Canadian Corporation Tax Rates by Province (2026)
Understanding corporate tax rates is essential for every Canadian business owner. The rates you pay depend on three things: whether you qualify for the small business deduction, which province your corporation operates in, and how much active business income you earn.
Here's the complete picture for 2026.
9%
Federal SBD rate
On first $500k active income
15%
Federal general rate
Above the SBD limit
9%
Manitoba combined SBD
Lowest in Canada
30%
NL general rate
Highest combined general
$500k
Small business limit
Shared across associated corps
$50k
Passive income floor
Before SBD clawback starts
Federal Corporate Tax Rates
The federal government applies two rates to corporate income:
| Income Type | Federal Rate |
|---|---|
| Small business income (first $500,000) | 9% |
| General corporate income (above $500,000) | 15% |
The reduces the federal rate from 15% to 9% on the first $500,000 of active business income. To qualify, your corporation must be a and your taxable capital must be under $10 million (with a phase-out between $10M and $50M). See the CRA's current corporate tax rates for the authoritative source.
Provincial and Territorial Corporate Tax Rates
Each province adds its own corporate tax rate on top of the federal rate. Small business rates (combined federal + provincial) vary from 9% in Manitoba to 13% in the Northwest Territories.
General corporate rates (above the $500k SBD limit) show a wider spread, from 23% in Alberta to 31% in PEI.
The raw table, for reference:
| Province/Territory | Small Business Rate | General Rate |
|---|---|---|
| Alberta | 11% (9 + 2) | 23% (15 + 8) |
| British Columbia | 11% (9 + 2) | 27% (15 + 12) |
| Manitoba | 9% (9 + 0) | 27% (15 + 12) |
| New Brunswick | 11.5% (9 + 2.5) | 29% (15 + 14) |
| Newfoundland & Labrador | 12% (9 + 3) | 30% (15 + 15) |
| Northwest Territories | 13% (9 + 4) | 26.5% (15 + 11.5) |
| Nova Scotia | 11.5% (9 + 2.5) | 29% (15 + 14) |
| Nunavut | 12% (9 + 3) | 27% (15 + 12) |
| Ontario | 12.2% (9 + 3.2) | 26.5% (15 + 11.5) |
| Prince Edward Island | 10% (9 + 1) | 31% (15 + 16) |
| Quebec | 12.2% (9 + 3.2) | 26.5% (15 + 11.5) |
| Saskatchewan | 10% (9 + 1) | 27% (15 + 12) |
| Yukon | 11% (9 + 2) | 27% (15 + 12) |
Note: Some provinces have their own small business income thresholds that differ from the federal $500,000 limit. Manitoba's provincial small business rate is 0%, making it the lowest combined rate in Canada.
What Qualifies as Small Business Income?
Not all corporate income qualifies for the small business deduction. The SBD only applies to active business income earned by a CCPC.
| Income Type | Qualifies for SBD? |
|---|---|
| Active business income (consulting, services, products) | Yes |
| Investment income (interest, capital gains) | No |
| Rental income (in most cases) | No |
| Foreign active business income | No |
Investment income earned inside a corporation is taxed at a higher rate (roughly 50% combined) and is subject to additional rules through the system.
The $500,000 Business Limit
The federal small business limit is $500,000, but it can be reduced in two situations:
- Associated corporations. If you own or control multiple corporations, they must share the $500,000 limit.
- Taxable capital over $10 million. The business limit is gradually reduced to zero as taxable capital employed in Canada grows from $10 million to $50 million.
- Passive investment income. If your corporation's aggregate investment income exceeds $50,000, the business limit is reduced by $5 for every $1 of investment income above $50,000. At $150,000 of investment income, the business limit is eliminated entirely.
For most one-person corporations, none of these clawbacks apply.
How Tax Integration Works
Canada's tax system is designed so that income earned through a corporation and then distributed as dividends is taxed at roughly the same total rate as income earned personally. This is the concept of integration. The CRA publishes both and gross-up and credit rates each year in its T5 reporting guide.
Here's a simplified example for a BC resident earning $100 of active business income:
| Path | Corporate Tax | Personal Tax on Distribution | Total Tax |
|---|---|---|---|
| Through corporation (SBD rate, eligible dividend) | $11.00 | ~$24.50 | ~$35.50 |
| Earned personally | N/A | ~$36.50 | ~$36.50 |
The rates are close but not identical. Perfect integration is a theoretical goal. In practice, small differences exist depending on the province, income level, and type of dividend (eligible vs. non-eligible).
Planning Considerations
Retain earnings when you can. If you don't need all the corporate income personally, leaving it in the corporation at 11% (BC small business rate) instead of withdrawing it at your personal marginal rate (potentially 53.5% at the top bracket) creates a significant tax deferral.
Watch the passive income threshold. If your corporation accumulates investments that earn more than $50,000 annually, you start losing access to the small business deduction. This creates a planning challenge for corporations with large retained earnings.
Provincial allocation matters. If your corporation earns income in multiple provinces, the income is allocated to each province based on where you have a permanent establishment and where your employees/revenue are. Different provincial rates mean the allocation can meaningfully affect your total tax bill.
How ledg Helps
ledg tracks your corporate income and expenses throughout the year, giving you a clear picture of your taxable income at any point. When it's time to plan your salary-dividend mix or estimate your tax bill, your numbers are already organized and ready to share with your accountant.
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