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A business privilege tax is a US term, and we found no Canadian tax by that name on the CRA pages we read. A Canadian business pays through separate things: corporate income tax, GST/HST if it registers, payroll remittances and local licences. On $100,000 of profit a small British Columbia corporation owes $11,000 in corporate tax.
What replaces a business privilege tax in Canada?
Nothing with that name, so start by working out which of these applies to you. A sole proprietor doesn’t pay corporate tax at all. Profit goes on your personal return and gets taxed at your own rates, which our self-employed tax calculator estimates.
A corporation files its own return. The CRA’s corporation tax rates page puts the federal rate on general income at 15% after the abatement and the general tax reduction. A Canadian-controlled private corporation that qualifies for the small business deduction pays a federal 9% instead. Provinces then add their own rate, and each sets its own business limit for the low rate.
What does a small corporation pay in BC?
The CRA lists British Columbia at 2% on income up to a $500,000 business limit and 12% above it. Add the federal side and you get this.
| Layer | Low rate (under the limit) | General rate |
|---|---|---|
| Federal | 9% | 15% |
| British Columbia | 2% | 12% |
| Combined | 11% | 27% |
Run $100,000 through the corporate tax calculator for a BC head office and it returns $9,000 federal and $2,000 provincial, $11,000 in all. That leaves $89,000 inside the company. At $600,000 the first $500,000 gets the low rate and the extra $100,000 the general one, which makes the bill $82,000.
We chose BC on purpose. Ontario’s small business rate has a 2026 change in it, and our tool blends that into an estimate for a calendar year, so we’d rather not quote that blended figure as settled fact.
Picture Hana, who runs a small design studio in Vancouver and clears $100,000 of profit. As a sole proprietor, the whole amount lands on her personal return. If she runs the studio through a corporation, the company pays the $11,000 and keeps $89,000 on its books. That money isn’t hers yet. When she pays it out as salary or dividends, it’s taxed again in her hands, so the corporate rate is only the first layer of the story. A comparison like that is worth running with an accountant before you decide, since the best choice depends on what you plan to take out each year.
Do I have to charge GST or HST?
Once you’re past the small supplier limit, yes. The CRA’s guide for GST/HST registrants says a small supplier’s revenue is $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters. Cross that line and you have to register. Taxi and commercial ride-sharing drivers must register whatever their income.
A registrant charges the tax, files returns and sends the money in, and can claim input tax credits on business costs. Try a price in the GST and HST calculator to see the tax split out.
Where do licences and permits come in?
These are the closest thing to a “privilege” charge, since you pay to be allowed to trade. They come from the city, the province or Ottawa depending on the business. The federal BizPaL search covers federal, provincial, territorial and municipal permits and licences in one place. No fee is quoted here because fees are set locally, so call your city hall or look at its website before you open.
Payroll is a separate bill
Hire someone and you must take CPP, EI and income tax off their pay and send it in, with your own share on top. The payroll remittance calculator estimates that amount. New owners are often caught out by it, since it runs on its own schedule, separate from the corporate return.
What if a letter says you owe a privilege tax?
Treat it as suspect until proven otherwise. We found no Canadian tax with that name, so a bill demanding one deserves a hard look. Look up the sender yourself. Phone the CRA, or your city, on a number you found on their own website, not the one on the letter. And don’t pay anything by card or gift card to a name you can’t confirm.
Mistakes to avoid
Treating profit and income as the same thing is a common one. Costs come off first. The profit margin calculator shows what’s left before tax. And don’t assume the 9% federal rate applies to everyone. Large taxable capital, passive investment income and associated companies sharing one limit can raise it, and our calculator leaves those out.
The sources behind this page
Federal rates come from the Canada Revenue Agency‘s corporation tax rates page, and the BC rates and $500,000 limit from its British Columbia corporation tax page. Registration wording is from the CRA’s GST/HST registrant guide. Dollar examples are our own calculator engine’s output. No level of government runs or endorses this site.
Frequently asked questions
Is there a business privilege tax in Canada?
It is a US term, and we found no tax by that name on the CRA pages we read. Canadian businesses pay corporate or personal income tax, GST/HST if registered, payroll remittances and local licence fees instead. A bill demanding a privilege tax deserves a close look.
What is British Columbia's business limit for the low corporate rate?
The CRA's British Columbia page gives $500,000, with a 2% provincial rate under it and 12% above it. Combined with the federal 9% small business rate, a qualifying corporation pays 11% on income under the limit, which is $11,000 on $100,000 of profit.
Do I need a business licence?
It depends on the trade and the city. Licences and permits come from the city, the province or Ottawa depending on the business, and fees are set locally. The federal BizPaL search lists federal, provincial, territorial and municipal permits and licences in one place.
Does a sole proprietor pay corporate tax?
No. A sole proprietor's profit is reported on the personal return and taxed at personal rates. A corporation files its own return and pays its own tax, and money paid out as salary or dividends is taxed again in the owner's hands, so compare both routes before you incorporate.
What should I do if a letter says I owe a privilege tax?
Treat it as suspect until proven otherwise. Look up the sender yourself and phone the CRA or your city on a number from its own website, not the one on the letter. Do not pay by card, gift card or cryptocurrency to a name you cannot confirm.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST