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BC corporate tax: the two rates, and why there's no separate BC corporate income tax return

British Columbia charges 2% and 12% corporate tax for 2026, collected on your T2 with no separate BC corporate income tax return. PST and payroll cost more.

By Matthew Reeves, FounderAugust 23, 2026 · 8 min read

Summary

Your corporation pays federal corporate tax on its profit, and British Columbia taxes the same profit again on top. Here is what the province charges for the 2026 tax year, and what it takes to comply.

  1. There’s no separate British Columbia corporate income tax return. The province writes its own corporate tax law, and the Canada Revenue Agency assesses and collects it on the T2, your corporation’s annual income tax return, using the business number the CRA already gave the company. There’s no British Columbia number to apply for.1
  2. For 2026 the province charges 2% on active business income (i.e. profit from actually running your business, rather than interest, rent or investment returns) up to $500,000 a year, and 12% above that. Add the federal rates and the totals are 11% and 27%.23
  3. Provincial sales tax, usually shortened to PST, is a second sales tax with a general rate of 7%, separate from the 5% federal goods and services tax, or GST. Nothing comes back for the PST your corporation pays on its own purchases.45
  4. The employer health tax is a provincial payroll tax, and for 2026 it costs nothing until the pay your corporation gives people working in British Columbia passes $1,000,000 in the calendar year.6
  5. WorkSafeBC is the province’s workplace injury insurance board, and an owner who does real work in their own company counts as a worker of it. So a corporation whose only worker is its owner can still have to register and pay premiums.7

In our view a British Columbia owner-manager should spend almost no time on the corporate rate, and spend it instead on the registrations the CRA doesn’t set up for you: PST, WorkSafeBC, and an employer health tax account if payroll heads toward $1,000,000. Two things make the corporate rate worth planning around: crossing $500,000 of active business income, and opening a business location outside British Columbia, which splits your profit between provinces that tax it differently.

The two British Columbia rates

For 2026 British Columbia charges a lower rate of 2% and a general rate of 12%.2 The lower rate goes to a Canadian-controlled private corporation (i.e. a private company resident in Canada that isn’t controlled by non-residents or public companies), on its active business income up to a business limit of $500,000 a year. The federal government taxes the same profit, at 9% inside that limit and 15% above it.8

So for a tax year ending December 31, 2026, profit inside the limit is taxed at 11% in total, being 9% federal plus 2% provincial, and profit above it at 27% in total, being 15% federal plus 12% provincial.3 Our guide to what changed for 2026 states the federal 9% and the federal $500,000 limit in full.

Neither total describes investment income (e.g. interest, rent and portfolio dividends). British Columbia’s 12% catches investment income as well as active profit above the limit, but the federal tax on investment income isn’t 15%, so the combined rate is nothing like 27%.8 Our answers by industry carry it.

The province’s $500,000 business limit is the federal business limit as computed under the federal Act, so anything reducing the federal limit reduces the provincial one at the same moment.9 The likeliest reduction is a federal rule often called the grind, which shrinks the limit when your corporation earns investment income. For every $1 of investment income above $50,000 in the previous year across a group of associated companies (broadly, corporations under common control, such as two you own), the limit drops by $5, so $150,000 wipes it out. Losing the limit means the full $500,000 is taxed 16 points higher, about $80,000 more tax that year.10

Where the British Columbia tax gets reported

A corporation with a permanent establishment in British Columbia at any point in its tax year owes British Columbia tax for that year, reported on the federal T2 rather than on a provincial return. A permanent establishment is the tax term for a business presence, and it usually means a fixed place of business (e.g. an office, a workshop or a warehouse). You also have one where an employee or agent based there has general authority to sign contracts for the company. Where you incorporated doesn’t settle the question, and neither does where your customers live, unless the corporation has no fixed place of business anywhere, in which case the registered office in your incorporating documents does.11

The provincial tax is worked out on Schedule 427, a calculation sheet you can use but don’t have to file, and the result lands on line 760 of the T2. With a permanent establishment in two provinces you also file Schedule 5, which splits your taxable income between them by weighting each province’s gross revenue (total sales before costs) and the salaries and wages paid there equally.111

Provincial sales tax at 7%

British Columbia runs its own sales tax at 7% of the purchase or lease price, alongside the 5% GST, with its own registration and its own return, made to the province rather than to the CRA.4 You have to register if your business is in the province and sells or leases taxable goods, or provides software or taxable services (e.g. repairing or installing goods). There’s no useful exemption for being small: the small seller exception requires you to keep no established business premises, so an incorporated business with an office or a shop can’t use it at any level of sales.12

The expensive difference is that PST isn’t refundable to businesses the way eligible GST on purchases for taxable business activities is. There’s no equivalent input tax credit for PST, so it normally stays in the cost of laptops, tools and vehicles bought for the business, with vehicle rates sometimes higher than 7%.513

The province legislated PST on five kinds of professional service from October 1, 2026:

  1. accounting, including bookkeeping
  2. architectural services
  3. engineering and geoscience services
  4. security and private investigation services
  5. non-residential real estate services, such as property management

None of the five is taxable, because British Columbia paused that tax in September 2026 with a regulation exempting all five from October 1, 2026. A provider charges no PST on them, and one that registered early for the new tax is told to cancel its PST account. Had the tax gone ahead, the 7% would have applied to the whole purchase price of accounting, security and non-residential real estate services. For architectural, engineering and geoscience work it would have applied to 30% of the price, an effective 2.1% of an invoice.14

Payroll: the employer health tax and WorkSafeBC

The employer health tax is charged on a calendar year of pay to people who report for work at a British Columbia location. For the 2026 calendar year the first $1,000,000 of that pay is exempt, so at $1,000,000 or less you owe nothing and don’t register. Between $1,000,000.01 and $1,500,000 the tax is 5.85% of the amount over $1,000,000, and above $1,500,000 the exemption disappears completely and the tax is 1.95% of the whole payroll. Associated companies share one exemption, so adding a company to the group buys you nothing. An employer whose British Columbia payroll crosses $1,000,000 for the first time in 2026 registers for an employer health tax account by December 31, 2026 and files its first return, with payment, by March 31, 2027.6

Every employer in British Columbia has to have WorkSafeBC coverage unless it’s exempt, and the exemptions are narrow enough that a working owner-manager shouldn’t assume one applies. Employers register with the board and pay premiums, and an injured worker is then compensated by the board rather than by suing the company. What the premium costs isn’t stated here, because no rate could be verified from WorkSafeBC’s own pages.7 What surprises incorporated owners is that shareholders, directors and officers who are actively involved count as workers of the company, so it has to register and pay premiums on their earnings. Actively involved means doing real work in the business rather than owning it and signing a resolution once a year. WorkSafeBC states that where a company that should have registered hasn’t and a shareholder is injured, the claim is rejected unless the shareholder shows they weren’t personally responsible for registering.

When to revisit this

Come back to the corporate rate when any of the following happens:

  • Your active business income crosses $500,000 in a year, which takes the next dollar from 11% in total to 27%.
  • You open a business location outside British Columbia, or an employee elsewhere gets authority to sign contracts for you.
  • Investment income across your associated companies passes $50,000 in a year, because next year’s business limit then starts shrinking.
  • British Columbia payroll approaches $1,000,000 in a calendar year, and again at $1,500,000 where the exemption vanishes.
  • British Columbia sets a new start date for provincial sales tax on the five professional services above, which it paused rather than repealed.
  • British Columbia tables a budget, usually in February. Budget 2026, tabled February 17, 2026, listed no change to the corporate income tax rates.15 A rate that changes partway through your tax year is applied as a blend, weighted by the days each rate was in force.2

Closing thoughts

Provinces get compared on their corporate rates because rates are easy to put in a table. British Columbia’s reputation as an expensive place to earn money comes mostly from its personal rates rather than its corporate ones. What takes the time is that the province runs its own sales tax, its own payroll tax and its own workers’ compensation board (WorkSafeBC). If you’re weighing where to run a business, our advice is to weigh those three sets of deadlines alongside the published rates rather than instead of them.

How we handle it

We prepare the T2 with the British Columbia calculation on it, and we set up the provincial accounts that don’t come with it. We register for PST where the rules require it, open an employer health tax account once British Columbia payroll gets near $1,000,000, and put the WorkSafeBC dates in the same calendar as your corporate deadlines. The fee is fixed annually and agreed before we start.

Footnotes

  1. Province of British Columbia (Ministry of Finance), “Corporate income tax”, last updated June 19, 2026. The page states that corporations file their provincial corporate income tax with the federal return using their business number, and need no separate provincial account number. Canada Revenue Agency, “British Columbia - Provincial corporation tax”, page dated March 17, 2026, gives the 2% lower rate, the 12% higher rate and the $500,000 business limit, and calls Schedule 427 a calculation aid you don’t have to file with the return. Canada Revenue Agency, T4012 T2 Corporation Income Tax Guide, chapter 8, carries line 760 for net provincial and territorial tax payable. Verified 2026-08-24. ↩ ↩2

  2. Province of British Columbia (Ministry of Finance), “Corporate income tax rates and business limits”, page last updated April 30, 2025. It gives 2% effective April 1, 2017, 12% effective January 1, 2018, and a $500,000 business limit effective January 1, 2010. Where a rate or the limit changes mid-year, the calculation runs on the number of days each was in effect. Verified 2026-08-24. ↩ ↩2 ↩3

  3. Our own arithmetic on the federal and provincial rates cited above, rather than a figure either government publishes. Inside the business limit it is 9% federal plus 2% provincial, and above the limit 15% federal plus 12% provincial, for a tax year ending December 31, 2026. The federal 9% and 15% come from Canada Revenue Agency, “Corporation tax rates”. That page’s provincial table lags provincial changes and shouldn’t be used for a provincial rate. British Columbia had no mid-year corporate rate change in 2026, so no day-weighting applies. Neither total describes investment income. Verified 2026-08-24. ↩ ↩2

  4. Province of British Columbia (Ministry of Finance), “Register to collect PST”, last updated May 1, 2026. The page sets out who has to register, and states that a business that should have registered and hasn’t is still obliged to collect and remit PST. The province’s provincial sales tax overview page carries the 7% general rate on the purchase or lease price of goods and services, and the province rather than the CRA administers the tax. Verified 2026-08-24. ↩ ↩2

  5. Province of British Columbia (Ministry of Finance), “Small business guide to PST”, published February 17, 2026. The guide states that unlike the GST/HST there are no PST input tax credits provided on goods purchased by a business. Verified 2026-08-24. ↩ ↩2

  6. Province of British Columbia (Ministry of Finance), “Employer health tax overview”, “File and pay your employer health tax”, and “Determining remuneration for employer health tax”, the last of those updated June 17, 2026. The first two give the $1,000,000 exemption, the 5.85% rate between $1,000,000.01 and $1,500,000, the 1.95% rate above $1,500,000, the exemption shared by associated employers, registration by December 31 of the first year an employer is liable, and the return due March 31 of the following year. The exemption and the 5.85% notch rate apply for the 2024 and later calendar years, and no change is indicated for 2026. The third page defines remuneration as the payments, benefits and allowances included in an employee’s income under sections 5, 6 or 7 of the Income Tax Act (Canada), and lists dividend income among its exclusions. Verified 2026-08-24. ↩ ↩2

  7. WorkSafeBC’s own pages on who needs coverage and on owners of incorporated companies. They state that all employers are legally required to have WorkSafeBC coverage unless the employer is exempt, that shareholders, directors, officers and principals actively involved in the company are treated as workers of it, and that a claim by an injured shareholder of a company that should have registered is rejected unless the shareholder shows they weren’t the person responsible for registering. Neither page states a registration deadline or a premium rate, for the reasons in the review flags above. Verified 2026-08-24. ↩ ↩2

  8. Income Tax Act sections 124(1), 123.3 and 123.4, read on the Department of Justice consolidation at laws-lois.justice.gc.ca, current to June 21, 2026. Section 124(1) deducts 10% of taxable income earned in the year in a province from the 38% basic rate. Section 123.4 gives the 13-point general rate reduction that takes the federal rate to 15%, and subparagraph 123.4(1)(b)(iii) removes a Canadian-controlled private corporation’s aggregate investment income from the income that reduction applies to. Section 123.3 then adds a further 10 2/3% on that investment income. Verified 2026-08-24. ↩ ↩2

  9. British Columbia Income Tax Act section 16(5), read on the consolidation at bclaws.gov.bc.ca on 2026-08-24. Paragraph (a) defines the corporation’s business limit as “the amount that is the corporation’s business limit for the taxation year within the meaning of the federal Act”, subject to paragraph (b), under which the limit is recomputed reading $500,000 in place of the federal figure if the amount expressed in dollars in section 125(2) of the federal Act is not “$500 000”. Federal Income Tax Act section 125(5.1) operates on the business limit itself, which is why the passive investment income reduction carries into the provincial limit. Verified 2026-08-24. ↩

  10. The passive investment income grind is stated in full, with its source, in our guide to corporate investing and the small business limit. The maximum cost of about $80,000 a year is our own arithmetic: the $500,000 limit multiplied by the 16-point gap between the 11% and 27% combined rates above. Whether two corporations are associated is a technical test worth checking rather than assuming, and it isn’t set out here. Verified 2026-08-24. ↩

  11. Income Tax Regulations sections 400(2) and 402, read on the Department of Justice consolidation. Section 400(2) defines a permanent establishment as a fixed place of business, including an office, branch, factory, workshop or warehouse, and reaches a place where the corporation carries on business through an employee or agent with general authority to contract. Paragraph 400(2)(e.1) deems a corporation that would otherwise have no permanent establishment to have one at the head or registered office named in its incorporating documents or bylaws. Section 402 deems all taxable income earned in the single province where the only permanent establishment sits, so a Vancouver consultancy billing Toronto clients with no Ontario location allocates everything to British Columbia, and otherwise allocates by equally weighting gross revenue and salaries and wages. That allocation formula is the general rule and is displaced for certain industries, including insurers, banks, railways, airlines and truckers. Verified 2026-08-24. ↩ ↩2

  12. Province of British Columbia (Ministry of Finance), Bulletin PST 003, “Small Sellers”, revised July 2026. The test requires all of the following at once: no established business premises, no regular retail sales from established commercial premises, $10,000 or less of gross retail revenue over both the previous and the next twelve months, no wholesale sales in the previous twelve months, and none of a long list of excluded goods that includes vehicles, liquor and cannabis. The bulletin is explicit that the premises conditions disqualify a business whatever its revenue. A small seller charges no PST, and also can’t claim the resale exemption on its own inventory. The federal $30,000 small supplier threshold used as the comparison in the body is stated in full, with its source, in our guide to GST/HST registration. Verified 2026-08-24. ↩

  13. British Columbia Ministry of Finance, Bulletin PST 308, Vehicles, distinguishes passenger-vehicle rates from the general PST rate. The vehicle calculator owns the rate bands. Scope distinction verified 2026-09-25. ↩

  14. Province of British Columbia (Ministry of Finance), Notice 2026-001, “Notice to providers of professional services”, last updated September 21, 2026. The Notice now opens by saying the expansion “is paused”, and tells providers who registered to cancel their PST accounts. It still lists the same five services at 7%, charged on 30% of the purchase price for architectural, engineering and geoscience work. The effective 2.1% of an invoice on that work is our arithmetic, not the Notice’s. The pause is Order in Council 408/2026, approved September 21, 2026 as British Columbia Regulation 116/2026, exempting all five services from October 1, 2026. The Office of the Premier announced it in a news release of September 18, 2026. The scope and the 30% are owned by our guide to moving a corporation between provinces, and this page matches it. Verified 2026-09-24. ↩

  15. Province of British Columbia (Ministry of Finance), “B.C. provincial budget tax changes”. Budget 2026 was tabled February 17, 2026, and that page lists the tax credit changes it made without listing any change to the corporate income tax rates. The claim on this page is an absence on the budget page rather than a statement made there. Verified 2026-08-24. ↩

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