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Most Canadian corporations pay a federal tax rate of 15%, but a small private company pays 9% on its first $500,000 of active business income. Add the provincial rate and the total usually lands somewhere between 11% and 27%, depending on where the company is based.
What are the federal business tax rates?
The Canada Revenue Agency starts from a basic federal rate of 38%. An abatement takes it down to 28%, and the general rate reduction brings it to 15% for most corporations. A Canadian-controlled private corporation that claims the small business deduction pays a net 9% instead.
| Type of income | Federal rate |
|---|---|
| General corporate income | 15% |
| Active business income up to the business limit, CCPCs only | 9% |
| Business limit for a corporation on its own | $500,000 |
The 9% rate is a benefit for small owner-run companies, not a right for every corporation. It needs Canadian control and private ownership, and it covers only active business income (not most investment income).
How do provinces change the total?
Every province except Quebec and Alberta has a two-tier system in the CRA’s rate table, a low rate for income that gets the federal small business deduction and a higher one for the rest. Quebec and Alberta run their own corporate tax. Alberta and Quebec are outside our examples below, because we couldn’t confirm their 2026 rates on a page we could read.
The CRA table shows British Columbia at 2% and 12%, Ontario at 3.2% and 11.5%, and Yukon at 0% and 12%. The business limit is $500,000 in those three, but it runs up to $700,000 elsewhere.
Ontario needs a warning. The CRA’s What’s new page lists a cut in the low rate from 3.2% to 2.2% from 1 July 2026. A company with a calendar year gets a blend of the two, which our calculator puts near 2.7%. We derived that number by counting days. It isn’t published anywhere, so use it as a guide and not as the rate on your return.
What does $700,000 of profit cost in Ontario?
Here’s a worked case from the corporate tax calculator. A private company in Ontario earns $700,000 of active business income in calendar 2026.
Federal tax is $75,000. That’s 9% of the first $500,000 ($45,000) plus 15% of the other $200,000 ($30,000). Ontario tax is $36,480, made up of the blended low rate on the first $500,000 and 11.5% on the rest. The total is $111,480, an average of 15.9%, and $588,520 stays in the company.
Compare that with $100,000 of profit. Total corporate tax is $11,696, or 11.7%. Growth past the limit is what pulls the average up, since the top slice is taxed at a combined 26.5%.
When do you pay more than the small business rate?
Several things can push a company off the 9% rate, and the calculator ignores all of them.
- Associated corporations share a single $500,000 limit.
- The limit shrinks when taxable capital passes $10 million, and it’s gone at $50 million.
- Passive investment income above $50,000 a year cuts the federal limit, and it reaches zero at $150,000. For Ontario’s own limit it works differently: the CRA says the Ontario small business limit is not subject to the federal passive income reduction.
- Quebec adds a paid-hours test for its own reduction, and we couldn’t confirm the details.
The CRA’s Ontario small business deduction page confirms the taxable capital rule: the deduction is phased out above $10 million of taxable capital employed in Canada in the previous year, and it is completely eliminated at $50 million.
If you own a corporation that holds investments as well as running a business, the passive income rule is the one to check first. It can cost far more than the rate difference suggests.
What if your company isn’t a small private corporation?
Then the 9% rate is off the table and the general rate does the work. A public company or a foreign-controlled one pays 15% federally on its income, plus the province’s higher rate. On $1,000,000 of income that’s $150,000 federally before any provincial tax. Nobody in a small shop faces that choice, but it shows why the CCPC label matters so much: on the first $500,000 it’s the difference between $45,000 and $75,000 of federal tax.
The arithmetic is simple, which is why people miss it. A Calgary startup that sells a majority stake to a foreign parent can lose the label overnight, and with it the low rate. Check the status with an accountant before ownership changes, not after.
Is corporate tax the end of the story?
No, and this is where owners get surprised. Paying yourself from the company triggers personal tax. A salary is deducted by the company and taxed to you like any pay, which you can test in the take-home pay calculator. A dividend comes out of after-tax profit and has its own credit, and the dividend tax calculator shows the result. Filing dates are a separate matter, covered in our guide to company tax filing.
So the corporate rate alone tells you little about what you keep. Whether to leave money in the company or take it out depends on your personal income, and that’s one place where an accountant earns the fee.
What this page is based on
The federal rates, business limit and provincial table come from the Canada Revenue Agency‘s corporation tax rates page. The taxable capital and passive income rules come from the CRA’s T2 guide. Rates and limits can change during the year, so check the CRA page for your province and your tax year end before you file.
Frequently asked questions
What is the federal corporate tax rate in Canada?
It's 15% for most corporations after the general reduction. A CCPC using the small business deduction pays 9% on up to $500,000.
Do provinces charge their own corporate tax?
Yes. Each province or territory sets a rate on top of the federal one, and most have a low rate for small business income.
Is the Ontario small business rate changing in 2026?
The CRA lists a cut from 3.2% to 2.2% from 1 July 2026. A calendar-year company gets a blended rate, which we couldn't confirm.
Can two companies each claim $500,000 at the low rate?
Not if they're associated. Associated corporations share one limit.
Does the corporate rate cover my personal tax too?
No. Salary and dividends paid to you are taxed again on your personal return.
- 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