Small business deduction (DPE);

The small business deduction (SBD) is a tax credit that lowers the federal tax rate to 9% on the first $500,000 of profits of a Canadian-controlled small business corporation (CCSC). In Quebec, a similar provincial rebate is available if the corporation qualifies.

Brief

Federal tax rate reduced to 9% (instead of 15%) on the first $500,000 of operating profits
Reserved for SPCCs: private companies under French control (owned by French citizens, not listed on the stock exchange)
In Quebec, the reduced rate requires, among other things, 5,500 hours of paid work per year.
The €500,000 limit is shared between the "associated" companies (those linked to the same group)

Why does this matter?

If you are incorporated in Quebec, the Small Business Deduction (SBD) is often your biggest tax advantage. For example, on $100,000 of eligible profit, the combined federal and provincial tax rate drops from approximately 26.5% to approximately 12.2%, representing a tax saving of nearly $14,000—money you can keep for reinvestment. However, we regularly see Quebec SMEs (small and medium-sized enterprises) lose the reduced provincial rate because they don't reach the 5,500 paid hours requirement, or see it dwindle due to sharing between related companies. An accountant who plans your compensation and structure around the SBD can save you thousands of dollars each year. Bankeo will introduce you to a certified accountant/CPA free of charge who understands the realities of incorporated SMEs, and we'll be there to support you every step of the way.

Frequently asked questions

What exactly is the DPE?

This is a tax break available to small private Canadian corporations. On the first portion of profits (up to $500,000 per year), the government applies a significantly lower tax rate than normal. As a result, the corporation retains more cash, which it can then reinvest or distribute.

What is the tax rate with the DPE?

At the federal level, eligible profits are taxed at 9% instead of the standard 15%. In Quebec, the rate drops to 3.2% if the company qualifies (for example, with 5,500 paid hours), otherwise it's 11.5%. Combining the two, the tax burden decreases from approximately 26.5% to approximately 12.2%.

Who is eligible and how can you make the most of it?

Il faut être une SPCC (société privée sous contrôle canadien) qui exploite une vraie entreprise au Canada. Le plafond de 500 000 $ diminue quand le groupe possède plus de 10 millions de dollars de « capital » (l'ensemble de ses avoirs financés par les propriétaires et les dettes), et il se partage entre sociétés liées; les revenus de placements, eux, n'y donnent pas droit. Pour tout optimiser, Bankeo vous présente gratuitement un comptable / CPA vérifié qui connaît la réalité des PME incorporées, et on reste à vos côtés.