Saskatchewan Small Business Deduction (SBD) – Complete Guide (2025)
The Saskatchewan Small Business Deduction (SBD) is a cornerstone of the province's business tax environment, providing incorporated small businesses with a 0% provincial corporate income tax rate on their first $600,000 of active business income (ABI). By reducing the tax burden on profitable small businesses, the SBD frees up cash flow for reinvestment, job creation, and expansion. This deduction is in addition to the federal SBD, which means eligible Saskatchewan companies can realize substantial combined tax savings each year.
Below you'll find a comprehensive breakdown of SBD eligibility, step-by-step claim process, calculation examples, documentation requirements, and advanced strategies for maximizing your deduction, especially if you have associated corporations or approach the phase-out thresholds.
- SBD Limit: Up to $600,000 of active business income per year (shared among associated corporations)
- Reduced Corporate Tax Rate: 0% (as of 2025) on the first $600,000; regular rate (12%) applies above this threshold
- Who Qualifies: Incorporated CCPCs (Canadian-Controlled Private Corporations) with permanent establishments in Saskatchewan, earning active business income
- Phased-Out: For CCPCs (and their associated group) with taxable capital employed in Canada between $10 million and $15 million
- Stacking: Fully combinable with the federal SBD for additional tax savings
Who Is Eligible for the Saskatchewan Small Business Deduction?
- Canadian-Controlled Private Corporation (CCPC): The corporation must be a CCPC throughout the tax year (controlled by Canadian residents, not listed on a stock exchange, and not a subsidiary of a public company).
- Permanent Establishment: Must have a permanent establishment (office, branch, place of management, etc.) in Saskatchewan.
- Active Business Income (ABI): Only ABI qualifies—investment income, specified investment business income, and personal services business income are excluded.
- Associated Corporations: The $600,000 SBD limit is shared among all associated corporations across Canada. An "Agreement to Allocate" SBD must be filed if applicable.
- Phased-Out for Large Groups: If the total taxable capital employed in Canada (including all associated corporations) is between $10M and $15M, the SBD is gradually reduced to zero.
Example: If two associated companies each have $400,000 of ABI, they must allocate the $600,000 SBD limit between them (e.g., $300,000 each, or $400,000/$200,000), not $600,000 each.
How to Claim the Saskatchewan Small Business Deduction
- File your T2 corporate income tax return and complete the Saskatchewan SBD schedules (SK428 and related forms).
- Calculate your active business income earned in Saskatchewan for the year. Exclude investment and passive income.
- If you are part of an associated group, allocate the SBD limit among all related companies using the prescribed agreement (attach to tax return).
- Report your taxable capital employed in Canada (to determine if phase-out applies). Complete the relevant lines on the T2 and SK schedules.
- Apply the 0% SBD rate to your allocated share of the first $600,000 of ABI; any ABI above this is taxed at 12% (regular provincial rate).
- Keep detailed supporting records: income calculations, association agreements, ownership structure, and taxable capital calculations.
Documentation Tip: If part of an associated group, keep signed allocation agreements and ownership charts. For taxable capital, retain your balance sheet and any working papers used to determine capital employed in Canada.
Example Calculation:
ABC Inc. is a Saskatchewan CCPC with $750,000 in active business income and no associated corporations. It is eligible for the full SBD limit.
- First $600,000 ABI: Taxed at 0% (SBD applies)
- Remaining $150,000: Taxed at 12% (regular SK rate)
Provincial tax: $0 (first $600,000) + $18,000 (12% of $150,000) = $18,000
ABC Inc. is a Saskatchewan CCPC with $750,000 in active business income and no associated corporations. It is eligible for the full SBD limit.
- First $600,000 ABI: Taxed at 0% (SBD applies)
- Remaining $150,000: Taxed at 12% (regular SK rate)
Provincial tax: $0 (first $600,000) + $18,000 (12% of $150,000) = $18,000
Associated Company Example:
ABC Inc. and XYZ Ltd. are associated. They agree to split the SBD limit $400,000 to ABC and $200,000 to XYZ. Each applies 0% rate to their allocated ABI.
ABC Inc. and XYZ Ltd. are associated. They agree to split the SBD limit $400,000 to ABC and $200,000 to XYZ. Each applies 0% rate to their allocated ABI.
Phased-Out Example:
If your group has $13M in taxable capital, your SBD limit is partially reduced. Calculate the reduced limit using the formula from the SK428 instructions. If over $15M, no SBD is available.
If your group has $13M in taxable capital, your SBD limit is partially reduced. Calculate the reduced limit using the formula from the SK428 instructions. If over $15M, no SBD is available.
Saskatchewan SBD Tax Rates (2025)
| Income Level | Saskatchewan SBD Rate | Regular SK Corporate Rate |
|---|---|---|
| First $600,000 active business income | 0% | 12% |
| Over $600,000 | N/A | 12% |
Note: Rates subject to change. Always confirm with the Government of Saskatchewan for up-to-date rates.
Advanced Scenarios & Practical Tips
Associated Corporations
- SBD limit ($600,000) must be split among all associated corporations in Canada—even those outside Saskatchewan.
- File the Agreement to Allocate SBD with your T2 return. Inaccurate allocations may trigger CRA reassessment.
- Associated status is based on the Income Tax Act (ownership/control, direct or indirect).
Phased-Out SBD
- If taxable capital (including all associates) is between $10M and $15M, use the prescribed formula from the SK428 to determine your reduced SBD limit.
- Carefully track taxable capital employed. Watch for "creep" over $10M due to expansion, asset purchases, or new subsidiaries.
- Review group structure annually to avoid unintentional loss of SBD.
Stacking with Federal SBD
- Most Saskatchewan CCPCs can claim both the provincial and federal SBD—just ensure you file both the federal and provincial schedules.
- Limits and eligibility are generally aligned, but allocation and taxable capital calculations must match across returns.
Documentation Best Practices
- Maintain detailed calculation workpapers, signed allocation agreements, group structure diagrams, and balance sheets for audit defense.
- Consult a tax professional for complex structures, multi-province operations, or changes in ownership.
Frequently Asked Questions
Can I claim both the federal and Saskatchewan SBD?
Yes! Most Saskatchewan CCPCs can claim both deductions, multiplying their tax savings. You must complete both federal and SK SBD schedules. The limit is shared, so you can only claim up to $600,000 total per group.
What if I have corporations in other provinces?
Associated corporations across Canada must share the $600,000 SBD limit. Your Saskatchewan allocation depends on your permanent establishment and income earned in the province. File the allocation agreement to avoid penalties.
What documentation is required for SBD claims?
Keep all supporting records: income calculations, allocation agreements (if associated), proof of CCPC status, balance sheets for taxable capital, and tax returns. These may be requested in a CRA or Sask Finance audit.
Is there an SBD for unincorporated businesses?
No. The SBD applies only to incorporated CCPCs. Sole proprietors and partnerships without corporate partners do not qualify; only corporations (and partnerships with corporate partners) can claim.
What happens if my taxable capital crosses $10 million?
The SBD is gradually phased out between $10M and $15M of taxable capital across your associated group. Above $15M, the SBD is eliminated. Calculate carefully and plan corporate growth with this threshold in mind.