Answering the most pressing tax questions for Canadian small businesses

Use CRA payroll tables or the Payroll Deductions Online Calculator(PDOC) calculator. CRA confirms 2026 federal bracket updates, with the lowest federal rate at 14 per cent for the first bracket. Update payroll systems for the first 2026 run.

What is the small business tax rate on the first $500,000 in income?

The federal small business rate is 9 per cent. Combined rates vary by province. Ontario’s provincial small business rate is 3.2 per cent, for a combined 12.2 per cent on the first $500,000.

How do I claim home office expenses?

Use a reasonable method tied to workspace area used regularly and exclusively for business. Claim a portion of rent, utilities, internet, and maintenance. Keep receipts and a simple worksheet.

What vehicle expenses are deductible?

Use either actual expenses with receipts or an allowance based on mileage. Keep a contemporaneous log. Business travel only. Commuting does not qualify.

What receipts and records do I need to keep?

Keep records for at least six years. Store sales invoices, purchase receipts, bank statements, payroll records, tax returns, and GST/HST filings. Digital backups help during reviews.

How should I handle the Canada Emergency Business Account (EBA) on my taxes?

The forgivable portion was taxable when received. You could elect to reduce eligible expenses instead of including income. If forgiveness conditions were not met and you repay, deduct the amount repaid in the year of repayment. Remaining CEBA loans accrue interest to December 31, 2026.

What is the difference between GST, HST, PST, and QST?

GST (Goods and Services Tax)

This is a federal tax applied across Canada at 5 per cent. It applies to most goods and services unless exempt or zero-rated (like basic groceries).

HST (Harmonized Sales Tax)

This combines the 5 per cent GST with a provincial portion into one tax. It applies to participating provinces: Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island. For example, Ontario’s HST is 13 per cent (5 per cent federal + 8 per cent provincial).

PST (Provincial Sales Tax)

This is a separate provincial tax charged in provinces that do not use HST, such as British Columbia (7 per cent) and Manitoba (7 per cent). Businesses in these provinces charge GST and PST separately on invoices.

QST (Quebec Sales Tax)

Quebec has its own sales tax called QST, currently 9.975 per cent, charged alongside GST. Businesses in Quebec must register for both GST and QST and remit them separately.

Key point for businesses:

You must register, charge, and remit taxes based on where your customer is located, not where your business is located. For example, if you are in Ontario but sell to a customer in British Columbia, you charge GST and PST, not HST.

How do Scientific Research and Experimental Development (SR&ED) tax credits work for small companies?

SR&ED provides investment tax credits for eligible research and experimental development. Canadian-Controlled Private Corporations (CCPCs) often qualify for a 35 per cent refundable federal credit on up to $3 million of qualifying expenditures. Other corporations receive 15 per cent. Provincial credits may stack.

How do I choose my business structure for tax efficiency?

Sole proprietors report income on T1 using T2125. Partnerships flow income to partners. Corporations file T2 and may access the small business deduction and credits. Pick a structure aligned with liability needs, growth plans, and owner compensation strategy.

How do I correct a late or incorrect GST/HST filing?

File the return and pay as soon as possible. Interest accrues until paid. Reconcile GST/HST collected and input tax credits monthly to avoid repeat errors.

What if I cannot pay on time?

File on time anyway. Arrange a payment plan with CRA. Make partial payments. Keep instalments current to limit interest and penalties.

Keep your business tax‑ready

Taxes touch every decision you make. Keep one calendar for all filings. Reconcile monthly. Track revenue against the GST/HST threshold. Use credits that fit your work. Store records for six years. Steady habits reduce stress and protect margins. Your work supports jobs and communities across Canada.

Do you want to avoid making costly mistakes? Click here to read our guide on common tax errors and how to prevent them.

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Sources:

Canada Revenue Agency, small businesses and self‑employed income
https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income.html

CRA, resources for small and medium businesses
https://www.canada.ca/en/services/taxes/resources-for-small-and-medium-businesses.html

CRA, payroll deductions tables 2026
https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/tx/bsnss/tpcs/pyrll/t4032/2026/t4032-ab-1-26e.pdf

Stern Cohen, Canadian tax deadlines 2026
https://www.sterncohen.com/insights/canadian-tax-deadlines/

ST Accounting, 2026 tax deadlines
https://www.staccounting.ca/2026-tax-deadlines-every-canadian-business-owner-needs-to-know/