Canada Professional Corporation Guide

the professional corporations in Canada. The professional corporation (PC) is the "corporation owned by the regulated professionals — the physicians, the surgeons, the dentists, the lawyers, the accountants, the veterinarians, the chiropractors, the optometrists". The small business deduction (SBD) reduces the federal corporate tax rate to 9% on the first $500,000 of the active business income (the "business limit"). The combined federal-provincial small business rate: the "Ontario at 12.2%", the "BC at 11%", the "Alberta at 11%", the "Quebec at 11.5%". The investment income in the corporation is taxed at the "general corporate rate (15% federal + the provincial rate)" — the "refundable tax (the RDTOH — the Refundable Dividend Tax On Hand)" — the "investment income earns the refundable tax at 30.67% federal" — the "tax is refunded when the corporation pays the dividends". The TOSI (Tax on Split Income) — the "2018 TOSI rules restrict the income sprinkling to the family members" — the "excluded business exception: the professional corporation owner who is the 'engaged on a regular, continuous, and substantial basis' in the business".

Corporate Tax Rates

Active business income (the SBD-eligible): The "federal rate: 9% (the small business deduction)". The "Ontario rate: 3.2%". The "combined federal-Ontario: 12.2%". The "combined federal-BC: 11%". The "combined federal-Alberta: 11%". The "business limit: $500,000 (the federal SBD limit)".
Passive investment income: The "federal rate: 38.67% (the part I tax at 28% + the part IV tax at 10.67%)". The "refundable portion: 30.67% (the RDTOH)". The "net tax after the refund: 8% federal + the provincial rate".
General corporate income (above the SBD limit): The "federal rate: 15%". The "Ontario rate: 11.5%". The "combined: 26.5%".

Income Sprinkling & TOSI

TOSI (Tax on Split Income): The "the dividends paid to the family members (the spouse, the children, the parents) are taxed at the top marginal rate (33% federal + the provincial top rate)". The "TOSI applies to the 'non-excluded' individuals".
Excluded business: The "corporation owner who works at least 90% of the time in the business" — the "engaged on the 'regular, continuous, and substantial basis'" — the "spouse and the children are exempt from the TOSI if the owner qualifies for the excluded business".
Excluded shares: The "shares that meet the 'excluded shares' test" — the "corporation must earn 90%+ of the income from the active business". The "spouse can receive the dividends without the TOSI".
Reasonable return: The "family members can receive the income if they contribute the 'labour or the capital' to the business". The "reasonable return based on the contribution".

Lifetime Capital Gains Exemption

LCGE (2025): The "$1,016,836 lifetime exemption on the capital gains from the sale of the qualified small business corporation (QSBC) shares".
QSBC test: The "90%+ of the assets used in the active business at the time of the sale". The "shareholder must own 10%+ of the shares". The "corporation is the Canadian-controlled private corporation (CCPC)".
Planning strategy: The "professional corporation can accumulate the investments in the holding corporation" — the "medical office building can qualify for the QSBC if the building is used for the active business".

For the CCPC rules and the small business deduction, see our CCPC Guide →. For the corporate tax rates and the filing, see our Corporation Tax Guide →.