Dual tax rates
Generally, provinces and territories have two rates of income tax: the lower rate and the higher rate.
The lower rate applies to the income eligible for the federal small business deduction. One component of the small business deduction is the business limit. Some provinces or territories choose to use the federal business limit. Others establish their own business limit.
The higher rate applies to all other income. See example 1.
When you allocate taxable income to more than one province or territory, you also have to allocate proportionally any income eligible for the federal small business deduction. See example 2.
For a table showing the income tax rates and business limits as of January 1, 2021, for the provinces and territories that have corporation tax collection agreements with the federal government, see Corporation tax rates.
For detailed information on the income eligible for each rate, and the rates that apply to each province and territory, see the following pages:
Reporting the tax
Enter the gross amount of each provincial or territorial tax payable on the appropriate lines of part 2 of Schedule 5, Tax Calculation Supplementary – Corporations.
Forms and publications
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