The corporate tax rate in Canada is not one number. A corporation pays two taxes on the same taxable income: a federal tax to Ottawa and a provincial or territorial tax to the province where it earns that income. For an Ontario Canadian-controlled private corporation (CCPC) claiming the small business deduction, the combined rate on its first $500,000 of active business income is 11.2% for a tax year beginning on or after July 1, 2026 — 9% federal plus Ontario’s reduced 2.2% small business rate. Income taxed at the general rate pays 26.5% combined in Ontario: 15% federal plus 11.5% Ontario. If your corporation’s tax year straddles July 1, 2026, the Ontario small business portion is prorated by days, giving a blended combined rate of about 11.7% for a calendar 2026 year. This guide explains both rates, the $500,000 limit, worked examples, and the T2 deadlines that catch owners out.
Corporate Tax Rates in Canada at a Glance
The table below is the whole story in one place, for Ontario. Every other province and territory has its own provincial rate, so never carry an Ontario combined rate into another province’s return — but the federal layer is the same everywhere.
| Income type | Federal | Ontario | Combined |
|---|---|---|---|
| Small business income — qualifying CCPC, first $500,000 of active business income, tax year beginning on or after July 1, 2026 | 9% | 2.2% | 11.2% |
| Small business income — same CCPC, calendar 2026 year straddling the July 1 cut (approximate blend) | 9% | ~2.7% | ~11.7% |
| General rate income — active business income above the limit, and most other corporate income | 15% | 11.5% | 26.5% |
| Personal services business income | 33% | 11.5% | 44.5% |
Two things in that table deserve emphasis. First, Ontario’s small business rate was 3.2% until June 30, 2026, and fell to 2.2% on July 1, 2026, which is why the combined small business rate fell from 12.2% to 11.2%. If you are reading an older guide that still quotes 12.2% as the current Ontario rate, it is out of date for tax years beginning after the cut — and if your year straddles the cut, neither 12.2% nor 11.2% is exactly right, because the Ontario portion is prorated. Second, investment income of a CCPC is taxed at a much higher rate up front — about 50% combined in Ontario — with part of it refundable when the corporation pays taxable dividends. That refundable mechanism is why corporate and shareholder tax bills have to be planned together.
How Corporate Tax Works in Canada
A corporation is a separate taxpayer from its owners. That is the single most important difference from a sole proprietorship, where business income is reported on the owner’s personal T1 return. A corporation files its own return, the T2, on its own fiscal year, and it pays tax on its taxable income — not on its revenue. Taxable income is what is left after the deductions the Income Tax Act allows: business expenses, salaries, rent, interest, and capital cost allowance, among others. Two corporations with the same $500,000 of revenue can therefore owe very different amounts of tax. The rate applies to taxable income on the return, never to gross sales.
The federal and provincial taxes are calculated on that same taxable income and added together. There is no single “Canadian corporate tax rate” to look up, because the provincial layer changes the answer by province — when you see a headline rate quoted without a province attached, treat it as incomplete.
The Small Business Deduction and the $500,000 Limit
The lower 9% federal rate is not available to every corporation. It comes from the small business deduction, and it applies to active business income of a CCPC up to the business limit — $500,000 federally. Active business income is income from an active business carried on in Canada: selling goods, providing services, manufacturing, and similar operating income. It is not passive investment income, and it is not personal services business income, which is why those categories carry their own, higher rates in the table above.
The $500,000 limit has two traps that quietly shrink it. The first is associated corporations: the limit is shared across a group of associated corporations, not $500,000 each. If you control two corporations, they share one $500,000 business limit between them. The second is passive income. Federally, the business limit is reduced by $5 for every $1 of adjusted aggregate investment income over $50,000, and it reaches zero at $150,000 of such income. A corporation earning significant rent, interest or portfolio income can therefore lose some or all of its small business deduction even though its operating income is well under $500,000. Ontario does not apply this passive-income reduction to its own small business rate, so a corporation can keep Ontario’s lower rate on its first $500,000 while losing part of the federal deduction — one more reason the federal and provincial calculations must be done separately, not assumed to match. The practical point for an owner is simple: do not assume the full $500,000 at 9% federal until you have checked associated corporations and passive income for the year.
Worked Examples — What the Rates Mean in Dollars
Example 1 — Ontario CCPC with $100,000 of active business income
Take a qualifying Ontario CCPC with a tax year beginning on or after July 1, 2026, earning $100,000 of active business income and claiming the small business deduction on all of it. Its combined tax is $100,000 × 11.2% = $11,200. For a calendar 2026 year that straddles the Ontario rate cut, the same $100,000 costs about $11,700 at the approximate blended rate of 11.7%. The difference — about $500 on $100,000 — is entirely the Ontario proration, and it is the kind of detail a T2 preparer checks before finalizing the return.
Example 2 — Ontario CCPC with $600,000 of active business income
Now take the same corporation earning $600,000 of active business income in a tax year beginning on or after July 1, 2026. The first $500,000 is taxed at the small business rate: $500,000 × 11.2% = $56,000. The remaining $100,000 is taxed at the general rate: $100,000 × 26.5% = $26,500. Total corporate tax: $82,500, which is an effective rate of 13.75% on the $600,000. Notice how the effective rate sits between the two statutory rates — quoting only one of them for a corporation over the limit is misleading.
Example 3 — A general-rate corporation with $100,000 of income
A corporation that does not qualify for the small business deduction — for example, a public corporation, or a corporation that is not a CCPC — pays the general rate on all of its income. On $100,000 that is $100,000 × 26.5% = $26,500 in Ontario. Comparing Example 1 and Example 3 shows exactly what the small business deduction is worth on the same income: $15,300 on $100,000 in Ontario, for a tax year beginning after the July 2026 cut.
These examples are illustrations on active business income before other adjustments, credits or refundable taxes — not a substitute for a full T2 calculation.
Corporate Tax Rates Outside Ontario
Every province and territory sets its own general rate and lower small business rate, and provincial business limits do not always match the federal $500,000. A corporation operating in more than one province therefore has no single combined rate: income is generally allocated between provinces, and each province’s rate applies to its share. If you are comparing provinces for a new corporation, compare the full picture, not just the headline small business rate: the general rate above the limit, the provincial business limit, and whether the province follows the federal passive-income reduction. And rates change — Ontario’s July 2026 cut is a reminder to check the current year’s rates on the CRA’s corporation tax rates pages before relying on last year’s figures.
T2 Deadlines — Filing Is Not the Same as Paying
Every resident corporation must file a T2 return each year, even in a year with no income or no tax owing. The filing deadline is six months after the end of the corporation’s fiscal year. For a December 31 year-end, the T2 is due June 30. For a March 31 year-end, it is due September 30. Unlike a personal return, there is no single April date — the deadline follows the corporation’s own year-end.
The payment deadline comes first, and this is the trap. Any balance owing is generally due two months after year-end; a CCPC that claimed the small business deduction and meets the CRA’s conditions generally gets three months. For a December 31 year-end, that means payment by February 28 (or March 31 for a qualifying CCPC) while the return itself is not due until June 30 — filing on time in June does not undo months of interest on an unpaid February balance. Instalments are the third clock. Once a corporation’s tax exceeds the CRA’s threshold, it must pay instalments during the year — monthly for most corporations, quarterly for an eligible small CCPC. Missing the filing deadline attracts a late-filing penalty of 5% of the unpaid tax plus 1% for each complete month late, up to 12 months, and interest on a late balance runs from the balance-due day, not the filing date.
Common Corporate Tax Rate Mistakes to Avoid
- Applying the rate to revenue instead of taxable income. The rate applies after deductions. Revenue times the rate is not a tax bill.
- Quoting the old Ontario small business rate. Ontario’s rate is 2.2% from July 1, 2026, not 3.2%. Guides quoting a combined 12.2% are describing the pre-cut rate, and straddle years need a prorated blend of about 11.7% for calendar 2026.
- Using April 30 as the corporate deadline. April 30 is a personal tax date. A corporation’s T2 is due six months after its own fiscal year-end, and its payment is due two or three months after year-end — earlier than the filing date.
- Assuming the full $500,000 small business limit. Associated corporations share one limit, and federal passive income over $50,000 grinds it down. Check both before assuming 9% federal on the full amount.
- Forgetting the provincial layer. Federal rates alone understate the bill by the entire provincial rate — 11.5% at the general rate in Ontario, for example.
- Ignoring investment and personal services income. These categories carry higher rates than active business income, and mixing them into an active-business estimate understates the tax.
Learn Corporate Tax Properly, Not Just the Headline Rate
Knowing Ontario’s combined rates is a starting point. Preparing a T2 — the small business limit, associated corporations, passive income, refundable taxes, instalments and the balance-due day — is a professional skill, and one of the most billable in Canadian bookkeeping and tax preparation: every corporation files every year. If you want hands-on training in Canadian corporate tax taught by working professionals, look at Get Trained Get Hired’s Corporate Tax Course in Mississauga. Related reading: our guide to T1 vs T2 tax returns in Canada explains which return applies to which taxpayer, and our CRA payroll deductions guide covers the other monthly obligation every employer with staff faces.
Frequently Asked Questions
What is the corporate tax rate in Canada?
There is no single rate: a corporation pays federal tax plus provincial or territorial tax on the same taxable income. Federally the rate is 15% at the general rate and 9% on the first $500,000 of active business income for a qualifying CCPC. In Ontario the combined rates are 26.5% at the general rate and 11.2% at the small business rate for a tax year beginning on or after July 1, 2026.
What is the corporate tax rate in Ontario in 2026?
For a tax year beginning on or after July 1, 2026, an Ontario CCPC pays a combined 11.2% on its first $500,000 of active business income (9% federal + 2.2% Ontario) and a combined 26.5% at the general rate (15% federal + 11.5% Ontario). For a calendar 2026 year straddling the July 1 Ontario cut, the blended small business rate is about 11.7%.
What is the small business tax rate in Canada?
The federal small business rate is 9% on the first $500,000 of active business income for a qualifying CCPC claiming the small business deduction. Each province adds its own lower rate — 2.2% in Ontario from July 1, 2026 — so the combined small business rate varies by province.
What happens to the $500,000 limit if my corporation earns investment income?
Federally, the business limit is reduced by $5 for every $1 of adjusted aggregate investment income over $50,000, reaching zero at $150,000. Associated corporations also share a single $500,000 limit. Ontario does not apply the passive-income reduction to its own small business rate.
When is a corporation’s T2 return due in Canada?
A T2 return is due within six months of the corporation’s fiscal year-end — June 30 for a December 31 year-end. The tax balance itself is due sooner: two months after year-end, or three months for a qualifying CCPC claiming the small business deduction.
Does the corporate tax rate apply to revenue or profit?
It applies to taxable income — profit after the deductions the Income Tax Act allows — not to gross revenue. Two corporations with the same revenue can owe very different amounts of tax depending on their deductible expenses.
