Dual tax rates

Generally, provinces and territories have two rates of income tax: the lower rate and the higher rate.

The lower rate applies to either:

• the income eligible for the federal small business deduction; or

• the income based on limits established by the particular province or territory.

The higher rate applies to all other income.  See example 1.

When you allocate taxable income to more than one province or territory, you also have to allocate proportionally any income eligible for the small business deduction.  See example 2.

For a table that shows the income tax rates as of January 1,  2006, for the provinces and territories that have tax collection agreements with the federal government, see Corporation tax rates.

For more detailed information on the income eligible for the lower rate, and the rates that apply to each province and territory, see the following pages:

• Newfoundland and Labrador
• Prince Edward Island
• Nova Scotia
• New Brunswick
• Manitoba
• Saskatchewan
• British Columbia
• Yukon
• Northwest Territories
• Nunavut

Reporting the tax

On the appropriate lines of part 2 of Schedule 5, Tax Calculation Supplementary - Corporations, enter the gross amount of each provincial or territorial tax payable.

Forms and publications

• Schedule 5, Tax Calculation Supplementary - Corporations