Revenu Quebec announced on 4 May 2026 that the small business deduction rate for Canadian-controlled private corporations will increase from 8.3% to 9.3% for taxation years beginning after 29 April 2026. The change reduces the minimum tax rate on eligible income from 3.2% to 2.2%, while maintaining the CAD 500,000 business limit and existing conditions related to paid-up capital and investment income thresholds.
Quebec tax authority, Revenu Quebec, announced, on 4 May 2026, an increase in the small business deduction rate and a reduction in the small business tax rate for taxation years beginning after 29 April 2026.
Under certain conditions, a Canadian-controlled private corporation (CCPC) can benefit from a reduction in the 11.5% general income tax rate. The reduction, known as the small business deduction (SBD), applies to the first CAD 500,000 of annual income from an eligible business carried on in Canada by the CCPC (the business limit).
The business limit is gradually reduced if the corporation’s paid-up capital and that of any associated corporations is between CAD 10 million and CAD 50 million and the adjusted aggregate investment income of the corporation and any associated corporations is between CAD 50,000 and CAD 150,000. It is totally eliminated when the paid-up capital reaches CAD 50 million, or the adjusted aggregate investment income reaches CAD 150,000.
For taxation years beginning after 29 April 2026, the SBD rate will be increased from 8.3% to 9.3%. The minimum tax rate applicable to eligible income will be reduced from 3.2% to 2.2%.
The other terms and conditions of the SBD, such as the linear reduction of the SBD rate based on the number of remunerated hours and the proportion of primary and manufacturing sector activities, will remain unchanged.
