If you run a corporation in Ontario, the Canadian corporate tax rate you actually pay is two numbers stacked together: a federal rate and a provincial rate. For most small businesses in Durham Region that total is about to drop, because Ontario is cutting its small business rate on 1 July 2026. Here is every corporate tax rate that applies in Canada in 2026, who qualifies for the low ones, and what your corporation really pays.
Rates below were confirmed against canada.ca and ontario.ca on 17 June 2026.
Key takeaways
- A Canadian corporation pays a combined federal and provincial corporate income tax rate. In Ontario the two common cases are the small business rate and the general rate.
- Small business rate (a CCPC's first $500,000 of active income): 9% federal plus Ontario's lower rate, which drops from 3.2% to 2.2% on 1 July 2026. The combined rate falls from 12.2% to 11.2%.
- General rate (income above the small business limit): 15% federal plus 11.5% Ontario, for a combined 26.5%.
- The low 9% rate is not automatic. It comes from the small business deduction, and only a Canadian-controlled private corporation qualifies.
The corporate tax rate in Canada at a glance (2026)
Quick answer. A Canadian corporation pays a combined federal plus provincial corporate income tax rate, and in Ontario there are two common cases:
- Small business rate,for a CCPC on its first $500,000 of active business income: 9% federal plus Ontario's lower rate. That lower rate is 3.2% until 30 June 2026 and 2.2% from 1 July 2026, so the combined small business rate falls from 12.2% to 11.2%.
- General rate, for income above the small business limit or income that does not qualify: 15% federal plus 11.5% Ontario, for a combined 26.5%.
The rest of this guide explains how each corporate tax rate in Canada is built and when it applies.
Federal corporate tax rate: 15% general, 9% small business
The federal corporate tax rate in Canada starts high and comes down through two reductions:
- The basic Part I rate is 38% of taxable income.
- A 10% federal tax abatement drops it to 28%, leaving room for the provinces to levy their own corporate income taxes.
- A 13% general tax reduction brings the net federal tax rate to 15%.
For a Canadian-controlled private corporation (a CCPC, meaning a smaller private company owned by Canadian residents) that claims the small business deduction, the net federal rate is just 9% on active business income up to the limit. Manufacturers of qualifying zero-emission technology pay less again, 7.5% general or 4.5% with the small business deduction. Banks and life insurers pay an extra 1.5% on taxable income over $100 million.
Provincial and territorial corporate income tax rates
Provinces and territories each add their own corporate income taxes on top of the federal tax, with a lower rate on small business income and a higher rate on everything else. These provincial corporate income tax rates vary widely across Canada:
| Province | Lower (small business) | Higher (general) | Business limit |
|---|---|---|---|
| Ontario | 3.2%, then 2.2% from 1 July 2026 | 11.5% | $500,000 |
| British Columbia | 2% | 12% | $500,000 |
| Alberta | 2% | 8% | $500,000 |
| Saskatchewan | 1% | 12% | $600,000 |
| Nova Scotia | 1.5% | 14% | $700,000 |
Alberta and Quebec set and collect their own corporate income taxes, so they are not in the CRA's rate table. The business limit, the amount of income that gets the lower rate, is not the same everywhere: it is $500,000 in Ontario but $600,000 in Saskatchewan and $700,000 in Nova Scotia.
Ontario's corporate tax rate drops to 2.2% on 1 July 2026
Here is the change most 2025 guides miss. Ontario is cutting its lower corporate income tax rate from 3.2% to 2.2%, effective 1 July 2026. For a Durham Region CCPC, that takes the combined small business rate from 12.2% down to 11.2% on the first $500,000 of active business income. We cover the change, the blended-year wrinkle and what it saves in our guide to Ontario's 2026 small business rate cut.
One detail trips people up. If your corporation's fiscal year straddles 1 July 2026, you do not get the full 2.2% for the whole year. Ontario prorates the rate by the number of days before and after the change, so a December year-end gives you a blended rate for the 2026 tax year. The full 2.2% applies cleanly to fiscal years that start on or after 1 July 2026.
The small business deduction: how a CCPC pays 9%
The low 9% federal rate is not automatic. It comes from the small business deduction (SBD), and only Canadian-controlled private corporations (CCPCs) qualify. Three conditions shape it:
- You must be a Canadian-controlled private corporation, a private company that is not controlled by non-residents or public companies.
- The low rate applies only to active business income, the profit from actually running your business, up to the $500,000 small business limit.
- The limit is shared across associated corporations, so you cannot multiply it by opening several companies.
Two rules claw the limit back. If your corporation earns more than $50,000 of passive investment income (interest, rent, portfolio dividends) in a year, the federal small business limit shrinks by $5 for every $1 over $50,000 and disappears at $150,000. The limit also phases out once taxable capital employed in Canada passes $10 million, and is gone at $50 million. One Ontario-specific point worth knowing: Ontario does not copy the passive income grind, so the Ontario lower rate can still apply even when the federal small business deduction is reduced.
What a Whitby corporation actually pays: a 2026 example
Say you run an incorporated trades business in Whitby, a CCPC with $200,000 of active business income, all income earned in Ontario and all under the $500,000 limit.
Worked example: $200,000 of active income
- Until 30 June 2026, the combined small business rate is 12.2%: 9% federal ($18,000) plus 3.2% Ontario ($6,400), so $24,400 in corporate tax.
- From 1 July 2026, the rate is 11.2%: 9% federal ($18,000) plus 2.2% Ontario ($4,400), so $22,400.
That is $2,000 less on the same $200,000 of profit. A CCPC earning the full $500,000 saves $5,000 a year once the new rate is fully in effect. The catch is the proration rule above, so the exact saving for your 2026 corporate tax return depends on your fiscal year-end.
Is incorporating worth it for the lower corporate tax rate?
The low corporate tax rate only helps if you leave profit in the company. At roughly 11.2% against personal rates that climb past 50%, a CCPC lets you defer a large chunk of tax on money you reinvest or hold back. The moment you pay that profit out to yourself as salary or dividends, personal tax applies and most of the deferral reverses. So incorporating tends to pay off when your business earns more than you need to live on and you can leave the surplus in the corporation. Below that, the tax saving often does not cover the extra accounting and filing costs, which is a conversation worth having before you register.
Work out your corporate tax rate with a Durham Region CPA
We help incorporated business owners across Oshawa, Whitby, Ajax, Pickering, Clarington, Bowmanville and Uxbridge work out their real corporate tax rate and keep it as low as the rules allow. If you are not sure which rate applies to your company, or how the 1 July 2026 Ontario change hits your year-end, book a free consultation and we will run the numbers with you.
This article is for general information only and does not replace professional tax advice. Rates were confirmed against canada.ca and ontario.ca as of 17 June 2026 and can change, and your specific situation matters. Always confirm with a qualified CPA before making tax decisions.
