An Ontario corporation pays a combined federal-plus-provincial corporate income tax rate of 12.2% on the first $500,000 of active business income through June 30, 2026, dropping to 11.2% on or after July 1, 2026 under a legislated small-business rate cut — see the Ontario small business tax rate page for the rate on its own. Active business income above the small-business range is taxed at a combined 26.5% general rate throughout the year. The $500,000 small-business limit itself is not changing — only the rate is dropping — and corporations with a fiscal year that straddles July 1, 2026 prorate the old and new rates over the days on each side of the effective date. This guide walks through the 2026 rates, the mid-year change and its proration, and how Ontario compares with Alberta and British Columbia.
Ontario corporate income tax rates for 2026
Like every province except Alberta and Quebec, Ontario does not operate a standalone corporate tax collection system. The Canada Revenue Agency (CRA) administers Ontario's corporate income tax under a federal-provincial collection agreement, so an Ontario corporation files a single federal T2 Corporation Income Tax Return that already builds in the Ontario rate — there is no separate provincial corporate return, unlike Alberta's AT1.
As of the 2026 tax year, the combined rates are:
| Income type | Federal rate | Ontario rate | Combined rate |
|---|---|---|---|
| Active business income up to $500,000 (CCPC small-business), before July 1, 2026 | 9% | 3.2% | 12.2% |
| Active business income up to $500,000 (CCPC small-business), on/after July 1, 2026 | 9% | 2.2% | 11.2% |
| Active business income above the small-business range (general) | 15% | 11.5% | 26.5% |
The 3.2% → 2.2% Ontario small-business rate cut, and the corresponding 12.2% → 11.2% combined drop, take effect July 1, 2026. Corporations with a non-calendar fiscal year that straddles the effective date generally prorate the two rates over the days falling before and after July 1, the standard approach the CRA applies whenever a corporate tax rate changes mid-year — confirm the exact proration mechanics for your fiscal year with your tax preparer or the CRA.
The July 1, 2026 small-business rate cut
The rate cut is legislated under Bill 97, the Plan to Protect Ontario Act (Budget Measures), 2026 (Statutes of Ontario 2026, chapter 2, Royal Assent March 26, 2026), which implemented the 2026 Ontario Budget. It lowers the Ontario small-business corporate income tax rate from 3.2% to 2.2% effective July 1, 2026 — the Ontario small-business deduction rate becomes 9.3% of the 11.5% general rate for days in a taxation year after June 30, 2026. Bill 97 does not touch the $500,000 small-business limit, which stays the same for both the federal and Ontario calculations.
(A separate, unrelated private member's bill — Bill 12, the Cutting Taxes on Small Businesses Act, 2025 — would have raised the Ontario limit to $600,000. It reached only First Reading in May 2025 and never became law, so it has no effect on 2026 rates or limits.)
Proration for a fiscal year that straddles July 1, 2026
Because the rate change lands mid-year for most corporations, the CRA prorates the old 3.2% and new 2.2% Ontario rates by the number of days in the fiscal year on each side of July 1, 2026 — the standard approach whenever a corporate tax rate changes mid-year:
| Fiscal year-end | Days at 3.2% (before July 1) | Days at 2.2% (on/after July 1) | Approx. blended Ontario small-business rate |
|---|---|---|---|
| June 30, 2026 | 365 | 0 | 3.2% (no change yet) |
| December 31, 2026 | 181 | 184 | ~2.7% |
| June 30, 2027 | 0 | 365 | 2.2% (full new rate) |
A corporation with a June 30 fiscal year-end keeps the full 3.2% Ontario rate for the year ending June 30, 2026 and moves to the full 2.2% rate the following year, with no proration needed. A calendar-year corporation blends the two rates for its 2026 return. Confirm the exact day-count mechanics for your fiscal year with your tax preparer or the CRA.
As with the federal small-business deduction, Ontario's $500,000 limit is shared among associated corporations and can be ground down where a CCPC and its associated group earn significant passive investment income — see our small business deduction limit guide for the federal grind-down mechanics that interact with Ontario's rules.
Ontario vs Alberta vs BC: a 2026 rate comparison
Ontario sits between Alberta and BC on both the small-business and general rates:
| Province | Small-business combined rate (2026) | General combined rate (2026) | Own corporate return? |
|---|---|---|---|
| Alberta | 11% | 23% | Yes — AT1, filed separately with TRA |
| British Columbia | 11% | 27% | No — filed with the T2 |
| Ontario | 12.2% (11.2% on/after July 1, 2026) | 26.5% | No — filed with the T2 |
On small-business income, Ontario's post-July-1 combined rate of 11.2% is close to Alberta's and BC's 11%. On general income, Ontario's 26.5% sits between Alberta's low 23% and BC's higher 27%. Businesses comparing Ontario to Alberta specifically should also weigh Alberta's AT1 filing obligation against Ontario's simpler single-T2 filing — see our Alberta corporate tax guide and BC corporate tax guide for the full provincial pictures, and our Alberta vs BC business tax comparison for a deeper side-by-side of those two.
Sales tax and payroll tax context for Ontario corporations
Corporate income tax is only part of an Ontario business's tax stack. Ontario charges a single harmonized 13% HST rather than separate GST and PST, and employers whose Ontario payroll exceeds the exemption threshold also pay the Employer Health Tax (EHT). We cover both in detail in our Ontario Employer Health Tax guide and our step-by-step incorporating in Ontario guide. For the sales-tax landscape nationally, see our GST/HST/PST guide for Canadian business.
How RN Canada helps
RN Canada is an accounting and advisory firm headquartered in Edmonton, with a Vancouver office, serving Ontario and Toronto-area clients remotely from our head office. Led by Ozgur Duymaz, Ph.D., CPA (Canada), ACCA (UK), CMA (US), we prepare T2 corporate returns for Ontario CCPCs, model the July 1, 2026 rate change and its proration for your specific fiscal year-end, and plan around associated-company and passive-income grind-down rules. Explore our tax return preparation service or estimate your liability with the corporate tax calculator. Learn more about how we serve businesses in Ontario and Toronto.
Frequently asked questions
For the 2026 tax year, an eligible Canadian-controlled private corporation pays a combined federal-plus-Ontario rate of 12.2% on the first $500,000 of active business income before July 1, 2026, dropping to 11.2% on or after July 1, 2026. Active business income above the small-business range is taxed at a combined 26.5% (15% federal general plus 11.5% Ontario general), unchanged through the year.
Yes. Under the 2026 Ontario Budget, implemented through Bill 97, the Plan to Protect Ontario Act (Budget Measures), 2026 (Royal Assent March 26, 2026), Ontario's small-business corporate income tax rate drops from 3.2% to 2.2% effective July 1, 2026. Combined with the federal 9% small-business rate, that lowers the combined small-business rate from 12.2% to 11.2% for income earned on or after the effective date.
No. Ontario's small-business limit stays at $500,000, matching the federal limit — Bill 97 changes only the rate, not the dollar threshold. A separate private member's bill, Bill 12, the Cutting Taxes on Small Businesses Act, 2025, would have raised the Ontario limit to $600,000, but it reached only First Reading in May 2025 and never became law.
The 3.2% and 2.2% Ontario rates are prorated by the number of days in the fiscal year that fall before and after July 1, 2026, the standard CRA approach for a mid-year rate change. A corporation with, say, a June 30 fiscal year-end pays close to the full 2.2% Ontario rate for that year, while a December 31 fiscal year-end pays a blended rate roughly halfway between 3.2% and 2.2%. The $500,000 small-business limit itself is unaffected and is still shared among associated corporations and ground down by the passive-income rules.
No. Ontario corporate income tax is administered by the Canada Revenue Agency (CRA) under a federal-provincial collection agreement, so an Ontario corporation files a single federal T2 return that already accounts for the Ontario rate. This is unlike Alberta, which requires a separate AT1 return filed with Tax and Revenue Administration in addition to the T2.
On small-business income, Ontario's 2026 combined rate (12.2% before July 1, 11.2% after) sits above Alberta's 11% and matches BC's 11%. On general income, Ontario's 26.5% combined rate is between Alberta's 23% and BC's 27% — meaningfully higher than Alberta, slightly lower than BC.
Ontario's general corporate income tax rate is 11.5% provincially, which combines with the 15% federal general rate for 26.5% combined. This rate applies to active business income above the small-business range and to most income earned by corporations that do not qualify for the small-business deduction.
Yes. Our corporate tax calculator estimates federal-plus-provincial corporate income tax and can be used to model Ontario's small-business and general bands, including the July 1, 2026 rate change. It is free and needs no sign-up.