BC corporate tax 2026: 27% general, 11% on small business income

BC's 2026 combined rates are 11% on small business income and 27% general

Each combined rate is the federal net rate plus the BC rate on the same income. The table assumes all taxable income is earned in BC.

BC's general rate has been 12% since January 1, 2018, its small business rate has been 2% since April 1, 2017, and its business limit has been $500,000 since January 1, 2010 www2.gov.bc.ca. The CRA's British Columbia page, updated March 2026, gives the same 2%, 12% and $500,000 canada.ca.

Budget 2026 lists no change to either corporate rate or the business limit. Its corporate measures are credits, led by a new refundable manufacturing and processing investment tax credit www2.gov.bc.ca. Unlike Ontario, BC has no reduced rate for manufacturing profits: everything that doesn't qualify for the lower rate pays 12% canada.ca.

Why BC's 2% applies to the same dollars as the federal 9%

Federal tax starts at 38% of taxable income and drops to 28% after the federal abatement. The general tax reduction takes it to 15%, and a CCPC claiming the small business deduction lands at 9% instead canada.ca. The general reduction is 13%, but ITA 123.4 removes the small business deduction amount and a CCPC's aggregate investment income from full rate taxable income first, so the two never stack laws-lois.justice.gc.ca.

On the BC side, section 14(2) of the BC Income Tax Act sets corporate tax at 12% of taxable income earned in BC. Section 16(1) then replaces 12% with 2% on part of that income, for a corporation other than a credit union that was a CCPC throughout the year bclaws.gov.bc.ca.

The part taxed at 2% is the least of three amounts: active business income under ITA 125(1)(a), taxable income under 125(1)(b), and the BC business limit. Section 16(5) defines that limit as the corporation's business limit within the meaning of the federal Act bclaws.gov.bc.ca. In practice, BC's 2% applies to the same dollars that get the federal 9%.

Investment income carries a federal surcharge. ITA 123.3 adds a refundable tax of 10 2/3% on a CCPC's aggregate investment income laws-lois.justice.gc.ca, so the federal rate is 38% less 10% plus 10.67%, or 38.67%. BC has no separate investment income rate, so 12% applies.

$600,000 of active business income costs $82,000 in BC

Take a CCPC with a December 31, 2026 year end, $600,000 of active business income earned entirely in BC, no associated corporations, taxable capital under $10 million and adjusted aggregate investment income of $50,000 or less in 2025. The first $500,000 gets the small business rates and the other $100,000 is general rate income.

Total tax is $82,000, an effective rate of 13.67%. The same corporation in Ontario pays $84,979.45 for calendar 2026, because Ontario charged 3.2% on small business income until June 30, 2026 see the Ontario rates.

Who qualifies for the $500,000 limit, and how associated corporations split it, is covered in small business deduction 2026. Every other province side by side is in corporate tax rates by province 2026.

BC follows the federal passive income grind, so it costs more than in Ontario

Federally, ITA 125(5.1) cuts the business limit by the greater of a taxable capital reduction and a passive income reduction. The passive formula reduces a full $500,000 limit by $5 for every $1 of adjusted aggregate investment income over $50,000, counting the corporation and its associated corporations laws-lois.justice.gc.ca.

Because BC's business limit is the federal business limit, the BC 2% shrinks with it bclaws.gov.bc.ca. Ontario does the opposite and keeps its full $500,000. Take the same CCPC with $100,000 of AAII in 2025: its federal limit falls to $500,000 less 5 × $50,000, or $250,000, and so does its BC limit.

Total tax rises from $82,000 to $122,000. The grind costs this client $40,000: $15,000 federal and $25,000 BC. In Ontario the same grind costs $15,000, all of it federal. How AAII is measured and how to plan around it is in the passive income SBD grind.

The taxable capital grind flows through the same way. Once the associated group's taxable capital employed in Canada passes $10 million, the federal limit shrinks and reaches nil at $50 million laws-lois.justice.gc.ca, and BC's limit follows. A limit assigned to another corporation under 125(3.2) also leaves BC with the reduced amount.

Investment income pays 50.67% up front and 20% after the refund

Of the 50.67% a CCPC pays on investment income, 30 2/3 points go into its refundable dividend tax on hand under ITA 129(4). The dividend refund is the lesser of 38 1/3% of taxable dividends paid, other than eligible dividends, and the RDTOH balance at year end laws-lois.justice.gc.ca.

On $10,000 of interest income, the corporation pays $5,066.67 (federal $3,866.67, BC $1,200). Once it pays enough taxable dividends, $3,066.67 comes back, leaving $2,000 of permanent corporate tax, or 20%. The BC 12% is never refunded, which is why BC lands 0.5 points above Ontario on this line.

How RDTOH builds and drains, including the eligible pool, is on our RDTOH explained page.