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A business privilege tax is a US term, and it doesn’t turn up on the Canada Revenue Agency pages we read. In Canada a small business pays for the right to operate through a handful of separate things instead: 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, using the rates below.
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 federal rate on general income is 15% after the abatement. 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. We couldn’t confirm the blended figure on an official page, so we’d rather not quote it as fact.
Do I have to charge GST or HST?
Once you’re past the small supplier limit, yes. The CRA page on registration says taxi and commercial ride-sharing drivers must register whatever their income. It doesn’t state the dollar limit in the part we could read, so check the current figure there before you count on one.
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. We can’t tell you a fee, and none is quoted here because fees are set locally.
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.
Mistakes to avoid
Paying a “privilege” invoice from a US-style notice without checking it is one. If a letter claims you owe a business privilege tax, look up the sender and call the CRA or your city on a number you found yourself.
Another is treating profit and income as the same thing. 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.
Where the numbers come from
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 registration page. Dollar examples are our own calculator engine’s output. We have no link with the CRA.
Frequently asked questions
Is there a business privilege tax in Canada?
It's a US term, and we found no tax by that name on the CRA pages we read.
What is the federal small business rate?
The CRA shows 9% net for a Canadian-controlled private corporation that claims the small business deduction, and 15% for general income.
What is BC's business limit?
The CRA's BC page gives $500,000, with a 2% rate under it and 12% above it.
Do I need a business licence?
It depends on the trade and the city. The federal BizPaL search lists federal, provincial, territorial and municipal permits and licences.
Does a sole proprietor pay corporate tax?
No. A sole proprietor's profit is reported on the personal return.
- 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
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.