More Reasons for BC Businesses to Incorporate

Small business corporate tax rates in BC heading downwards

Several changes to tax legislation announced in the 2015 Canadian federal budget were recently granted Royal Assent. A measure that is highly relevant for small businesses in BC going forward is the gradual decrease in the combined federal and provincial corporate tax rates over the next 4 years, which are as follows:

  • 13.5 % – present rate
  • 13.0 % – effective January 1, 2016
  • 12.5 % – effective January 1, 2017
  • 12.0 % – effective January 1, 2018
  • 11.5 % – effective January 1, 2019

The Tax Changes and What Does It Mean to Your Business

Basically, on $100,000 of corporate net profits, the current tax bill at the current combined rate (2015) is $13,500. By 2019, the same tax bill will be $11,500 – a 15% discount. This is a huge discount on one of the biggest expenses that a business faces – taxes.

By contrast, the highest combined personal tax rate in BC is 45.8% on any employment and interest income above $151,051. In addition to that, the combined employer/employee CPP premium paid by the self-employed either as a proprietor or as an owner/manager of his own corporation has increased to $4,960 for 2015.

Bottom Line

The bottom line is that a successful proprietor who has been debating the cost/benefit of incorporating can now consider the corporate tax rate that is set to decrease over the next 4 years.

Vancouver Chartered Accountants, Mew and Company

We’re Mew and Company, your Vancouver Chartered Accountants, and we’re here to help.