A corporation cannot deduct most usual business expenses from its PSB income. For example, it cannot deduct expenses for:

• office supplies;
• travel;
• meals;
• a cellphone.

Deductible expenses are limited to:

• a salary, wages or other remuneration paid in the year to the incorporated employee;
• the cost to the corporation of an allowance or a benefit granted in the year to the incorporated employee;
• an expense which, had it been paid by an individual, would have been deductible from the income from an office or employment connected with the selling of property or negotiating of contracts;
• an amount the corporation pays in the year as judicial or extrajudicial expenses to recover an amount owing to it for services it provided.

A corporation carrying on a PSB therefore cannot deduct, for example, capital expenditures or capital cost allowance.

A corporation that carries on a PSB in the taxation year or that carried on a PSB in a previous taxation year must include in its income for the year every amount that is deemed to be a benefit received by the corporation if a person contracts a debt because of: 

• services provided or to be provided by the corporation;
• the individual's previous, current or intended office or employment.

A corporation cannot claim the small business deduction for PSB income because it is not considered income from an eligible business. The general corporation income tax rate therefore applies to PSB income.

For more information, see Calculation of the Income Tax of a Corporation.

A corporation carrying on a PSB may not be able to claim some tax credits for a taxation year. Contact us for more information.