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ARTICLE

Small Business Deduction (SBD)


Small business tax in Canada can be a complex and confusing topic for entrepreneurs.

However, understanding the basics of small business taxes can help you keep more of your hard-earned money and ensure compliance with Canadian tax laws.


In Canada, small businesses are considered to be Canadian-controlled private corporations (CCPCs) with revenues of less than $15 million. As a small business owner, you have access to a number of tax advantages and deductions that are not available to other types of businesses.


One of the main advantages of being a small business in Canada is the small business deduction (SBD). The SBD allows CCPCs to pay a lower corporate income tax rate on the first $500,000 of active business income. This means that the effective tax rate on the first $500,000 of active business income is just 9% for most provinces, as opposed to the general corporate income tax rate of 15%.


Another advantage of being a small business in Canada is the ability to claim the capital cost allowance (CCA). CCA is a tax deduction that allows businesses to write off the cost of certain capital assets, such as equipment and buildings, over a number of years. This can help reduce the tax burden on small businesses and make it easier for them to invest in new assets.


Small business owners in Canada are also eligible for a number of other deductions and credits, such as the Scientific Research and Experimental Development (SR&ED) tax credit, the Apprentice Mechanic tax credit, and the Canada Pension Plan (CPP) and Employment Insurance (EI) premium reduction.

It is important to note that small businesses in Canada are required to register for and charge the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), depending on the province. This means that small business owners must collect and remit GST/HST on their sales and can claim input tax credits (ITCs) for GST/HST paid on their business-related expenses.


In conclusion, small business tax in Canada can be complex, but understanding the basics can help you take advantage of the many tax advantages and deductions available to small business owners. By being aware of the rules and regulations, and by working with GB Solutions qualified tax professionals, you can ensure compliance with Canadian tax laws and keep more of your hard-earned money.

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