Corporate Tax Rates in Canada 2026

Canada's corporate tax system has two layers: federal tax (the same across all of Canada) and provincial/territorial tax (set independently by each province). The combined rate you pay depends on your province, your corporation type, and the nature of your income.

For most small incorporated businesses, the most important rate is the small business rate — which applies to the first $500,000 of active business income earned by a Canadian-Controlled Private Corporation (CCPC).

Federal Corporate Tax Rates (2026)

Income Type	Rate	Notes
CCPC — Active income ≤ $500K (SBD)	9%	Requires CCPC status + passive income test
General corporations — Active income	15%	After 28% rate minus 13% general reduction
Investment income (CCPC)	38.67%	Refundable portion via RDTOH mechanism
Capital gains	50% of gain × applicable rate	Inclusion rate 50% (2026)

Combined Federal + Provincial Rates by Province (2026)

Province	SBD Rate (≤$500K)	General Rate (>$500K)
Alberta	11.0%	23.0%
British Columbia	11.0%	27.0%
Manitoba	9.0%	27.0%
New Brunswick	12.5%	29.0%
Newfoundland & Labrador	14.0%	30.0%
Nova Scotia	14.5%	29.5%
Ontario	12.2%	26.5%
PEI	14.0%	31.0%
Quebec	14.0%	26.5%
Saskatchewan	9.0%	27.0%

The Small Business Deduction: Who Qualifies?

To claim the SBD and access the lower 9% federal rate, your corporation must meet all of these conditions:

1. It must be a Canadian-Controlled Private Corporation (CCPC) — meaning it is controlled by Canadian residents and not publicly listed
2. The income must be from an active business carried on in Canada — not passive investment income
3. The corporation's (and any associated corporations') taxable capital employed in Canada must be under $15 million (the SBD is phased out between $10M and $15M)
4. The corporation's (and associated corporations') aggregate investment income must be under $150,000 (the SBD is reduced by $5 for every $1 of passive income above $50,000)

For most small business owners with under $500,000 in active income and modest passive income, the SBD is fully accessible. See our detailed guide: Small Business Deduction — Complete Guide.

Investment Income Tax in a Corporation (CCPC)

Investment income (interest, foreign dividends, rental income earned through a corporation) is taxed at a much higher rate inside a corporation — approximately 50.67% federally. However, a portion (30.67%) is refundable when the corporation pays taxable dividends to shareholders. This mechanism is called the Refundable Dividend Tax on Hand (RDTOH).

The high rate on passive income inside a corporation is intentional — it neutralizes the deferral advantage of accumulating investment income in a corporation at the low 9% rate. The refund mechanism ensures the tax is eventually integrated with the shareholder's personal rate.

Why Provincial Rate Differences Matter

A CCPC in Ontario pays 12.2% on its first $500,000 of active income. The same corporation in Alberta pays 11.0% — a 1.2% difference. On $500,000 of income, that's $6,000/year in additional tax just from choosing where to incorporate.

For larger corporations (above the SBD threshold), the spread is more dramatic: Alberta charges 23.0% combined versus 31.0% in PEI — an 8% difference on potentially millions of dollars of income.

For most small business owners, the choice of province is driven by where the business actually operates — not tax optimization. But understanding your effective rate is important for planning salary/dividend splits and retained earnings decisions.