CadenceTax & Accounting
Get started

Compensation

RRSP or leave it in the corporation? Only salary creates the room

Dividends create no RRSP room, ever. Set your salary at the room you'll actually fill, contribute it, and leave the surplus invested in the corporation.

By Matthew Reeves, FounderAugust 9, 2026 · 8 min read
Show figures for

Quebec runs its own corporate tax regime through Revenu Québec, and Cadence doesn't currently serve Quebec. The figures below are Ontario's.

Summary

If your corporation has earned more than you need to live on, the surplus has two realistic homes. Money can go into an RRSP, a registered retirement savings plan where money goes in without personal tax being taken off it first, and nothing is taxed while it sits there growing. Every dollar you take out later is taxed exactly like salary, at whatever your normal rate is that year. The alternative is an investment account owned by the corporation itself, funded by profit you never take out.

Of salary and dividends, only salary creates RRSP contribution room, which is the permission to contribute: the amount you’re allowed to put in and then subtract from your personal income before tax is calculated. Filling that room is a separate step, and the cash for it can come from any source (e.g. dividends, savings or a gift), which is why room banked in earlier years is still worth having. Room for a year is 18% of your previous year’s “earned income”, a defined list that includes salary and net rent but leaves out dividends.1 Of the two ways to take money out of your corporation, only salary creates room, and a year you missed can’t be recreated later.

For an owner with no near-term plan to sell the business, we’d usually recommend this:

  1. Look up the available RRSP contribution room on your latest notice of assessment, the summary the Canada Revenue Agency (CRA) sends after processing your return. Subtract contributions you’ve made since the amounts shown there. The deduction limit can be higher because earlier contributions may still be waiting for a deduction, so don’t treat that figure as space for a new deposit.2
  2. Decide how much you’ll actually contribute next year, because the salary follows from it. A year of salary creates room worth 18% of it, so divide the intended contribution by 0.18 (e.g. $30,000 of contribution next year needs about $167,000 of salary this year).
  3. Take dividends for whatever else you need personally, and leave the rest invested in the corporation.

Two situations flip that answer: a possible sale of the business, and cash you might need back inside it.

Where the room comes from

Room runs a year behind, so salary you pay yourself during 2026 creates room you use in 2027. The dollar limit that caps the salary you’re setting now is therefore next year’s, being the 2027 limit of $35,390 rather than the 2026 limit of $33,810.1 Filling that 2027 room to the maximum takes $196,612 of 2026 earned income, because 18% of that figure just clears the limit.3 If you actively work in the business, a salary that size is a decision rather than a ceiling. Salary paid to a spouse or a child is different, because it has to be reasonable for the work they actually do.4 Your limit is also reduced by any pension adjustment reported for you, which can come from your corporation’s pension plan or a plan at another employer.1

What each account costs while the money sits there

When your corporation pays you salary it deducts that money, so it pays no corporate tax on it. The RRSP deduction then cancels the personal tax you’d otherwise owe, so $10,000 of salary routed into an RRSP arrives as a full $10,000 invested. Leaving $10,000 of profit in the corporation instead means paying corporate tax on it first. Operating profit under an annual small business limit, being $500,000 federally and a little higher in a few provinces, is taxed at 9% federal plus your own province’s lower rate. Adding the two together, an Ontario company pays about 11.7% corporate tax for a December 31, 2026 year-end, after a mid-year Ontario rate changea British Columbia company pays about 11% corporate tax for a December 31, 2026 year-endan Alberta company pays about 11% corporate tax for a December 31, 2026 year-enda Saskatchewan company pays about 10% corporate tax for a December 31, 2026 year-enda Manitoba company pays about 9% corporate tax for a December 31, 2026 year-enda New Brunswick company pays about 11.5% corporate tax for a December 31, 2026 year-enda Nova Scotia company pays about 10.5% corporate tax for a December 31, 2026 year-enda Prince Edward Island company pays about 10% corporate tax for a December 31, 2026 year-enda Newfoundland and Labrador company pays about 11% corporate tax for a December 31, 2026 year-end.5 A little under the full $10,000 therefore reaches the corporation’s investment account.

The bigger difference shows up in the years after that, because an RRSP pays no Canadian tax at all while it grows.6 A corporation’s investment income, meaning interest, rent, foreign dividends and the taxable half of realised capital gains (i.e. everything except the profit from actually running the business), is taxed as it’s earned at about 50.2% in total in Ontario for 2026.7 Most of that 50.2% is a deposit rather than a permanent tax. About 30 of those 50 points come back to the corporation when it pays dividends out to you, at roughly 38 cents refunded for every dollar of dividend paid. Until you pay dividends the CRA holds the money and nobody earns anything on it, and the part you never get back is about 19.5% in Ontario.8

Two features of the corporation push back the other way, and an RRSP can’t match either of them. Gains on shares the corporation hasn’t sold aren’t taxed at all until it sells them. Half of a realised gain can then be paid out to you completely tax-free through a running tally called the capital dividend account, which your accountant releases by filing a form.9 Those features can make a corporation more competitive for shares held a long time, but they don’t establish a fixed gap against an RRSP. The result depends on dividends, gains, selling dates and the tax you pay when money finally leaves each account, so we’d model those assumptions before choosing. For anything that pays interest the corporation is an expensive place to hold it (e.g. guaranteed investment certificates or bonds), and there the RRSP wins comfortably.

Our default answer, and what it costs

In our view the defensible default is to set salary each year at the amount that creates the room you actually intend to fill, contribute it, and leave the surplus in the corporation. Room is the only part of this decision that’s permanently lost if you skip a year, and creating it isn’t expensive. The price is the Canada Pension Plan, since you pay both halves of it on your own salary, as the employer and as the employee. At a salary of $85,000 or more, both halves together come to $9,292.90 of cash in 2026.10 The cost after tax is lower than that, because the employer half is deductible to the corporation and part of the employee half is credited or deducted on your personal return.

You’ll also need a payroll account with the CRA, with income tax and CPP withheld from each payment and remitted by the 15th of the following month (i.e. April 15 for a March payroll) unless you qualify to remit quarterly, plus a T4 slip due at the end of February.11 What an RRSP costs you in return is flexibility, because a withdrawal is taxed at your marginal rate (the rate on your next dollar of income) and the room you used is gone for good. Contributions count against a tax year if you make them during that year or in the 60 days after it, so a contribution for 2026 has to be in the plan by Monday March 1, 2027.12

Two situations flip that default:

  • You might sell the business within the next couple of years. Investments piling up inside the company that actually runs your business (i.e. your only company, unless somebody set you up with two) can cost you the lifetime capital gains exemption, which lets you take up to $1,275,000 of gain on a sale of qualifying shares tax-free, once, across your whole life.13 Whether your shares qualify depends on how much of the company’s asset value is tied up in investments rather than in the business itself, tested both at the sale and over the two years before it.14
  • You might need the cash back inside the business for a hire, a building or a bad year. An RRSP contribution you’re later forced to withdraw is the worst outcome described here, because the tax comes back at your full rate and the room is gone.

How often this changes

Redo the salary calculation once a year, about two months before your corporate year end, while you can still change the figure. Your corporate year end is the date your company’s financial year closes, which may not be December 31. Redo it earlier if your corporation’s active income crosses the small business limit, being the first $500,000 a year of operating profit taxed at the low federal rate of 9%, with a few provinces setting a higher limit of their own. Profit above both limits is taxed at about 26.5% combined in Ontario for 2026about 27% combined in British Columbia for 2026about 23% combined in Alberta for 2026about 27% combined in Saskatchewan for 2026about 27% combined in Manitoba for 2026about 29% combined in New Brunswick for 2026about 29% combined in Nova Scotia for 2026about 30% combined in Prince Edward Island for 2026about 30% combined in Newfoundland and Labrador for 2026 rather than at the low rate, so a dollar of salary saves the corporation more tax than it did below them.15 Redo it too if a sale becomes plausible, or if the corporation’s investment income approaches $50,000 in a year, because every $1 above $50,000 cuts that $500,000 federal limit by $5 and wipes it out at $150,000, pushing your operating profit onto the higher rate.16

The federal rates quoted here, the 18% RRSP formula and CPP all apply everywhere in Canada, and the corporate rates on operating profit follow the province picked in the selector at the top of this guide. The investment-income arithmetic (the 50.2%, the refund on dividends and the roughly 19.5% permanent cost) is computed with Ontario’s 2026 rates whichever province is picked, so in another province those figures will differ.

Closing thoughts

The tax difference between an RRSP and a corporate investment account is smaller than the amount of argument it attracts, and the difference between deciding and not deciding is much larger. Owners who lose real money on this question mostly aren’t the ones who picked the second-best account. They’re the ones who left eight years of profit sitting in a corporate chequing account, and who arrive at 60 with no RRSP room and no cheap way to get the money into their hands.

How we handle it

We set the salary and dividend mix before your year end, working from your corporation’s income, the RRSP room on your latest notice of assessment, and what you need in your hands. We register the payroll account if there isn’t one, run the remittances and the T4, and prepare both the written record the directors sign to declare a dividend and the T5 slip that reports it to the CRA. Your personal return is prepared in the same file as the corporate return, and an annual compensation review is included in all three of our service plans.

Footnotes

  1. Your RRSP deduction limit for a year starts with the deduction room you didn’t use in earlier years. To that you add the lesser of the RRSP dollar limit and 18% of the preceding year’s earned income. From the total you subtract your pension adjustment for the preceding year and any net past service pension adjustment. You then add back any pension adjustment reversal, and the statute sets the whole thing out as A + B + R - C. A pension adjustment arises only where a registered pension plan or an individual pension plan is maintained for you. The RRSP dollar limit itself is $33,810 for 2026 and $35,390 for 2027. Sources: the Income Tax Act, s.146(1), definition of “RRSP deduction limit”, and Canada Revenue Agency, “MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE”. Verified 2026-08-09. ↩ ↩2 ↩3

  2. CRA, Reading your notice of assessment, RRSP deduction-limit statement, and T4040, RRSPs and Other Registered Plans for Retirement. Available contribution room deducts unused contributions already reported from the deduction limit. Later contributions must also be reconciled before a new deposit. Verified 2026-09-25. ↩

  3. Derived figure, being the 2027 RRSP dollar limit of $35,390 divided by 0.18. The result is $196,611.11, which rounds up to $196,612 of earned income to clear the limit. No issuer publishes the salary figure itself, so it is arithmetic rather than a published number. Earned income covers employment income, income from a business you actively carry on, net rent from real property and royalties on your own work. The list also takes in CPP or QPP disability benefits, spousal support received and net research grants. Earned income is reduced by support paid and by business and rental losses, and taxable dividends, interest and capital gains are all excluded. Sources: Canada Revenue Agency, “MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE”, and the Income Tax Act, s.146(1), definition of “earned income”. Verified 2026-08-09. ↩

  4. An expense is deductible to the corporation only to the extent that it is reasonable in the circumstances. Salary to a family member is therefore a question of the work that person actually performed. The CRA also has a long-standing administrative practice of not challenging the reasonableness of salary paid to a principal shareholder who is active in the business. That practice is not cited on the page, because it was not verified against a current CRA publication in this session. The reasonableness test itself comes from the Income Tax Act, s.67, verified 2026-08-09. ↩

  5. The federal rate on active business income eligible for the small business deduction is 9%, on a business limit of $500,000, and the federal general rate is 15%. Both of those figures are owned by /guides/what-changed-for-2026/, which states them in full. Where a rate changes during a tax year, the calculation is based on the number of days in the year that each rate is in effect. Ontario’s lower rate is 3.2% to June 30, 2026 and 2.2% from July 1, 2026, so a December 31, 2026 year end blends 181 days at 3.2% with 184 days at 2.2%. The blended Ontario rate is 2.696%, which gives 11.70% once the federal 9% is added. Either side of the cut the same addition gives 12.2% before July 1, 2026 and 11.2% after it. Sources for the Ontario chain: Canada Revenue Agency, “Corporation tax rates”, and Ontario Ministry of Finance, “Corporations Tax: corporate income tax”, updated 2026-04-27. Verified 2026-08-09. The combined small business rate stated in the body is computed and sourced per province. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca), corroborated by 2026 Ontario Budget - Annex: Details of Tax Measures (budget.ontario.ca/2026/annex.html) and Bill 97 status page (ola.org). Verified 2026-08-13. The rate reduction is prorated for taxation years straddling July 1, 2026 (Ontario 2026 Budget annex: 'The tax rate reduction would be prorated for taxation years straddling July 1, 2026.'). Enacted by Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026, S.O. 2026, c. 2, which amends s. 31(4) of the Taxation Act, 2007 so the small business deduction rate is 9.3% for days in a taxation year after June 30, 2026 (11.5% general rate minus 9.3% = 2.2%). The combined 11.7% adds the federal 9% small business rate to the Ontario lower rate and is our arithmetic.For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13. Rate of 2% effective April 1, 2017, and a business limit of $500,000 effective January 1, 2010. Budget 2026 (tabled February 17, 2026) announced no corporate income tax rate changes. The combined 11% adds the federal 9% small business rate to the British Columbia lower rate and is our arithmetic.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. The current-rates table on the issuer page lists 2% with effective date July 1, 2020 (the rate has been 2% since 2017, and July 1, 2020 is the current table row). Alberta Budget 2026 (tabled 2026-02-26) made no corporate rate changes. The issuer rate table loaded 2026-08-13 shows no pending 2026 change. The combined 11% adds the federal 9% small business rate to the Alberta lower rate and is our arithmetic.For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56(2) - Rates of tax. Verified 2026-08-13. Rate history in s. 56(2): 2% to Sept 30 2020, then 0% Oct 1 2020 - Jun 30 2023, then 1% from Jul 1 2023 with no end date. The 2026-27 budget (tabled March 18, 2026) makes no change: budget.saskatchewan.ca/economy states the budget is "maintaining the small business tax rate at one per cent". The combined 10% adds the federal 9% small business rate to the Saskatchewan lower rate and is our arithmetic.For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13. Budget 2026 (tabled March 24, 2026, Information Bulletin 126) announced no corporate income tax rate changes, so 0% holds for all of 2026. The combined 9% adds the federal 9% small business rate to the Manitoba lower rate and is our arithmetic.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), corroborated by NB Department of Finance and Treasury Board corporate tax page, New Brunswick Income Tax Act (consolidated), s.57(1)(a) and s.57(1.025). Verified 2026-08-13. The combined 11.5% adds the federal 9% small business rate to the New Brunswick lower rate and is our arithmetic.For Nova Scotia: Nova Scotia Department of Finance and Treasury Board (novascotia.ca), Corporate income tax rates - Government of Nova Scotia. Verified 2026-08-13. The cut from 2.5% to 1.5% is applied on a days-prorated basis for taxation years straddling April 1, 2025 (NS Income Tax Act s. 40(2) formula, and CRA Schedule 346 Part 3 prorates 2.5% for days before April 1, 2025 and 1.5% after March 31, 2025). Budget 2026-27 (novascotia.ca/budget) keeps the rate at 1.5% - no 2026 change. The combined 10.5% adds the federal 9% small business rate to the Nova Scotia lower rate and is our arithmetic.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. The 1% rate has applied since January 1, 2022 and was left unchanged by the July 1, 2025 package (which changed the general rate and threshold) and by Budget 2026. Statutory basis: Income Tax Act (PEI) s. 37.11.6 (years beginning on or after 2022-01-01 and ending before 2025-07-01) and s. 37.11.7 (years beginning on or after 2025-07-01), factor A = 1.0% in both. The combined 10% adds the federal 9% small business rate to the Prince Edward Island lower rate and is our arithmetic.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(3) (as amended by 2026 c14 s4), announced in Government of Newfoundland and Labrador Budget 2026, Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador, and the Budget 2026 News Release. Verified 2026-08-13. Announced in Budget 2026 (tabled April 29, 2026) retroactive to January 1, 2026, and already enacted: the consolidated statute's s. 40(3) reads 2% with amendment citation 2026 c14 s4. Section 40(4) prorates straddle years by days: 2.5% for days before January 1, 2026 and 2% for days after December 31, 2025. Budget 2026 also announced further cuts to 1.5% on January 1, 2027 and 1% on January 1, 2028, but those steps are NOT yet in the consolidated statute (no 1.5%/1% text found). The Finance department's Corporate Income Tax web page still showed 2.5% when loaded on 2026-08-13 - that page lags the statute. The combined 11% adds the federal 9% small business rate to the Newfoundland and Labrador lower rate and is our arithmetic. ↩

  6. No Canadian tax applies to income or gains earned inside an RRSP. Foreign withholding tax is the exception, because it is deducted at source before the money arrives. It can’t be recovered inside an RRSP the way a foreign tax credit recovers it in a taxable account. The Canada-United States treaty exemption for US-source dividends held in an RRSP is the main relief from it. Verified 2026-08-09. ↩

  7. Federal tax on a Canadian-controlled private corporation’s investment income is 28% after the federal abatement, plus a 10 2/3% additional refundable tax, which gives 38 2/3%. Ontario’s general rate of 11.5% applies on top, because investment income never qualifies for the small business rate, and the 50.2% combined figure is derived by addition. Sources: the Income Tax Act, ss.123, 123.3 and 123.4, and Canada Revenue Agency, “Corporation tax rates”. Verified 2026-08-09. ↩

  8. The refundable portion of Part I tax on aggregate investment income is 30 2/3% of that income. The refund comes back at 38 1/3 cents for every dollar of taxable dividend the corporation pays. The provincial portion of the tax on investment income is not refundable at all, which is where the roughly 19.5% permanent cost comes from. The refund mechanics are set out in the Income Tax Act, ss.129(1) and 129(4), verified 2026-08-09. ↩

  9. The capital gains inclusion rate is one-half, and the 2024 proposal to raise it to two-thirds never became law. That one-half rate is owned by /guides/what-changed-for-2026/, which states it in full. A capital dividend is paid free of tax to a resident shareholder once the corporation files the election, while a non-resident shareholder faces Part XIII withholding on it instead. The capital dividend account is defined at the Income Tax Act, s.89(1), and the inclusion rate at s.38(a). Verified 2026-08-09. ↩

  10. For 2026 the year’s maximum pensionable earnings is $74,600, with a basic exemption of $3,500. The rate is 5.95% for each of the employee and the employer, to a maximum of $4,230.45 each. A second ceiling of $85,000 applies above that, at 4% from each side, to a maximum of $416 each. The $9,292.90 figure is derived by adding both halves of both contributions together. The employer half is deductible to the corporation, and the enhanced portion of the employee half is deductible on your personal return. The base portion of the employee half attracts a non-refundable credit, so the after-tax cost is lower than the cash that leaves. Sources: Canada Revenue Agency, “CPP contribution rates, maximums and exemptions”, and “CPP2 contribution rates and maximums”. Verified 2026-08-09. ↩

  11. Remittances are due the 15th day of the month following payment for a regular remitter, meaning average monthly withholdings under $25,000, with accelerated schedules above that. Two quarterly categories sit below it, and both remit on April 15, July 15, October 15 and January 15. The first is new small employers with average monthly withholdings under $1,000 and a perfect compliance history. The second is employers with an account open 12 months or longer, average monthly withholdings under $3,000 and the same clean history. The T4 information return is due the last day of February following the calendar year. For 2026 that day is Sunday February 28, 2027, so the deadline moves to Monday March 1, 2027. Sources: Canada Revenue Agency, “When to remit (pay)”, and the Income Tax Regulations, s.205(1). Verified 2026-08-09. ↩

  12. A contribution is deductible for a year if it is made during that year or within the 60 days after the end of it. Sixty days after December 31, 2026 falls on Monday March 1, 2027, which is the deadline for the 2026 tax year. Source: the Income Tax Act, s.146(5)(a). Verified 2026-08-09. ↩

  13. The lifetime capital gains exemption on qualified small business corporation shares is $1,275,000 for 2026 dispositions, and it is a cumulative lifetime amount rather than a per-sale one. That figure is owned by /guides/lcge-primer/, which states it in full with its source. Verified 2026-08-09. ↩

  14. At the moment of sale, all or substantially all of the fair market value of the corporation’s assets must be attributable to assets used principally in an active business. The business has to be carried on primarily in Canada. A portfolio of marketable securities is not such an asset, which is the whole reason a corporate investment account can disqualify the shares. The CRA administers “all or substantially all” as 90% or more, which is an administrative position rather than a figure in the Act. The courts have not treated that 90% figure as a bright line either. More than 50% of asset value must also be so used throughout the 24 months before the sale. Throughout those same 24 months the shares must not have been owned by anyone other than you or a person or partnership related to you. Sources: the Income Tax Act, ss.110.6(1) and 248(1), definition of “small business corporation”. Verified 2026-08-09. ↩

  15. The federal general rate of 15% is owned by /guides/what-changed-for-2026/, which states it in full. A few provinces set their own small business limit above the federal $500,000, so profit between the two limits pays the federal general rate while still keeping the provincial lower rate. The combined figure here assumes profit above both. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca), confirmed in 2026 Ontario Budget - Annex. Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13. 12% effective January 1, 2018. Budget 2026 announced no corporate rate changes. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. 8% effective July 1, 2020 (Job Creation Tax Cut endpoint). Alberta Budget 2026 (tabled 2026-02-26) made no change. The issuer rate table loaded 2026-08-13 shows 8% as current with nothing pending. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56(1) - Rates of tax. Verified 2026-08-13. No change in the 2026-27 budget (tabled March 18, 2026). The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13. Budget 2026 (March 24, 2026) made no change to the general rate. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), New Brunswick Income Tax Act (consolidated), s.56(4.32) and s.57(1.07). Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Nova Scotia: Nova Scotia Department of Finance and Treasury Board (novascotia.ca), Corporate income tax rates - Government of Nova Scotia. Verified 2026-08-13. 14% since April 1, 2020 (was 16% before). Budget 2026-27 proposes no change to corporate income tax rates. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, s. 37(1), Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. Reduced from 16% by the 2025-26 budget, effective July 1, 2025. Straddling taxation years are split into notional years at June 30/July 1, 2025 with income apportioned by days (Income Tax Act (PEI) s. 37.11.7(4)). CRA applies day-based proration for dual-rate years. Budget 2026 (tabled April 14, 2026) made no further change. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(1), Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador. Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic. ↩

  16. The federal business limit is reduced by $5 for every $1 of adjusted aggregate investment income above $50,000, and it reaches nil at $150,000. The measurement is taken across associated corporations, for tax years ending in the preceding calendar year. Source for the federal mechanism: the Income Tax Act, s.125(5.1), verified 2026-08-09. Provinces differ on whether their own small business limits shrink the same way, and fuller detail sits at /guides/corporate-investing-grind/. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca). Verified 2026-08-13. The 2026 Ontario Budget made no change to the business limit - it remains $500,000 (blog reports of an increase to $600,000 are not supported by the Budget annex).For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. AT1 Schedule 1 shows the Alberta Small Business Threshold at $500,000 for periods after March 31, 2009 (base amount $200,000 x 250%).For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56.6 - Small business threshold, certain taxation years. Verified 2026-08-13.For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), New Brunswick Income Tax Act (consolidated), s.57(2.5). Verified 2026-08-13.For Nova Scotia: Nova Scotia Legislature - Income Tax Act, R.S.N.S. 1989, c. 217, s. 40(6)(d), Income Tax Act (consolidated to April 9, 2026). Verified 2026-08-13. Raised from $500,000 to $700,000 effective April 1, 2025. For straddling taxation years, CRA Schedule 346 applies the $700,000 limit only to the post-March 31, 2025 period (by scaling federal line 428 by 700,000/500,000). Budget 2026-27 keeps the threshold at $700,000 - no 2026 change.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, s. 37.11.7(2), Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. Increased from $500,000 by the 2025-26 budget. Income Tax Act (PEI) s. 37.11.7(3) applies it to taxation years beginning on or after July 1, 2025, and s. 37.11.7(4) splits a year straddling July 1, 2025 into two notional taxation years at June 30/July 1, 2025 with taxable income apportioned by days.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(3), Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador. Verified 2026-08-13. ↩

Questions your situation raises that this guide can't answer?

That's what the fit and fee estimate is for — describe your business, hear back within one business day.
Schedule a fit and fee estimate