Free invoice generator and tax tools for Canada

A small business in Canada deals mainly with the Canada Revenue Agency (CRA). A sole proprietor or partner reports business profit on a personal T1 return, and federal tax is added to provincial or territorial tax. A corporation files a T2 return; a Canadian-controlled private corporation that qualifies for the small business deduction pays a net federal rate of 9% on its eligible active business income, with provincial rates on top. In Quebec, Revenu Québec runs the provincial income tax and also administers GST/HST for businesses located there.

Sales tax is GST/HST, collected by registrants and remitted to the CRA, or to Revenu Québec in Quebec, which also has its own QST. Payroll means Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums and income tax withheld from each pay, all remitted to the CRA. Quebec employers use the Quebec Pension Plan rather than CPP for their Quebec employees, so they also deal with Revenu Québec.

The most recent reform is Bill C-4, which received Royal Assent on 12 March 2026. It lowered the first federal income tax rate from 15% to 14% from 1 July 2025, and the rate is 14% for 2026 onward.

GST/HST registrants with annual worldwide taxable supplies of $400,000 or less, including their associates, can elect the quick method of accounting (guide RC4058). The business still charges GST or HST at the normal rate, but remits a fixed percentage of sales instead of working out net tax from its purchases. For a business with a permanent establishment in a GST-only province, the CRA table sets the remittance rate on 5% GST supplies at 1.8%. Where 13%, 14% or 15% HST applies the rates are higher, and they differ by the province of the establishment. A 1% credit applies to the first $30,000 of eligible sales in each fiscal year. Bookkeeping, financial consulting, tax consulting and tax return preparation businesses cannot use it, and the business needs a permanent establishment in Canada.