Business GICs in Canada: Guaranteed Returns on Corporate Cash

Canadian businesses often hold cash for payroll, tax instalments, planned purchases or an operating buffer. A business GIC earns a fixed rate on the part of that cash with a known date. This page covers what is different when the depositor is a business: where to get a GIC, how deposit insurance applies, and how the interest is taxed. For how GICs work in general, see the GIC guide.

What Is a Business GIC?

A business GIC (Guaranteed Investment Certificate) is the corporate equivalent of a personal GIC. A company deposits a fixed amount at a financial institution for a specified term, earning a guaranteed interest rate. At maturity, the principal plus interest is returned to the business.

Business GICs work identically to personal GICs in terms of how interest and returns work. The differences are:

• The account holder is a corporation or business entity, not an individual
• CDIC coverage depends on the business’s legal structure (see below)
• Interest is corporate taxable income, not personal income
• No registered accounts (RRSP, TFSA) are available to corporations

Why Businesses Use GICs

A fixed rate: A GIC locks in its rate for the term, while a business savings account rate can change at any time. Posted GIC rates at named institutions are on the best GIC rates page; business GIC rates can differ from personal ones, so confirm with the institution.

Capital preservation: Unlike investing in stocks or bonds, a GIC guarantees principal return at maturity. For cash you know you will need on a specific date (a tax installment, a planned equipment purchase), a GIC locks in the return and ensures the money is there.

Cash flow planning: Non-redeemable GICs match the term to a known future cash need. A business expecting a major expense in 12 months can lock in a 12-month GIC and earn more than a savings account.

Types of Business GICs

Where to Get a Business GIC in Canada

For larger amounts, many institutions negotiate rates through their commercial or business banking teams.

CDIC Coverage for Business GICs

The Canada Deposit Insurance Corporation (CDIC) insures business deposits at member institutions, but coverage depends on the business’s legal structure. The personal-deposit categories and limits are explained in are GICs safe?.

• Corporations: A corporation is a separate depositor with its own $100,000 limit per member institution, apart from the owner’s personal deposits. Because a corporation cannot hold an RRSP or TFSA, that single limit covers all of its eligible deposits at that institution.
• Sole proprietorships: Not a separate legal entity, so there is no separate coverage: business deposits held in the owner’s name are combined with the owner’s personal deposits under the same “deposits held in one name” limit.
• Partnerships: CDIC counts a partnership as a depositor in its own right, so its eligible deposits can be insured separately from the partners’ personal deposits.
• Spreading risk: Businesses with more than the limit often spread deposits across several CDIC member institutions.

CDIC said, answering questions at its annual public meeting of November 6, 2024: “Most of Canada’s credit unions are provincially regulated and not CDIC members. Each of Canada’s 10 provinces has a provincial deposit insurer that protects deposits at provincial credit unions.” Each province’s insurer, who it says it covers and its coverage, in the insurer’s own words, are in the insurer table. CDIC's members include banks, federally regulated credit unions, and loan and trust companies.

Tax Considerations for Corporate GICs

Investment income vs. active income

GIC interest is passive investment income. For a Canadian-Controlled Private Corporation (CCPC), adjusted aggregate investment income over $50,000 in one year reduces the small business deduction limit for the next year:

• For every dollar of investment income above $50,000, the $500,000 business limit is reduced by $5, reaching zero at $150,000 of investment income
• Active business income that loses the deduction is taxed at the federal general rate of 15% instead of the small business rate of 9%, before provincial tax
• This threshold is important for businesses with large cash reserves generating significant interest

Corporate tax rate on investment income

Investment income in a CCPC is taxed at a higher rate than active business income, including an additional refundable federal tax of 10 2/3%. Part of that tax, equal to 30 2/3% of the corporation’s aggregate investment income, goes into a refundable pool that is paid back to the corporation (at 38 1/3% of the taxable dividends it pays) when it pays dividends to shareholders. Corporate cash management involves several interacting rules, which is why many owners work through it with a CPA.

Timing of interest recognition

A corporation reports GIC interest as it accrues each year, even on a multi-year GIC that pays only at maturity, so a longer term does not defer the tax. Individuals face a similar annual accrual rule, explained in the guide to how GIC interest is taxed.

Business GIC vs Business Savings Account

The trade-off is the same one individuals weigh in GIC vs HISA: a fixed rate for a term against a variable rate with daily access.

GIC Laddering for Businesses

Businesses can ladder GICs the same way individuals do (see how to build a GIC ladder), often over shorter terms that match their cash needs. One example:

• 25% of reserves in each of a 3-month, 6-month, 1-year and 2-year GIC
• As each GIC matures, it is reinvested in the longest rung, so part of the money comes due at regular intervals
• Longer rungs pay more when the yield curve slopes upward, which is common but not guaranteed

This strategy reduces reinvestment risk (not all cash maturing at once in a potentially lower-rate environment).

Key Takeaways

• Business GICs offer guaranteed returns on corporate cash at rates typically higher than savings accounts
• A corporation’s CDIC coverage is $100,000 per member institution; larger deposits are often spread across institutions
• GIC interest is corporate investment income, taxable in the year earned: CCPC investors should understand the passive income threshold
• Rates differ between institutions and between personal and business GICs; compare them on the day
• GIC laddering helps balance yield and liquidity for businesses with ongoing cash flow needs

Related: GIC guide · Best GIC rates · Term deposit vs GIC · Best business savings accounts · GIC hub