What is the corporate tax rate in Canada for 2026?

A Canadian-controlled private corporation (CCPC) pays a small business rate of 9% federally on the first $500,000 of active business income, plus a provincial rate (e.g. 3.2% in Ontario, for 12.2% combined). Income above $500,000, or income of non-CCPCs, is taxed at the 15% federal general rate plus a provincial rate (about 26.5% combined in Ontario).

What is the small business deduction?

The small business deduction (SBD) reduces the federal corporate rate from 15% to 9% on the first $500,000 of active business income earned by a CCPC. Most provinces offer a matching reduced provincial rate, giving a combined rate of roughly 9-13% depending on the province.

How does passive income affect the small business deduction?

Since 2019, the $500,000 SBD limit is reduced by $5 for every $1 of adjusted aggregate investment income above $50,000, and is fully eliminated once passive income reaches $150,000. This discourages using a corporation as a passive investment vehicle.

Canada · 2026 tax year

Canada Corporation Tax Calculator

For Canadian-controlled private corporations. The small business rate (9% federal) applies to the first $500,000 of active income; the 15% general rate applies above. Add your province for the combined rate.

Your company

Revenue

Deductible expenses Salaries, rent, supplies, and other business costs

Active business income$0

Province

This is a CCPC (eligible for the small business deduction)

Passive investment income

Adjusted aggregate investment income Over $50,000 grinds the $500k limit; gone at $150,000

Corporate tax

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— effective · —

Active business income$0

At small business rate (12.2%)$0

At general rate (26.5%)$0

Total corporate tax$0

After-tax profit$0

SBD limit available

$500,000

After-tax profit

Effective rate

Combined rates

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How corporation tax works in Canada

A corporation is a separate taxpayer with a flat rate on its profit — no brackets. But there are effectively two rates, and which one you pay turns on the small business deduction (SBD). A Canadian-controlled private corporation pays just 9% federally on its first $500,000 of active business income; everything above that, and all income of larger or non-private corporations, is taxed at the 15% general rate. Each province adds its own rate on top.

Combined federal + provincial rates

Because the province stacks on, the real rate depends on where the company is. In Ontario a CCPC pays about 12.2% on small-business income and 26.5% above the limit; Alberta's general rate is lower at around 23%. There's no separate "state" corporate tax beyond the provincial rate, and it's all filed on the federal T2 return (except Quebec, which also files a CO-17).

The passive-income grind

To stop companies being used as investment shelters, the $500,000 SBD limit is reduced by $5 for every $1 of passive investment income above $50,000 — so it's fully gone once passive income hits $150,000. Past that point, all active income is taxed at the general rate.

Frequently asked questions

What's "active business income"?

Income from actually running a business — sales, services, operations — as opposed to passive income like interest, rents, royalties or portfolio dividends. Only active business income qualifies for the small business rate; passive income is taxed at a high rate (around 50%) with part refundable when dividends are paid.

What happens when I take money out?

The corporate tax is only the first layer. When you pay yourself a dividend from after-tax profit, you're taxed again personally — but the dividend tax credit offsets the corporate tax already paid (Canada's "integration"). A salary, by contrast, is deductible to the company but taxed as employment income to you. The best mix depends on your situation.

Is the $500,000 limit shared?

Yes. Associated corporations (commonly controlled companies) share a single $500,000 business limit between them, so you can't multiply the small-business rate by splitting a business across several companies. Saskatchewan and Nova Scotia set higher provincial limits.

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Sole proprietor

The unincorporated path

Educational estimate — not tax advice. Canada 2026 tax year. CCPC small business rate = 9% federal + a provincial/territorial rate (0%–3.2%) on the first $500,000 of active business income; general rate = 15% federal + a provincial/territorial rate (8%–16%) above. All 10 provinces and 3 territories are covered. The $500,000 SBD limit is reduced by $5 per $1 of adjusted aggregate investment income over $50,000, eliminated at $150,000. It assumes a single corporation with no associated-company sharing, ignores provincial small-business limits that differ from the federal $500k (Saskatchewan $600k, PEI $600k, Nova Scotia $700k) and treats Nova Scotia's small-business rate at its current 1.5% and PEI's general rate at 15% after their mid-2025 changes, and excludes manufacturing & processing rates, refundable taxes on investment income (RDTOH), Part IV tax, the general rate reduction nuances, and the personal dividend tax on distributions. Confirm with the CRA or an accountant.