Open
Source verified August 10, 2026
Small Business Deduction (SBD)
Corporate tax reduction for Canadian-controlled private corporations
Funding available
Up to 16% of project cost
Deadline
Open continuously
Location
Canada
Who can apply
Canadian-controlled private corporations (CCPCs) throughout the taxation year.
See full eligibility
Overview
Small Business Deduction (SBD) reduces Part I corporate income tax for CCPCs in Canada, generally 16% of the least of active business income, taxable income, and the business limit. It supports reinvestment and expansion while applying only to income from an active business carried on in Canada.
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Opportunity Score
Moderate potential, but conditions must align.
At a glance
Funding available
Financing goals
- No objectives are currently available
Eligible Funding
- Up to 16% of project cost
Funds Providers
Eligible candidates
Eligible Industries
- All industries
Location
- Canada
Legal structures
- For-profit business
Annual revenue
- All revenue ranges
Organisation size
- All organization sizes
Audience
- All groups
Next Steps
1
Determine your project
2
Validate your eligibility
Official resources
Eligibility
Who is eligible?
- Canadian-controlled private corporations (CCPCs) throughout the taxation year.
Who is not eligible
- Specified investment businesses.
- Personal services businesses.
Eligible geographic areas
- Canada
Selection criteria
- Ability to reduce corporate tax
- Amount of income for the year from an actively operated business in Canada
- Taxable income for the year
- Business limit for the year
How to apply
- Step 1: Calculate Your SBD and Business Limit
- Determine your status as a Canadian-controlled private corporation (CCPC).
- Calculate your income from active business in Canada, taxable income, and business limit for the year.
- Apply the phase-out rules if your adjusted aggregate investment income or taxable capital employed in Canada is above prescribed thresholds.
- Step 2: Prepare Relevant Documentation
- Gather supporting documents including financial statements, details of active business income, records of adjusted aggregate investment income, and information on associated corporations.
- Maintain documentation on any asset disposals, transfers of property, and any changes to fiscal year end, as required.
- Step 3: Complete Your Corporate Tax Return
- Accurately complete your T2 Corporation Income Tax Return, applying the Small Business Deduction in the relevant schedules.
- Include all required schedules detailing business limits, income calculations, and associated corporations, as applicable.
- Step 4: Submit the Tax Return to the CRA
- File your completed and signed T2 Corporation Income Tax Return, including all supporting schedules, with the Canada Revenue Agency (CRA) by the applicable deadline.
- Step 5: Respond to CRA Notices or Requests
- Monitor for any follow-up communications from the CRA regarding your SBD claim.
- Provide additional information or documentation if requested by the CRA for verification.
Additional information
- Allocation of the business limit must be shared among associated corporations within the same taxation year.
- Anti-avoidance rules are in place to prevent reduction of the passive income business limit through transfers or loans to related corporations that are not otherwise associated.
- Corporations must maintain detailed documentation to substantiate the purpose and timing of relevant transactions, particularly regarding transfers of investments or changes in fiscal year.
- For changes in fiscal year end, corporations must receive approval from the Canada Revenue Agency (CRA) by submitting a formal request with supporting details.
Frequently Asked Questions about the Small Business Deduction (SBD) Program
What is the Small Business Deduction (SBD)?
Small Business Deduction (SBD) reduces Part I corporate income tax for CCPCs in Canada, generally 16% of the least of active business income, taxable income, and the business limit. It supports reinvestment and expansion while applying only to income from an active business carried on in Canada.
How much funding can be received?
Small Business Deduction (SBD) Funds up to 16% of admissible expenses.
Who is eligible for the Small Business Deduction (SBD) program?
To be eligible for the Small Business Deduction (SBD) program, you must:
The corporation must be a Canadian-controlled private corporation (CCPC) throughout the taxation year.
The deduction applies to income from an active business carried on in Canada.
Who can I contact for more information about the Small Business Deduction (SBD)?
You can contact Canada Revenue Agency (CRA).
Where is the Small Business Deduction (SBD) available?
The Small Business Deduction (SBD) program is available across Canada.
Is the Small Business Deduction (SBD) a grant, loan, or tax credit?
Small Business Deduction (SBD) is a Tax Credits
Who are the financial supporters of the Small Business Deduction (SBD)?
Small Business Deduction (SBD) is funded by Canada Revenue Agency (CRA)