Ontario Corporate Tax Rates for 2026: Small Business and General Rates

Ontario charges corporations two main income tax rates: a lower rate on qualifying small-business income and a general rate on everything else. On July 1, 2026, the lower rate was cut from 3.2% to 2.2%. The general rate stayed at 11.5%.

The federal government charges its own corporate tax on the same income, so the rate a corporation actually pays is the federal and Ontario rates combined. This guide sets out both, explains which rate applies to which income, and shows how the July 1, 2026 change works when your corporation’s tax year doesn’t line up with the calendar.

A note on terms: a corporation’s tax year (its fiscal period) is set by its year-end, which isn’t always December 31. The rates below apply to days within a corporation’s tax year, which is why the timing of your year-end matters.

Ontario corporate tax rates at a glance

These rates apply to income a corporation earns in Ontario:

Type of income	Ontario rate	Federal rate	Combined rate
Qualifying small-business income, for days before July 1, 2026	3.2%	9%	12.2%
Qualifying small-business income, for days after June 30, 2026	2.2%	9%	11.2%
All other active business income (general rate)	11.5%	15%	26.5%

“Qualifying small-business income” means active business income of a Canadian-controlled private corporation (CCPC), up to the $500,000 business limit. The conditions are explained below.

Corporations engaged in manufacturing and processing (and in fishing, farming, mining or logging) may qualify for an Ontario credit that reduces the Ontario rate on eligible income to 10%.

Investment income earned inside a corporation is taxed under separate rules and is not covered by this table. See our guide to passive income tax rules in Canada.

Ontario’s small-business rate

Ontario’s lower rate is produced through the Ontario small business deduction, applied against the 11.5% basic rate. For 2026, the deduction is:

• 8.3% for days before July 1, 2026, which leaves a 3.2% rate (11.5% − 8.3%)
• 9.3% for days after June 30, 2026, which leaves a 2.2% rate (11.5% − 9.3%)

The deduction applies to the least of the corporation’s active business income earned in Canada, its taxable income and its Ontario business limit (normally $500,000), multiplied by the share of the corporation’s taxable income that is earned in Ontario. For a corporation that does all its business in Ontario, that share is 100%.

Ontario’s general corporate rate

The general rate of 11.5% applies to taxable income that doesn’t qualify for the small business deduction. That includes active business income above the $500,000 limit, income of corporations that aren’t CCPCs, and income from a personal services business. The 2026 change did not affect the general rate. It has been 11.5% since July 1, 2011.

What changed on July 1, 2026?

Ontario’s 2026 Budget proposed cutting the small-business rate from 3.2% to 2.2%. The change was enacted through Bill 97, the Plan to Protect Ontario Act (Budget Measures), 2026, which amends the small business deduction in section 41 of Ontario’s Taxation Act, 2007. The deduction rate is 9.3% for days in a tax year that fall after June 30, 2026.

Three points are often misreported:

• Only the small-business rate changed. The 11.5% general rate is unchanged.
• The cut applied in full from July 1, 2026. It was not phased in over several years.
• The $500,000 business limit did not change.

Some published rate tables, including older government summaries, still show 3.2% without mentioning July 1, 2026. The rate is set by the statute, which is linked at the end of this guide.

If your tax year includes July 1, 2026

Many corporations don’t have a December 31 year-end. If your tax year started before July 1, 2026 and ends after June 30, 2026, Ontario blends the two rates by the number of days on each side of the change date:

Ontario small business deduction rate = 8.3% × (days before July 1, 2026 ÷ days in the tax year) + 9.3% × (days after June 30, 2026 ÷ days in the tax year)

The blended rate applies to all of the year’s qualifying small-business income. It doesn’t matter in which month the income was earned.

The table below applies that formula to some common year-ends. Each of these tax years has 365 days. Rates are rounded, and the combined figure adds the federal 9% small-business rate.

Corporation’s tax year	Days before July 1, 2026	Days after June 30, 2026	Ontario small-business rate (approx.)	Combined with federal (approx.)
July 1, 2025 – June 30, 2026	365	0	3.20%	12.20%
October 1, 2025 – September 30, 2026	273	92	2.95%	11.95%
January 1 – December 31, 2026	181	184	2.70%	11.70%
April 1, 2026 – March 31, 2027	91	274	2.45%	11.45%
Any tax year that starts on or after July 1, 2026	0	All	2.20%	11.20%

So a corporation with a December 31, 2026 year-end does not get the full 2.2% rate for its 2026 tax year. For qualifying income it pays roughly 2.70% to Ontario. Its first full year at 2.2% is the tax year that starts January 1, 2027.

The calculation is made on Schedule 500 of the T2 return, using the actual start and end dates of your tax year. If your tax year is shorter than a full year (for example, the first year after incorporating, or the year of a change in year-end), the day counts will differ from the table.

Federal and Ontario rates together

Ontario corporate tax is calculated on Schedule 500 of the corporation’s T2 return, but federal and Ontario tax are separate taxes, each with its own rules:

• Federal general rate: 15%. The basic federal rate is 38%, reduced by a 10% abatement for income earned in a province and by a 13% general rate reduction.
• Federal small-business rate: 9%. A CCPC’s qualifying income gets a 19% federal small business deduction from the same 28%.

Adding Ontario’s rates gives the combined figures in the first table: 12.2% or 11.2% on qualifying small-business income, depending on the days, and 26.5% on general income.

The two small business deductions don’t always move together. The main difference is passive investment income. The federal $500,000 business limit shrinks when the corporation (together with associated corporations) earned more than $50,000 of passive investment income in the previous year, and disappears above $150,000. Ontario does not follow that federal rule. A corporation with significant investment income can therefore lose some or all of its federal small-business rate while keeping Ontario’s lower rate. Its combined rate then falls somewhere between the figures above, and working it out needs an actual calculation, not a table lookup.

Who qualifies for the small-business rate?

The federal and Ontario small business deductions share several core conditions, but their rules are not identical:

• The corporation must be a Canadian-controlled private corporation (CCPC) throughout the tax year.
• The income must be active business income earned in Canada. Income from a specified investment business or a personal services business does not qualify. Both are defined terms in the Income Tax Act.
• The limit is $500,000 per year, and associated corporations share it. Associated CCPCs divide one $500,000 limit between them and report the split on Schedule 23. A tax year shorter than 51 weeks gets a prorated limit.
• Larger corporations lose access. The limit is reduced when the corporation’s taxable capital employed in Canada (including associated corporations) is between $10 million and $50 million, and eliminated at $50 million or more. Ontario applies the same phase-out for tax years beginning on or after April 7, 2022.
• Passive income affects the federal limit only, as explained above.

Whether income is “active business income”, whether corporations are “associated”, and whether a business is a “personal services business” are technical questions. The answers depend on how the business is structured and run.

How corporate tax is calculated: two examples

The examples below illustrate how the rates combine. They are not estimates for any particular business. Both assume:

• a CCPC with a January 1 – December 31, 2026 tax year
• all of its business carried on in Ontario
• all taxable income is active business income
• no associated corporations
• taxable capital under $10 million
• passive investment income under $50,000
• before any tax credits, other deductions or instalment interest

For a January 1 – December 31, 2026 tax year, the day-weighted Ontario small business deduction is approximately 8.804%, leaving an Ontario small-business rate of approximately 2.70%. The examples use that percentage.

Example 1: $200,000 of active business income

• Federal: $200,000 × 9% = $18,000
• Ontario: $200,000 × 11.5% = $23,000, minus the day-weighted small business deduction of $200,000 × 8.804% = $17,608, which leaves $5,392
• Total: about $23,392, or roughly 11.7% of the income

Example 2: $600,000 of active business income

• Federal: $500,000 × 9% + $100,000 × 15% = $60,000
• Ontario: $600,000 × 11.5% = $69,000, minus the day-weighted small business deduction of $500,000 × 8.804% = $44,021, which leaves $24,979
• Total: about $84,979, or roughly 14.2% of the income

The only thing separating these examples is the $500,000 limit. The first $500,000 is taxed at the blended small-business rate and the next $100,000 at the 26.5% general rate. Change any of the assumptions and the result changes: a different year-end, income earned outside Ontario, an associated company or investment income.

These examples show corporate tax only. Money paid out of the corporation to its owners as salary or dividends is taxed again on the owner’s personal return. For whether a corporation makes sense in the first place, see incorporation vs. sole proprietorship.

Common questions

Did Ontario lower its general corporate tax rate in 2026?
No. Only the small-business rate changed, from 3.2% to 2.2% on July 1, 2026. The general rate is still 11.5%.

Does the 2.2% rate apply to my whole 2026 tax year?
Only if your tax year started on or after July 1, 2026. If your tax year includes July 1, 2026, Ontario applies a day-weighted blend of 3.2% and 2.2%. A December 31, 2026 year-end works out to roughly 2.70% on qualifying income.

Do these rates apply to a sole proprietor?
No. Corporate tax rates apply only to corporations. A sole proprietor’s business income is taxed on their personal return at personal tax rates.

Does Ontario reduce the small-business limit for passive investment income?
No. The federal limit is reduced for passive investment income over $50,000 and eliminated over $150,000. Ontario does not apply that reduction.

When is corporate tax due?
Filing and payment deadlines are separate, and the balance of tax is usually due before the T2 return is. See Canadian tax deadlines for the T2 filing and payment dates.

When to get professional help

The rates themselves are simple. Applying them often isn’t: a tax year that straddles July 1, 2026, associated corporations sharing one limit, investment income inside the company, income earned in more than one province, or deciding how to pay yourself. If your corporation’s situation involves any of these, we can prepare your T2 return and work through the numbers with you.

Sources

• Taxation Act, 2007 (Ontario), S.O. 2007, c. 11, Sch. A: s. 38 (basic rate) and s. 41 (small business deduction), as amended by S.O. 2026, c. 2, Sch. 15: ontario.ca/laws/statute/07t11
• Ontario Ministry of Finance: Corporate Income Tax
• Legislative Assembly of Ontario: Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026
• 2026 Ontario Budget: Annex: Details of Tax Measures
• Income Tax Act (Canada): s. 123, s. 123.4, s. 124, s. 125
• Canada Revenue Agency: T2 Corporation – Income Tax Guide, Chapter 4
• Canada Revenue Agency: Ontario small business deduction

Last reviewed: September 25, 2026. Rates are those in effect for tax years that include days in 2026. This guide is general information, not advice for a specific corporation.

Running a small business? See our small business accounting packages.

Run the numbers with our corporate tax calculator for Ontario.