BC Corporate Tax Rate in 2026: What Your Incorporated Small Business Actually Pays

Your incorporated business in British Columbia (BC) pays either 11% or 27% in combined corporate tax, depending on one threshold. On $500,000 of active business income, that gap works out to $80,000. Most owner-managers know one of these two numbers. Few know exactly what pushes them from one to the other, or that a new PST rule taking effect in October 2026 has nothing to do with either.

This article breaks down both rates, shows what they mean in real dollars, and covers the 2026 changes that actually affect your business.

What Is the Corporate Tax Rate in BC?

The corporate tax rate in British Columbia is 11% on the first $500,000 of active business income, and 27% above that. Both numbers combine a federal rate and a BC rate into one. You won't find a separate BC tax return, either: the Canada Revenue Agency (CRA) collects both through your regular T2 filing. Which of the two rates applies to you is what actually decides your tax bill.

The table below breaks down exactly what each rate costs you, and where corporate tax filing services earn their keep — making sure your business lands on the right side of that line.

For context, BC's 27% general rate is higher than Alberta's 23% combined general rate, though the two provinces are essentially tied on the small business rate at 11%.

How These Rates Have Changed Over Time

Rate update — BC 2026: On February 17, 2026, BC Finance Minister Brenda Bailey tabled the province's 2026 budget. It confirmed no change to either corporate income tax rate or to the $500,000 small business limit. The budget did introduce one change relevant to incorporated business owners: an expansion of PST to professional services, covered later in this article.

Qualifying for the Small Business Rate

The 11% rate isn't automatic. Your corporation has to meet specific conditions at both the federal and provincial levels.

CCPC and Active Business Income Requirements

To access the reduced rate, your corporation must be a Canadian-controlled private corporation (CCPC) — incorporated in Canada, controlled by Canadian residents, and not publicly traded. From there, the Small Business Deduction (SBD) reduces the federal rate from 15% to 9% on up to $500,000 of active business income per tax year. British Columbia applies its own 2% rate on that same $500,000, with no separate provincial eligibility test to pass.

Active business income means revenue from operations: selling products, providing services, running the day-to-day business. According to the CRA, it excludes rental income, interest, and most investment income, which fall under a different set of rules.

When the General Rate Applies Instead

The 27% rate kicks in under a few specific circumstances:

• Income above $500,000: the portion exceeding the threshold is taxed at 27%, while the first $500,000 stays at 11% if the corporation still qualifies.
• Passive investment income above $50,000: the federal SBD starts phasing out and disappears entirely once investment income reaches $150,000, pushing all active income to the general rate.
• Associated corporations: the $500,000 limit is shared across the group, not multiplied.
• Personal services business (PSB) classification: a corporation reclassified as a Personal services business loses SBD access at both levels, regardless of income size.

What This Means in Dollars

Knowing the rate is one thing. Seeing what it costs is another.

On $500,000 of income, a corporation paying the general rate instead would owe $135,000 — an $80,000 gap for the same revenue. That gap is exactly why confirming your eligibility every year matters, particularly if your investment income is creeping up or your corporate structure has changed.

The Blended Rate Above $500,000

Once income crosses $500,000, two rates apply in the same tax year, not one or the other.

For a corporation earning $700,000 in active business income:

• $500,000 × 11% = $55,000
• $200,000 × 27% = $54,000
• Total tax: $109,000

This is why year-end planning around the $500,000 threshold matters. Adjusting the timing of a salary or dividend payment to the owner-manager before the fiscal year closes can, in some situations, keep taxable income under the threshold.

New for 2026: PST Expansion to Professional Services

The 2026 BC budget left corporate income tax untouched but changed something else that affects incorporated business owners directly: what Provincial Sales Tax applies to.

Effective October 1, 2026, BC's 7% PST extends to certain professional services, including accounting and bookkeeping, along with non-residential real estate services. This is a consumption tax on services purchased. It has no effect on your corporate income tax rate or on how your $500,000 threshold is calculated. The two are entirely separate mechanisms, even though both changes came out of the same budget.

In practical terms: if your corporation pays for professional accounting or bookkeeping services, expect a 7% PST charge on those invoices starting October 1, 2026, on top of the 5% federal GST already in place. Providers of these services need to register for PST and start charging it by that date if they haven't already.

Other Income, Other Rates

The 11% and 27% rates apply specifically to active business income. Other income types are taxed differently. Some of them also affect your access to the reduced rate in the first place.

Investment Income and the Refundable Tax Mechanism

Investment income earned by a CCPC — interest, rental income, and taxable capital gains — is taxed at a combined federal-BC rate of approximately 50%, close to double the general rate on active income. This higher rate exists deliberately, to discourage using a corporation mainly to hold investments rather than run a business.

Part of that tax is refundable. The Refundable Dividend Tax on Hand (RDTOH) mechanism lets a corporation recover a portion of the tax paid on investment income once it pays taxable dividends to its shareholders.

Investment income also has a direct impact on your small business rate. Once it exceeds $50,000 in a year, the federal SBD starts phasing out, and disappears completely at $150,000, eliminating access to the 11% rate entirely.

Associated Corporations Share the $500,000 Limit

Under the Income Tax Act (ITA), your corporation is considered associated with one or more others when connected through common ownership or control, and when that's the case, the $500,000 business limit is shared among the group, not multiplied. Two associated corporations splitting the limit equally would each access the 11% rate on only $250,000 of active income; anything above that portion is taxed at 27%.

The same limit can also shrink on its own, independent of how many corporations share it. Once your corporation's — or your associated group's — taxable capital employed in Canada passes $10 million, the $500,000 business limit starts declining, and it disappears completely at $15 million. This is a separate test from the investment income grind covered above, and it's often the one that catches a growing business first.

If you operate more than one incorporated business, associated status needs to be reassessed every year as part of preparing your T2 return.

Tax Credits Can Lower What You Actually Pay

The rate is only half the picture. Once it's set at 11% or 27%, tax credits don't move that number. What they do is shrink what you actually pay on top of it, and that's how two businesses sitting at the same 11% rate can end up owing very different amounts. The gap between them comes down to their effective tax rate, not the rate on paper.

BC adds its own credits on top of federal ones instead of replacing them, so there's often more room to save than owners expect. A corporation doing scientific research, for example, can claim the BC SR&ED credit alongside its federal counterpart on the same expenses. It's worth checking which federal tax credits your corporation qualifies for each year: that review often makes a bigger difference to your final bill than the rate itself.

Filing Your BC Corporate Tax Return

Every corporation with a permanent establishment in BC must file a T2 form, along with Schedule 427 (British Columbia Corporation Tax Calculation) to apply the provincial rate, and Schedule 5 if your corporation operates in more than one province or territory.

Schedule 427 walks you through applying the correct BC rate to your eligible income; Schedule 5 handles the provincial allocation if you have a presence outside BC. Neither form needs to be filed separately from your T2: both go in with the same return.

Getting Your BC Corporate Tax Rate Right

Your corporation's rate isn't fixed: it depends on active business income, CCPC status, investment income levels, and associated company relationships, reassessed every tax year. A corporation paying 27% when it qualifies for 11% is overpaying by tens of thousands of dollars on a single year's income.

Our Corporate Tax Accountants confirm the right rate applies to your BC corporation, catch eligibility issues before they cost you, and make sure nothing — including the new PST rules — gets missed. Get help filing your BC corporate tax return with T2inc.ca.

This content is for informational purposes only and does not constitute tax or legal advice. Every corporation's situation is unique — we recommend consulting a qualified CPA before making any tax-related decisions.

FAQ — BC Corporate Tax Rate