Corporate Tax Rate Canada 2026: What Corporations Pay in Each Province

Ask what a corporation pays in tax and the honest answer starts with “it depends”. Two corporations with the same profit can pay very different amounts, because the corporate tax rate Canada applies is made of two layers, one federal and one provincial, and each layer has a lower rate for small businesses.

Here is how those layers fit together for 2026, what each province adds, and what the rate on its own does not tell you.

The CRA starts every corporation at a basic federal rate of 38% of taxable income. That number is never what a corporation actually pays.

• A 10% federal abatement applies to income earned in a province or territory, bringing the rate to 28%.
• A 13% general tax reduction then brings it to the net federal rate of 15%.
• A Canadian-controlled private corporation (CCPC) claiming the small business deduction pays a federal rate of 9% on its qualifying income.

So when people look up the Canada corporate tax rate, the federal answer is really two numbers: 15% for general income and 9% for small business income. The province then adds its own rate on top.

The lower rate is the one most owner-managed businesses care about. The small business corporate tax rate applies when all of these are true:

• The corporation is a CCPC, meaning it is privately held and controlled by Canadian residents
• The income is active business income earned in Canada
• The income falls within the business limit, which is $500,000 a year federally

Income above the limit is taxed at the general rate. Associated corporations, such as two companies owned by the same person, share a single $500,000 limit between them.

The limit can also shrink. Under the CRA’s rules, it is reduced once a corporation’s taxable capital passes $10 million and is gone at $50 million. It is also reduced when passive investment income inside the corporation goes above $50,000 a year, and eliminated at $150,000. For an owner who has built up savings inside the company, that second rule is the one that tends to come as a surprise.

Each province and territory sets its own lower and higher rate, which is why there is no single corporate tax rate Canada-wide. Combined with the federal rates above, the 2026 Canadian corporate tax rate looks like this in each jurisdiction:

A few details sit behind the table:

• Ontario cut its small business rate from 3.2% to 2.2% on July 1, 2026. For a tax year that straddles that date, the CRA prorates the two rates by the number of days each was in effect. Our guide to the Ontario corporate tax rate covers how that works in practice.
• Newfoundland and Labrador lowered its small business rate to 2% on January 1, 2026.
• Nova Scotia, Prince Edward Island and Saskatchewan use a higher provincial business limit than the federal $500,000, so some income can get the provincial small business rate while paying the general rate federally.
• Alberta collects its own corporate tax and has its own return. Our post on the Alberta corporate tax rate explains the 2% and 8% rates and how payment works there.

For British Columbia, our breakdown of the BC corporate tax rate walks through the same income taxed at both rates.

The corporate tax rate only tells you what the corporation pays. It does not tell you what you keep.

Money left in the corporation has been taxed once. When it comes out to you as a dividend, it is taxed again on your personal return, with a dividend tax credit designed to offset part of the corporate tax already paid. Salary works differently: it is deductible for the corporation, so it reduces corporate tax, but you pay personal tax and CPP on it.

That is why a low small business rate can be misleading on its own. A business owner who leaves profit in the corporation at 11% and plans to draw it out later is deferring tax, not avoiding it. The right mix of salary, dividends and retained earnings depends on your income, your plans and how much the business needs to keep.

Most corporations in Canada have a December 31 year-end, which puts the busiest stretch of corporate tax work in the first half of the year. Under the CRA’s rules:

• The balance of tax owing is generally due two months after the year-end, or three months for many CCPCs that claim the small business deduction.
• The T2 return is due six months after the year-end.

A corporation that waits for the filing deadline to work out what it owes usually ends up paying interest on a balance that was due months earlier. Our guide to the T2 corporate tax return covers the deadlines and penalties in more detail.

The rate a corporation pays comes down to choices made before the year-end: how much salary to pay, whether income is active or passive, how associated companies share the business limit, and when to pay the balance. Those decisions are much easier to make in November than in March.

For a corporation with a December 31 year-end, the next few weeks are the window to review them. A short check before the books close can confirm the business limit is being used fully, that associated companies are sharing it the way you intend, and that any passive income inside the company is not quietly eating into the small business rate. It is also the point to decide how much to pay yourself before December 31, since salary has to be paid in the calendar year to count for that year. Getting the corporate tax rate Canada allows you is mostly about this kind of planning, done early.

Your Modern Accountant prepares corporate returns for owner-managed businesses across Canada, from December year-ends to companies that close their books in June or September. Our corporate tax filing services cover the T2, the provincial return where one applies, and the planning that goes into both.