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Ontario corporate tax: what your corporation pays, and what it files

Ontario's small business rate fell to 2.2% on July 1, 2026. There's no separate Ontario corporate return, and only some corporations file the Ontario annual return.

By Matthew Reeves, FounderAugust 23, 2026 · 8 min read

Summary

If your corporation does business in Ontario, Ontario taxes its profit and the federal government taxes that same profit as well, the two charges adding together. There’s no separate Ontario corporate income tax return, because the Canada Revenue Agency (the CRA) works out and collects Ontario’s tax on the T2, the corporate income tax return your corporation already files federally. Every deadline below runs off your taxation year, meaning your corporation’s own financial year, which may or may not end on December 31.

  1. Ontario charges 2.2% on the first $500,000 a year of active business income, meaning profit from running your business rather than from holding investments, and 11.5% on profit above that.1 Federal corporate tax adds 9% and 15% on the same two slices, for totals of about 11.2% and 26.5%.2
  2. Ontario’s 2.2% covers only days from July 1, 2026 onwards, and the rate was 3.2% before, so a year spanning that date pays a blend of the two. A year ending December 31, 2026 pays roughly 11.7% in total on the first $500,000 of profit and 26.5% above it.2
  3. If your corporation was incorporated in Ontario, one filing doesn’t come with the T2: the Ontario annual return, reporting your directors, officers and registered office to the province’s business registry six months after your year-end.3 A corporation incorporated federally or in another province files its home registry’s annual return instead.4
  4. Two registrations may arrive later, and most owner-managed companies need neither at the start. Employer Health Tax is an Ontario payroll tax with a $1,000,000 exemption shared by eligible associated employers, meaning companies linked by ownership or control.5 GST/HST, the sales tax you charge customers, is a single 13% in Ontario, merging the federal and provincial parts,6 and starts once your revenue passes $30,000.7

A one-percentage-point difference in the provincial rate is worth $2,000 on $200,000 of profit, so the rate isn’t where an Ontario owner-manager saves real money. A missed annual return is worse, because a corporation in default can’t bring a court case in Ontario about its own business unless a judge lets it.8 As such we’d recommend a standing reminder for whichever annual return your corporation owes: six months after year-end for an Ontario corporation, and on the incorporation anniversary for a federal one.

Who Ontario taxes, and at what rate

Ontario’s corporate income tax reaches a corporation carrying on business through a permanent establishment in the province. A permanent establishment is usually a fixed place of business (e.g. an office, a workshop, a warehouse or a factory), and you can also have one wherever an employee or agent of the corporation is based with general authority to sign contracts for it.9 What counts is where you work rather than where you incorporated, so a consulting company run out of a spare bedroom in Ottawa has an Ontario permanent establishment. Where you incorporated decides the registry filings below, which is a separate question.

If Ontario is the only province you work in, it taxes all of your taxable income, meaning your profit after the adjustments the tax rules require. A permanent establishment in a second province splits that income between the two, on a formula weighting where your gross revenue was earned and where your salaries and wages were paid equally.9

Ontario taxes the first $500,000 a year of active business income at its lower rate, provided your corporation is Canadian-controlled and privately owned, which most owner-managed companies are, and it calls that $500,000 its small business limit.10 Profit above the limit is taxed at Ontario’s general rate of 11.5%.11 The lower rate is 2.2% for days in a taxation year after June 30, 2026, and was 3.2% for days before July 1, 2026.1

Federal corporate tax is charged on the same profit and simply adds to Ontario’s rate, at 9% and 15% on the same two slices.2 Any taxation year with days on both sides of July 1, 2026 blends the two lower rates, weighting each one by the number of days of your year falling on its side. A calendar 2026 year has 181 days at 3.2% and 184 days at 2.2%, which averages to 2.696% once you divide by the 365 days in the year, or roughly 11.7% with the federal 9% on top. A taxation year beginning after June 30, 2026 doesn’t blend at all.

One tax return, and the filings that don’t come with it

Ontario writes its own corporate tax law, in the Taxation Act, 2007, and the CRA assesses and collects it on the T2 under a collection agreement between the two governments. Most provinces do the same, and Alberta and Quebec are the exceptions, each running its own tax system and its own return on top of the T2.12 For a corporation working only in Ontario that means one T2 filed six months after your year-end (e.g. June 30, 2027 for a December 31, 2026 year-end), one notice of assessment, which is the CRA’s written decision on your return, and one payment.13

The tax itself falls due before the return does, two months after year-end. Three months is allowed where your corporation claimed the small business deduction, meaning the deduction that produces Ontario’s lower rate and the federal 9%, in the current year or the one before, was Canadian-controlled and privately owned throughout the year, and had taxable income last year no higher than its business limit for that year. Most owner-managed Canadian companies get the three months, but the conditions are worth checking. Above a small threshold the CRA also expects the tax in instalments during the year rather than in one payment afterwards.14

Ontario’s own annual return is a corporate-law filing rather than a tax one, and it’s narrower than people expect. Four kinds of corporation file it: corporations under Ontario’s Business Corporations Act, corporations under the Corporations Act, foreign corporations holding an Ontario licence under the Extra-Provincial Corporations Act, and not-for-profits, with every other corporation exempt.3 An Ontario-incorporated company files it six months after its taxation year-end, through the Ontario Business Registry rather than with the T2, and no accounting software will prompt you for it. A federally incorporated company doesn’t file it at all, and instead files a federal annual return with Corporations Canada within 60 days after the anniversary of its incorporation.4

One Ontario registry filing does reach every corporation working here, wherever it was incorporated, and that’s the Initial Return: the same director, officer and address information, filed once. An Ontario corporation files it within 60 days of incorporating, and a corporation incorporated elsewhere within 60 days after it begins carrying on business here, with any later change going in within 15 days.8

A corporation missing a filing required by the Corporations Information Act can’t bring or continue a court case in Ontario about its business without a judge’s permission. Catch up those filings before trying to sue over an unpaid invoice.8

Employer Health Tax and the $1,000,000 exemption

Employer Health Tax is a provincial tax Ontario administers itself, charged on remuneration, meaning the salary, wages, bonuses and taxable benefits paid to employees who report to your Ontario location (e.g. a cash bonus counts, while a dividend paid to a shareholder isn’t remuneration at all). The first $1,000,000 of Ontario remuneration in a year is exempt for an ordinary private company, and only two things take that exemption away: being controlled by a government, or paying more than $5 million of Ontario remuneration between your corporation and any corporations associated with it. Associated is a defined tax concept covering, broadly, the companies you or your family control alongside this one, so if you own more than one corporation, assume the test looks at all of them together and ask us. Associated eligible employers also share one $1,000,000 exemption, allocated between them, so a company in the group may have less than the full amount. If this is your only corporation, the $5 million test just looks at this corporation’s Ontario payroll.5

A company paying one owner and a few staff can therefore owe nothing if its payroll stays within its exemption allocation. We’d recommend checking registration as your payroll approaches that allocation, because a registered employer is sent an annual return and then has to file it every March 15. The recommendation flips if you expect to cross the exemption mid-year, where registering in advance beats backdating.

Above your exemption allocation, you pay on the Ontario remuneration left after that allocation is subtracted. The rate is 0.98% where your total Ontario remuneration for the year is $200,000 or less, rises on a sliding scale from 1.101% to 1.829% between there and $400,000, and is 1.95% over $400,000. Pick the rate off your full payroll, then apply it only to the amount above your allocated exemption. Ontario’s own example takes $1,300,000 of payroll and applies 1.95% to the $300,000 above the exemption, for $5,850 of tax.5

How often this changes

Ontario’s corporate rates are a Budget item, so read them again each spring after the provincial Budget, with three dated changes already on the calendar.

  • Your first taxation year beginning after June 30, 2026 stops blending the two lower rates, so a December 31, 2027 year-end pays the clean 2.2%, or about 11.2% in total with the federal 9%.2
  • The $1,000,000 Employer Health Tax exemption is scheduled for an inflation adjustment on January 1, 2029, which Ontario has announced and which isn’t in force yet.5
  • Ontario has also cut a personal tax credit on dividends your corporation pays you out of profit taxed at the lower rate, from January 1, 2027. The cut raises your own tax rather than the corporation’s, so ask us before you set your 2027 pay.

Closing thoughts

What Ontario asks of a small corporation is a handful of dates and one or two decisions about when to register, and very little of it is about the rate. The registry filings are where it usually goes wrong, because they’re the only obligations here that don’t arrive attached to something you were already doing.15

How we handle it

We file the T2, which covers your Ontario corporate tax as well, and we check which registry filing your corporation actually owes, given where it was incorporated, before putting it on the same calendar as your year-end. We check whether an Employer Health Tax account is genuinely needed before opening one, register for GST/HST when the $30,000 test is met, and work out whether the year’s tax falls due in instalments. Your personal return is prepared in the same file, so the choice of salary against dividends gets made once.

Footnotes

  1. Ontario Ministry of Finance, “Corporations Tax: Corporate Income Tax” (ontario.ca). Its rate table shows the lower rate at 3.2% from January 1, 2020 to June 30, 2026, and 2.2% from July 1, 2026 onwards. The cut was enacted by Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026. That bill is Statutes of Ontario 2026, chapter 2, and it amends section 31(4) of the Taxation Act, 2007. Ontario doesn’t set its lower rate directly. It sets a small business deduction that comes off the general 11.5% rate, and raising that deduction to 9.3% for days after June 30, 2026 leaves 2.2%, where the previous 8.3% left 3.2%. Verified 2026-08-24. As at that date the CRA’s own “Corporation tax rates” page still showed Ontario’s lower rate as 3.2%, so this page cites the Ontario issuer and the statute rather than the CRA table. ↩ ↩2

  2. Adding the federal and Ontario rates together is our arithmetic on top of two separately cited rates, and neither government publishes a combined figure. Ontario’s day-weighted lower rate for a December 31, 2026 year-end is 2.696%, being 181 days at 3.2% plus 184 days at 2.2%, divided by 365. With the federal 9% that gives 11.7%. The general figure is the federal 15% plus Ontario’s 11.5%. A December 31, 2027 year-end gets the clean 2.2%, for 11.2% in total. Federal rates per CRA, “Corporation tax rates”, and stated in full on /guides/what-changed-for-2026/. Verified 2026-08-24. ↩ ↩2 ↩3 ↩4

  3. Ontario Ministry of Public and Business Service Delivery and Procurement, Notice ON00229, “Notice - Corporations Information Act - Filing an Annual Return”, effective February 1, 2025. It states that the corporations required to file an Annual Return under section 3.1 of the Corporations Information Act, and subsection 11(2) of the General Regulation under that Act, are corporations subject to the Business Corporations Act, corporations subject to the Corporations Act, foreign corporations that have a licence endorsed under the Extra-Provincial Corporations Act, and corporations subject to the Not-for-Profit Corporations Act, 2010. Those corporations file within six months after the end of the corporation’s taxation year, and there is no statutory fee. Filing goes through the Ontario Business Registry, either directly with the ministry or through an intermediary, and intermediaries charge their own fee, for which no figure is stated here. The same notice records that the temporary exemption from filing under section 3.1, set out in the former Regulation 182, applied to returns due on or after May 15, 2021 and has now ended. Online filing needs a company key, which is free from the ministry but is mailed out where no email address is on file. Verified 2026-08-24. ↩ ↩2

  4. Corporations Canada, “Annual return - Business corporations” (ised-isde.canada.ca), page modified 2026-04-20. Its wording is that business corporations need to file an annual return and information on individuals with significant control within 60 days following their incorporation, amalgamation or continuation anniversary date. The filing costs $12 online. Corporations Canada states on the same page that an annual return and a tax return are not the same thing. A corporation incorporated in another province files that province’s equivalent instead, and no other province’s deadline is stated on this page. Verified 2026-08-24. ↩ ↩2

  5. Ontario Ministry of Finance, “Employer Health Tax (EHT)” (ontario.ca). The exemption is $1,000,000, available where Ontario payroll including associated employers does not exceed $5 million (registered charities excepted) and the employer isn’t controlled by a government. An employer outside those conditions pays from the first dollar. Rates run from 0.98% on total Ontario remuneration up to $200,000, through 1.101% to 1.829% between $200,000.01 and $400,000, to 1.95% over $400,000. The applicable rate is set on payroll before the exemption is deducted, and only then does the exemption reduce the amount taxed. Ontario’s published example applies 1.95% to $1,300,000 of payroll less the $1,000,000 exemption, for $5,850 of tax. The annual return and payment are due March 15, and monthly instalments start once Ontario remuneration passes $1,200,000. Ontario states that registration is the employer’s responsibility where it isn’t eligible for the exemption or its payroll exceeds it, and that a registered employer is sent an annual return. Associated employers share one exemption and must file an allocation form. Where that form isn’t filed, or leaves one of them out, every employer in the group is denied the exemption. The exemption amount is scheduled for an inflation adjustment on January 1, 2029. Re-verified 2026-09-25 against Ontario’s tax exemption and associated employers guidance. ↩ ↩2 ↩3 ↩4

  6. Ontario’s HST rate is 13%, per CRA, “Charge and collect the GST/HST: Which rate to charge”, which carries 13% across every period in its rate-history table. Ontario Ministry of Finance, “Retail Sales Tax” (ontario.ca) confirms that the HST replaced Ontario’s retail sales tax on July 1, 2010 and directs HST matters to the CRA, so Ontario runs no general provincial sales tax registration of its own. The 13% is stated in full on /guides/ecommerce-gst-hst/. The rate charged follows the place of supply, so an Ontario business shipping goods to Alberta charges the Alberta rate rather than 13%. Ontario’s retail sales tax survives in two places the HST didn’t absorb. Insurance premiums carry 8%, and a specified vehicle bought privately from someone who isn’t a GST/HST registrant carries 13%. Neither can be claimed back, unlike the HST you pay on business purchases once you’re registered. Verified 2026-08-24. ↩

  7. CRA, “When to register for and start charging the GST/HST”. The $30,000 is measured on worldwide taxable supplies, meaning total revenues before expenses, including those of associates. Exceeding it within a single calendar quarter ends small supplier status on the supply that crossed it. Exceeding it over four or fewer consecutive calendar quarters, without crossing it inside any one of them, ends small supplier status at the end of the month following that quarter. The effective date of registration is then the first supply made after that. Registration is required within 29 days of the effective date of registration, which is not the same day in the two cases. Both windows, both effective dates and the deadline are stated in full on /guides/gst-hst-registration/. Verified 2026-08-24. ↩

  8. Corporations Information Act, Revised Statutes of Ontario 1990, chapter C.39, as set out in Notice ON00230 (Ontario corporations) and Notice ON00231 (extra-provincial corporations), both from the Ministry of Public and Business Service Delivery and Procurement. Section 2 requires an Initial Return within 60 days after the date of incorporation, amalgamation or continuation. Section 3 requires an extra-provincial corporation to file an Initial Return within 60 days after the date it begins to carry on business in Ontario. ON00230 records that the Act’s filing requirements apply to corporations wherever or however incorporated, unless exempted by the General Regulation (e.g. corporations subject to the Bank Act). Section 4 requires a Notice of Change within 15 days after any change to the information previously filed. Section 18(1) has two limbs, which are alternatives, so a default in filing alone is enough on its own. It provides that a corporation in default of a requirement under the Act to file a return or notice, or that has unpaid fees or penalties, is not capable of maintaining a proceeding in a court in Ontario in respect of the business carried on by the corporation, except with leave of the court. Leave is to be granted under section 18(2) where the failure was inadvertent, nobody was deceived, and the filings are brought up to date. Sections 13 and 14 create separate offences with their own maximum fines, not quantified here because prosecution isn’t the realistic exposure for an owner-managed company. A corporation incorporated in another Canadian province needs no Ontario licence to work here, while one incorporated outside Canada needs an extra-provincial licence under the Extra-Provincial Corporations Act. Verified 2026-08-24. ↩ ↩2 ↩3

  9. Income Tax Regulations, section 400(2), on the Justice Laws Website. It treats a permanent establishment as a fixed place of business, and enumerates an office, a branch, a mine, an oil well, a farm, timberland, a factory, a workshop and a warehouse. It also deems one where an employee or agent established in a place has general authority to contract, or fills orders from a stock of goods held there. Paragraph 400(2)(e.1) deems a permanent establishment at the head or registered office named in the incorporating documents, where there would otherwise be none. Paragraphs 400(2)(f) and (g) confirm that dealing through an independent agent, or having a subsidiary in a place, doesn’t by itself create one. Where a corporation has a permanent establishment in one province and none elsewhere, all of its taxable income is treated as earned there under section 402(1). Where it has them in two or more, section 402(3) allocates taxable income by a formula weighting gross revenue and salaries and wages equally. Each province taxes its own share at its own rates, on schedules inside the same T2. The CRA’s administrative positions on allocation are in Income Tax Folio S4-F3-C2. Verified 2026-08-24. ↩ ↩2

  10. Ontario Ministry of Finance, “Corporations Tax: Corporate Income Tax” (ontario.ca). The Ontario small business deduction applies to the first $500,000 of active business income of a Canadian-controlled private corporation. The 2026 Ontario Budget left that limit unchanged. Separately, the federal small business rate is reduced, and can be lost completely, once a corporation earns significant income from investments. Ontario states on the same page that it does not copy that rule, so a corporation that has lost the federal 9% rate entirely still gets Ontario’s lower rate on its first $500,000. The Ontario limit does shrink the way the federal one does for a large corporation. That reduction runs where taxable capital in Canada, broadly assets less certain debts, is between $10 million and $50 million across the associated group, for taxation years beginning on or after April 7, 2022. Below that size neither reduction touches you. Verified 2026-08-24. The federal 9% rate and the federal $500,000 business limit are stated in full on /guides/what-changed-for-2026/. ↩

  11. Ontario’s general rate of 11.5% has been in force since July 1, 2011, per Ontario Ministry of Finance, “Corporations Tax: Corporate Income Tax” (ontario.ca). The proration across a taxation year straddling July 1, 2026 is stated in the 2026 Ontario Budget, Annex: Details of Tax Measures. Its wording is that the reduction would be prorated for taxation years straddling July 1, 2026. Section 31(4) of the Taxation Act, 2007 as amended carries it as a day-count ratio rather than a whole-year rule. Verified 2026-08-24. ↩

  12. Ontario Ministry of Finance, “Corporations Tax: Corporate Income Tax” (ontario.ca). Ontario states there that the CRA administers its corporate income tax, its corporate minimum tax and the special additional tax on life insurers. The CRA’s “Corporation tax rates” page heads its provincial table as not including Quebec and Alberta, neither of which has a corporation tax collection agreement with the CRA. Ontario also has a corporate minimum tax, but it reaches only a corporation or associated group with total assets of $50 million or more and total revenue of $100 million or more. Owner management does not create an exemption, so a large owner-managed group still has to check those thresholds. The minimum tax is charged at 2.7% of adjusted book income (i.e. financial statement income with certain adjustments), per Ontario Ministry of Finance, “Corporations Tax: Corporate Minimum Tax”. Verified 2026-08-24. ↩

  13. CRA, “When to file your corporation income tax return”, which requires filing within six months of the end of the tax year. Filing late costs 5% of the unpaid tax plus 1% per complete month, to a maximum of 12 months. That penalty is in CRA guide T4012 and subsections 162(1) and (2) of the Income Tax Act. Ontario’s own exposure comes from section 120(1) of the Taxation Act, 2007, which applies those federal penalties for the purposes of the Ontario Act. Section 120(3) then lets the federal Minister refrain from levying or reduce the Ontario penalty where the same failure is already penalised federally. If you disagree with the CRA’s assessment, you have 90 days from the day the notice was sent to file a formal objection, per subsection 165(1) of the Income Tax Act. Verified 2026-08-24. ↩

  14. The two-month and three-month intervals are both in the definition of “balance-due day” in subsection 248(1) of the Income Tax Act. Paragraph (d)(ii) gives two months in any other case. Paragraph (d)(i) gives three months on three conditions. An amount must have been deducted under section 125 for the current or the preceding year. The corporation must have been a Canadian-controlled private corporation throughout the year. Its taxable income for the preceding year must not have exceeded its business limit for that preceding year. That limit is $500,000 only for a corporation that is unassociated and below the taxable-capital phase-out, and an associated group uses combined limits and combined incomes for the test. The instalment obligation itself is in section 157. Corporate instalments aren’t required where total tax payable is $3,000 or less in either the current or the previous year, and that test counts the Ontario tax, per CRA, “Who has to pay in instalments”. Verified 2026-08-24. ↩

  15. Ontario also runs several refundable corporate tax credits (e.g. co-operative education, innovation, manufacturing investment and regional opportunities) and a reduced rate for manufacturing and processing income. None of them is covered here, and none of their figures is stated on this page. ↩

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