Ministry confirms rates annually in the BC Budget; always check the current year.
Related concepts
Authority
- Income Tax Act (BC), RSBC 1996, c. 215, s. 14
- Income Tax Act (Canada), s. 125 (Small Business Deduction)
- BC Ministry of Finance (Corporate Income Tax)
See also
Related entries
BC Holding Company
A BC holding company is a corporation used primarily to hold investments, shares of active operating companies, real property, or family trust interests; common uses include creditor protection, income splitting, capital gains planning, and BC-specific real estate structuring.
Small Business Deduction
The Small Business Deduction reduces federal corporate tax on the first $500,000 of active business income earned by a CCPC, dropping the federal rate from 15% to 9%.
CCPC Status
A Canadian-Controlled Private Corporation is a private corporation resident in Canada that is not controlled by non-residents or public corporations, and CCPC status unlocks the small business deduction, refundable tax mechanics, and the capital gains exemption.
T2 Corporate Return Overview
Every Canadian resident corporation must file a T2 return within six months of year-end and pay any balance owing within two or three months.
This entry is for general reference. It does not constitute professional tax advice. Consult a qualified Canadian accountant for your specific situation.