For integration to work properly for a CCPC whose income qualifies for the small business deduction, the combined federal/provincial tax rate on corporations must be equal to 20 percent, while the combined federal/provincial dividend tax credit must be equal to two-thirds of the gross up.

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The integration principle aims to ensure that income earned through a corporation and then distributed as dividends is taxed at the same rate as if it were earned directly by an individual. The specific rates for corporate tax and dividend tax credits can vary by jurisdiction and do not have to be exactly 20 percent and two-thirds, respectively, for integration to work properly.

For Integration to Work Properly for a CCPC Whose Income