Canadian corporate tax rates for 2024–2025 feature distinct categories for small business, active business, and investment income, each with its own tax considerations. Small businesses can benefit from reduced rates on up to $500,000 of active income, helping entrepreneurs reinvest in their companies and foster growth. In contrast, income from passive investments is subject to a higher rate, which is partially refundable when certain dividends are distributed, encouraging businesses to weigh the advantages and drawbacks of retaining earnings in investment accounts.

The first infographic provides a clear overview of Canada’s federal corporate tax rates for Canadian-Controlled Private Corporations (CCPCs). It delineates how small business income, active business income, and investment income are each subject to different federal rates, factoring in abatements, deductions, and refundable components. This visual snapshot helps business owners quickly grasp which portions of their earnings are taxed favorably and which are subject to higher rates.

The second infographic breaks down the combined federal and provincial tax rates applied to different types of income. It shows that small business income is taxed at a notably low rate, offering a favorable environment for qualifying enterprises. In contrast, active business income is subject to a higher combined rate, reflecting its broader income base once the small business threshold is exceeded.

Meanwhile, investment income stands apart with a considerably steeper tax rate—often exceeding 50%. This higher rate underscores the tax system’s intent to differentiate between income generated through active operations and income derived from investments, thereby encouraging businesses to reinvest in core activities rather than rely predominantly on passive earnings.