Updated Checked by the Tax-Services.ca editorial team How we check
Business tax in Ontario means two bills stacked on the same profit: a federal one and an Ontario one. For most corporations they add up to 26.5%. A small Canadian-controlled private corporation (a CCPC) pays far less on its first $500,000 of active business income, about 11.2% once Ontario’s July 2026 cut is in place for a full year.
What is the business tax rate in Ontario?
A corporation with an Ontario office pays federal tax and Ontario tax on the same taxable income. The federal rate is 15% for most companies and 9% for a CCPC on income under the small business limit. Ontario’s basic rate is 11.5%, and its lower rate for small companies is 3.2% until 30 June 2026.
| Layer | General rate | Small business rate (CCPC) |
|---|---|---|
| Federal | 15% | 9% |
| Ontario | 11.5% | 3.2% to 30 June 2026, then 2.2% |
| Combined | 26.5% | 12.2% before, 11.2% after |
If you run the business as yourself, with no corporation, none of this applies. Your profit goes on your own return and gets taxed at personal rates instead, which our self-employed tax calculator estimates.
What changed for Ontario businesses on 1 July 2026?
The CRA says the lower rate of Ontario corporation tax falls from 3.2% to 2.2% on that date. That sounds simple. It isn’t, because the date lands in the middle of most companies’ tax years, and the tax year decides which rate applies to which slice of profit.
A company with a 31 December year end gets a blend of both rates. Our calculator works out about 2.7% for Ontario over calendar 2026, and it’s our own day-count, not a figure the CRA prints. Use it as a guide. A different year end gives a different blend, so check your T2 with the CRA rate page open.
Some CRA pages haven’t caught up yet. The CRA’s Ontario small business deduction page still shows the 3.2% lower rate and says an increase to the deduction has been announced. Treat the 3.2% on that page as the rate before the change.
How much does a small Ontario corporation pay on $100,000 of profit?
Take a CCPC with $100,000 of active business income and a calendar year end. On the corporate tax calculator, the federal part is $9,000 and the Ontario part is about $2,696. That’s roughly $11,696 in total, or 11.7%, and $88,304 stays in the company.
Push the profit to $700,000 and the first $500,000 still gets the low rates, but the last $200,000 is taxed at 26.5%. The estimate comes to about $111,480, an average of 15.9%. And a company that isn’t a CCPC pays 26.5% from the first dollar, so $1,000,000 of profit means $265,000.
Here’s the same logic in one sentence for a bakery owner in Kingston clearing $250,000 a year through her CCPC: about $29,240 of combined tax at the 2026 blend, which leaves about $220,760 in the company before she pays herself anything. That’s just $250,000 times 11.696%, so check it against your own numbers.
Who can use the small business rate?
Only a CCPC. And only on active business income.
Passive income such as interest does not count, and the $500,000 limit is shared with associated corporations, so two companies under common control don’t get $500,000 each.
Ontario also phases its small business deduction out for companies with taxable capital of more than $10 million in Canada, and it’s gone at $50 million. That doesn’t touch a typical owner-run company. It matters if you sit inside a bigger group.
Which other taxes does an Ontario business face?
Corporate income tax is only one of them. If your taxable sales pass $30,000 over four consecutive calendar quarters, you have to register for the GST/HST, and you can work out the amounts with the GST/HST calculator. Once you have staff, you remit their deductions to the CRA, and the payroll remittance calculator shows what that looks like.
Then there’s the owner.
Money you pull out as a dividend is taxed again in your hands, which you can test with the dividend tax calculator. For a fuller look at the rates themselves, see our page on corporate tax.
Does it matter when your year end falls?
It can. A company with a 30 June year end finishes its year just as the new rate starts, so that whole year sits on the old 3.2% rate. A company with a 31 December year end straddles the change, and one with a 30 June year end the following year gets the full cut. If you can choose a year end, that’s a question for your accountant, and it shouldn’t be the only reason you pick one.
It’s also why two small companies in the same town can show different Ontario rates on their T2s this year, and neither one is wrong. Before you panic over a number that doesn’t match a friend’s, compare year ends first. At tax time that’s the first thing worth checking.
What does the estimate leave out?
The calculator uses rates only. It ignores credits, the passive income rules and associated companies. It also leaves out Ontario’s corporate minimum tax, which the CRA describes separately, and which we haven’t modelled.
The rate cut is recent, so whoever files your first T2 after it should check the year-end blend against the CRA page.
One more thing. A corporation has to file a T2 within six months of its year end even if it owes nothing.
How we checked the figures
The federal and Ontario rates come from the Canada Revenue Agency‘s corporation tax rate pages and its Ontario pages, read in September 2026. The 1 July 2026 change is on the CRA’s “what’s new for corporations” page. The blended 2026 figure is our own arithmetic. No government body has reviewed or endorsed what you read here.
Frequently asked questions
What is the business tax rate in Ontario?
A general corporation pays 15% federal and 11.5% Ontario, 26.5% in all. A CCPC pays 9% federal plus Ontario's lower rate on its first $500,000.
Did Ontario cut the small business rate?
The CRA says the lower rate falls from 3.2% to 2.2% on 1 July 2026. A calendar-year company gets a blend of the two for 2026.
Do sole proprietors pay corporate tax?
No. A sole proprietor reports the profit on a personal return and pays personal tax on it.
When is the T2 due?
Six months after the end of the tax year, even when no tax is owing.
Does the calculator show my exact bill?
No. It uses rates only and leaves out credits, associated companies, passive income limits and Ontario's corporate minimum tax.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
- Ontario income tax and sales tax in 2026
How Ontario income tax works in 2026: the five brackets, the surtax and health premium, the 13% HST, and the calculators that switch to Ontario