A British Columbia corporation pays a combined corporate income tax rate of about 11% on the first $500,000 of active business income (9% federal + 2% BC small-business) and 27% above that limit (15% federal + 12% BC general) for the 2026 tax year. On top of income tax, BC businesses deal with two separate sales taxes: the 5% federal GST and a 7% provincial PST, for a combined 12% on most taxable purchases. This guide explains how those rates fit together, what is recoverable and what is not, and how BC's 2026 PST changes affect business owners.
BC corporate income tax rates for 2026
British Columbia does not run its own corporate tax return. The Canada Revenue Agency (CRA) administers BC's corporate income tax alongside the federal tax, so a BC company files one T2 Corporation Income Tax Return and the combined rate is simply the federal rate plus the BC provincial rate.
As of the 2026 tax year, the rates are:
| Income type | Federal rate | BC rate | Combined rate |
|---|---|---|---|
| Active business income up to $500,000 (CCPC small-business) | 9% | 2% | 11% |
| Active business income above $500,000 (general) | 15% | 12% | 27% |
| Manufacturing & processing (general) | 15% | 12% | 27% |
The 2% small-business rate applies only to a Canadian-controlled private corporation (CCPC) on active business income within the $500,000 small-business limit, which mirrors the federal limit. Income above $500,000 — and most passive investment income — is taxed at the 12% BC general rate, one of the higher general rates among the provinces.
Who qualifies for the 2% small-business rate
To access the low rate, a corporation must be a CCPC earning active business income. Two common traps reduce the benefit:
- Associated companies must share a single $500,000 limit between them.
- A CCPC with high passive investment income can see its small-business limit ground down — the federal limit is reduced once associated-group passive income exceeds $50,000 in a year, and BC follows the reduced limit.
If your corporation earns mostly investment income rather than active business income, the low rate generally does not apply, and that income is taxed at higher rates.
GST and PST in British Columbia
BC is one of four provinces that charge a separate provincial sales tax rather than a harmonized HST. That means two parallel systems.
| Tax | Rate | Administered by | Recoverable by business? |
|---|---|---|---|
| GST (federal) | 5% | Canada Revenue Agency | Yes — via input tax credits (ITCs) |
| PST (provincial) | 7% | BC Ministry of Finance | No — generally not recoverable |
| Combined on most goods | 12% | — | — |
The practical difference matters enormously. GST is largely a flow-through tax for registered businesses: you collect 5% on sales, claim input tax credits for the 5% you paid on expenses, and remit only the net. PST is a real cost. When a BC corporation buys taxable goods — computers, furniture, software, many supplies — for its own use, the 7% PST is usually built into the expense with no credit to recover it. Budgeting for BC operations should treat PST as a hard cost on capital purchases and many inputs.
What PST applies to
PST generally applies to the purchase or lease of tangible goods, software, and a defined list of services. Many business inputs are taxable even when bought purely for business use. A BC corporation that sells taxable goods or the listed services must register for PST (separately from GST), collect 7%, and remit it to the province.
2026 PST changes for professional services
As of the 2026 BC Budget, effective October 1, 2026, PST is extended to certain professional services that were previously untaxed. The affected categories include accounting and bookkeeping services, assurance work, and non-residential real estate services such as commercial trading, rental property management, and strata management. Providers of these services must register and charge 7% PST. Architectural, engineering and geoscience services are subject to a special rule under which PST applies to only 30% of the price. If you buy these services, expect PST to appear on invoices from late 2026 onward; if you provide them, you may need to register and collect for the first time.
Putting it together: a BC corporation's tax stack
A typical incorporated BC small business deals with three distinct obligations:
- Corporate income tax — one federal T2 return covering both federal and BC tax (11% combined up to $500K, 27% above), filed with the CRA, with instalments and a balance due on the federal schedule.
- GST — registered once taxable revenue passes the $30,000 small-supplier threshold; collect 5%, claim ITCs, remit the net to the CRA.
- PST — registered if you sell taxable goods or listed services; collect 7%, remit to the BC Ministry of Finance, and absorb the 7% you pay on your own taxable inputs.
You can model the income-tax side with our corporate tax calculator and the GST/PST side with our sales tax calculator. For the full sales-tax picture nationally, see our GST/HST/PST guide for Canadian business. BC owners weighing a move or expansion should also compare provinces in our Alberta vs BC business tax guide — Alberta has no PST and a lower 8% general corporate rate, which materially changes the math.
How RN Canada helps
RN Canada is an accounting and advisory firm with offices in Edmonton and Vancouver, led by Ozgur Duymaz, Ph.D., CPA (Canada), ACCA (UK), CMA (US). For BC corporations we handle T2 corporate filings, GST and PST registration and returns, and the planning around the $500,000 small-business limit, associated-company rules, and passive-income grind. With PST expanding to professional services in late 2026, we help affected BC businesses assess registration obligations and update their billing. Explore our bookkeeping and tax filing service or our fractional CFO service for deeper financial leadership.
Frequently asked questions
For the 2026 tax year, a Canadian-controlled private corporation pays a combined federal-plus-provincial rate of 11% on the first $500,000 of active business income (9% federal + 2% BC) and 27% on income above the small-business limit (15% federal + 12% BC). The BC general rate of 12% is among the higher provincial general rates in Canada.
Yes. BC layers a 7% Provincial Sales Tax (PST) on top of the 5% federal GST, for a combined 12% on most taxable goods and some services. PST and GST are separate taxes with separate registrations, returns and rules. Unlike GST, PST paid on most business inputs is not generally recoverable, so it is a real cost, not a flow-through.
The 2% BC small-business rate applies to active business income up to the $500,000 small-business limit, matching the federal threshold. Income above $500,000, plus most passive investment income, is taxed at the 12% BC general rate. The limit can be reduced where associated companies share it or where passive investment income is high.
Often, yes. PST applies to taxable goods a corporation buys for its own use, such as office equipment, software, and supplies, even when bought for business. There is no broad input-tax-credit mechanism for PST as there is for GST, so most PST a BC business pays on inputs becomes a sunk cost built into its expenses.
Yes. Under the 2026 BC Budget, effective October 1, 2026, PST is extended to certain professional services including accounting and bookkeeping, and to non-residential real estate services. Affected providers must register and charge 7% PST. Engineering, architectural and geoscience services have a special rule applying PST to 30% of the price.
A BC corporation files a single federal T2 return; the Canada Revenue Agency administers both federal and BC corporate income tax, so there is no separate provincial corporate return. Corporate tax instalments and the final balance follow the federal schedule. GST and PST are filed separately, GST with the CRA and PST with the BC Ministry of Finance.