Small Business Tax Guide for Canadians 2025

Updated March 2025 • bremo.io

Running a small business in Canada comes with a complex but navigable tax landscape. Understanding your obligations and opportunities — from the small business deduction to GST/HST registration — can save thousands annually and keep you on the right side of CRA.

Business Structure and Tax Implications

Your business structure determines how you are taxed:

The Small Business Deduction

CCPCs benefit from a dramatically reduced federal tax rate on the first $500,000 of active business income:

• Federal corporate tax rate (general): 15%
• Federal rate with small business deduction: 9%
• Combined federal + provincial rate for most provinces: 11–13%

The small business limit phases out when a CCPC's taxable capital employed in Canada exceeds $10 million, reaching zero at $50 million. Associated corporations share one small business limit.

Common Business Deductions

• Cost of goods sold — inventory and direct costs of delivering services
• Advertising and marketing — website costs, Google Ads, print
• Professional fees — accountants, lawyers, consultants
• Office rent and utilities
• Employee salaries and benefits
• Business insurance
• Vehicle expenses (business portion)
• Business meals and entertainment — 50% deductible
• Travel for business
• Equipment and technology (via Capital Cost Allowance)
• Bank charges and merchant fees

GST/HST Registration

Businesses with annual revenue exceeding $30,000 over four consecutive quarters must register for GST/HST. Voluntary registration is also available and often beneficial — it allows you to claim Input Tax Credits (ITCs) on business purchases even before you hit the threshold.

GST/HST registration is free and done through CRA. Once registered, you must collect GST/HST from customers and remit it to CRA (net of ITCs) on a monthly, quarterly, or annual basis.

Payroll Deductions

Businesses with employees must deduct and remit CPP contributions, EI premiums, and income tax from employee wages. As an employer, you also pay:

• CPP employer contribution: equal to the employee's CPP contribution (2025 rate: 5.95% on eligible earnings)
• EI employer contribution: 1.4× the employee's EI premium

Corporate Tax Filing Deadlines

For incorporated businesses:

• T2 corporate return is due 6 months after fiscal year end
• Corporate tax balance is due 2 months after fiscal year end (3 months for CCPCs claiming the small business deduction)

Scientific Research and Experimental Development (SR&ED)

Businesses conducting qualifying R&D activities can claim the SR&ED Investment Tax Credit (ITC). CCPCs receive a 35% refundable ITC on the first $3 million of qualifying expenditures. This is one of the most generous R&D incentive programs in the world and is available to software, manufacturing, and many other sectors.