Understanding corporate tax rates in Canada is essential for any business owner. The good news — Canadian small businesses enjoy some of the lowest corporate tax rates in the world, especially with the Small Business Deduction.
Federal Corporate Tax Rates 2026
| Type | Federal Rate |
|---|---|
| General corporations | 15% |
| CCPC — Small Business Rate (first $500,000) | 9% |
| Investment income (CCPC) | 38.67% |
Combined Federal + Provincial Rates 2026
| Province | Small Business Rate | General Rate |
|---|---|---|
| Ontario | 12.2% | 26.5% |
| British Columbia | 11% | 27% |
| Alberta | 11% | 23% |
| Quebec | 12.2% | 26.5% |
| Saskatchewan | 9% | 27% |
| Manitoba | 9% | 27% |
| Nova Scotia | 12.5% | 29% |
| New Brunswick | 12% | 29% |
| PEI | 12.5% | 31% |
| Newfoundland | 15% | 30% |
✅ Example: An Ontario CCPC earning $400,000 in active business income pays only 12.2% combined tax — saving over $57,000 compared to the general rate.
Small Business Deduction — Who Qualifies?
To qualify for the 9% federal small business rate your corporation must be a Canadian Controlled Private Corporation (CCPC):
- Incorporated in Canada
- Not publicly traded
- Majority owned by Canadian residents
- Active business income (not investment income)
- Annual income under $500,000
The $500,000 Small Business Limit
The small business deduction applies to the first $500,000 of active business income per year. Income above $500,000 is taxed at the general 15% federal rate.
⚠️ Note: If your corporation has taxable capital over $10 million, the $500,000 limit starts to phase out. It is fully eliminated at $15 million in taxable capital.
How to Reduce Your Corporate Tax Bill
- Pay yourself a salary — reduces corporate income, creates RRSP room
- Pay dividends — can be tax-efficient at lower personal income levels
- Maximize deductible expenses — home office, vehicle, equipment, salaries
- Capital Cost Allowance (CCA) — deduct depreciation on assets
- Scientific Research & Development (SR&ED) — tax credits for eligible R&D
- Lifetime Capital Gains Exemption — up to $1.25M tax-free on sale of shares
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