How much corporate tax will your corporation pay this year?

The two layers of corporate tax

A Canadian corporation pays federal corporate tax and provincial corporate tax on the same active business income, meaning the profit it makes from actually running the business. The two are worked out separately, at different rates, and then added together. Any straight answer to the question "what is the corporate tax rate" is therefore two numbers stacked rather than one.

Each government then charges two rates rather than one. There is a reduced rate on a first slice of profit, and a higher general rate on everything above that slice. The slice itself is called the business limit, and the break that drops the rate on it is the small business deduction. Only a Canadian-controlled private corporation claiming that deduction gets the reduced rate, and every other corporation pays the general rate from its first dollar.

So the calculator splits your profit at the business limit, taxing the part below it at the reduced rate and the part above it at the general rate. The same split runs twice, once federally and once provincially. Most provinces set their own limit at the same amount as the federal one, and three of them set it higher. Your profit can therefore sit above the federal limit and below the provincial one at the same time, taxed at two different rates in the same year.

The reduction that runs on investment income

Money your corporation keeps rather than paying out to you earns investment income once it's invested, and enough of that income triggers a reduction that takes the business limit away altogether. The reduction is measured on adjusted aggregate investment income, meaning what the corporation's investments earned with a set of adjustments applied, and accountants call it the grind.

Two details of the grind matter more than the rest, and the first of them is its timing. The figure that counts is the previous year's, so what your investments earned last year sets the limit for this year, long after the cash was reinvested or spent. The second detail is its scope: the figure is added up across the associated group (e.g. this corporation plus a second company you also own), broadly meaning corporations under common control. A second company therefore doesn't buy a second threshold, and moving investments into a related company doesn't help either.

Where an associated group has split the limit between its companies, the reduction scales down in proportion. A corporation allocated half the limit loses half as many dollars of limit to the same investment income. The limit still reaches nil at the same point either way. Some provinces apply the same reduction to their own limit and some don't, which the calculator states for whichever province you pick.

Rates that change part way through your year

Ontario cut its lower corporate rate part way through 2026, and the legislation prorates the cut for a fiscal year that straddles the change. A corporation whose year ends on December 31 therefore pays neither the old rate nor the new one, but a mix of the two weighted by how many days of its year fell under each.

Ontario isn't the only province whose figures moved inside a year this calculator covers. The changes it carries are Nova Scotia's lower rate and business limit on April 1, 2025, Prince Edward Island's general rate and business limit on July 1, 2025, Newfoundland and Labrador's lower rate on January 1, 2026 and Ontario's lower rate on July 1, 2026, and each province's own legislation weights a fiscal year that straddles its change by the days on each side. Where a business limit or a general rate moved as well, the calculator taxes each period on that period's own figures and weights the periods by their days, which is how the CRA's provincial schedules work it on the T2.

The calculator does that arithmetic from the dates each figure actually changed, counting the days of your fiscal year that fall into each period. Every period it used is listed under the answer, with its rate and its day count, so you can check the weighting yourself. A province whose figures didn't move during your year has one rate and no blending.

A first tax year, or one cut short by a change of year-end, covers fewer days than twelve months. The Income Tax Act also shrinks the business limit of a year under 51 weeks to the share of 365 days the year actually covers, and the provinces start their own small business calculations from that federal figure. Answer the first-year question and the calculator weights the rates across the real days and cuts each limit, federal and provincial, in the same proportion.

Your fiscal year can also reach back before this calculator's first date or forward past its last one. When it does, the calculator carries the nearest published rate across those days and prints the assumption beside the answer. We'd treat the rate on those days as an assumption rather than as something anyone published, and check it against the issuer. The check is unnecessary where the whole of your fiscal year sits inside the dates this calculator covers.

What this calculator leaves out

The calculator models the business limit reduction that runs on investment income, and not the second one that runs on taxable capital employed in Canada. Leaving the second out is a practical choice rather than a principled one, because taxable capital isn't a figure an owner can type from memory. A group carrying a large amount of taxable capital loses business limit under that second rule instead, and only the larger of the two reductions ever applies.

Two special rate rules also sit outside the arithmetic, because both turn on what a corporation manufactures rather than on how much it earns. Manufacturers of qualifying zero-emission technology pay less federally, some provinces charge a separate manufacturing and processing rate, and neither of those rates is applied here. The calculator also assumes your corporation is taxable in one province. A corporation with a permanent establishment in more than one allocates its taxable income between them on Schedule 5 of the T2 return, and each province then taxes its own share.

The personal services business rules sit outside it as well, and where they apply they reverse the whole answer. A corporation that exists so one person can work for a client they'd otherwise be an employee of can be treated as a personal services business, which loses the small business rate and pays a further federal charge on top, so none of the rates this calculator applies would be the right ones.

Finally, the calculator works out corporate tax on active business income and stops there. Investment income your corporation earns runs under a separate set of rules. The personal tax you pay when the money comes out to you as salary or dividends is a second layer this page doesn't touch.

The test turns on whether you'd be that client's employee if the corporation weren't in between, which is the question the employee or contractor checker asks from the client's side.

Getting the money out of your corporation is a separate decision with its own arithmetic, and it's where most of the tax on a year of profit is eventually paid. Salary or dividends covers it.

Two worked examples

To provide an example, take a consulting corporation in Ontario with a December 31, 2026 year-end and no investments of its own.

All $100,000 of active business income sits inside the federal business limit of $500,000 and inside the Ontario limit of $500,000. Federal tax is $9,000 (9% on $100,000). The Ontario lower rate blends 3.2% for 181 days with 2.2% for 184 days to give 2.7%, which is $2,696. Total corporate tax is $11,696, an effective rate of 11.7%, leaving $88,304 in the corporation.

Now take a Saskatchewan corporation with the same December 31, 2026 year-end, whose profit runs past both business limits.

The federal business limit is $500,000, so $500,000 is taxed at 9% ($45,000) and $200,000 at 15% ($30,000), which is $75,000 federally. Saskatchewan sets its own limit at $600,000, so $600,000 is taxed at 1% ($6,000) and $100,000 at 12% ($12,000), which is $18,000. Total corporate tax is $93,000, an effective rate of 13.3%, leaving $607,000.

Profit can sit above the federal business limit and below a higher provincial one at the same time. The slice in between is taxed at the federal general rate and at the provincial lower rate in the same year, so both limits matter to a corporation whose profit lands in that band. The provinces that set a limit above the federal one are Saskatchewan, Nova Scotia and Prince Edward Island.

Corporate tax rates by province

Each figure below adds the federal and provincial rates together for a December 31 year-end, for the tax year this calculator covers. The small business column applies to profit inside the business limit, and the general column applies to everything above it.

A combined rate marked blended belongs to a province whose rate changed part way through 2026, and the legislation prorates the change across a fiscal year that straddles it. The figure shown is the day-weighted rate for a full year ending December 31, 2026.