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.
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.