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Personal Services Business (PSB) – New Tax Rate

posted Oct 25, 2012, 8:15 PM by Margaret Lin CPA, CGA, CFP   [ updated Jan 9, 2013, 5:53 PM ]

For the taxation years that begin after October 31, 2011, income of a PSB no longer qualifies for the federal general rate reduction of 13%.  That means, in British Columbia, a PSB will have a combined federal and provincial rate of 38% and a flow through rate of 54.2% when the after tax earnings are paid to the corporate shareholder as a dividend. If the shareholder had earned the income directly as an employee, the total tax rate would be only 43.7%.