Ontario Corporate Tax Rate 2026: What Toronto Business Owners Need to Know

The Ontario corporate tax rate for 2026 is 11.5% for general corporations and 3.2% for small businesses, dropping to 2.2% effective July 1, 2026. When combined with the federal rate, Toronto business owners will pay a combined rate of 26.5% on general corporate income and as low as 11.2% on the first $500,000 of active business income earned through a Canadian Controlled Private Corporation (CCPC). 

This guide breaks down every rate, explains what changed in the 2026 Ontario Budget, and shows you how to keep more of your hard earned revenue.

Understanding the Ontario Corporate Tax Rate Structure

Ontario uses a two tier system with separate rates for general corporations and small businesses. Every corporation that operates through a permanent establishment in Ontario pays both federal and provincial corporate income tax. The federal government sets its rates uniformly across Canada, while Ontario adds its own provincial rates on top. This means your total corporate tax bill depends on both levels of taxation combined.

For 2026, the federal corporate tax rate is 15% for general corporations and 9% for CCPCs that qualify for the small business deduction (SBD). Ontario then adds its own provincial rate, which varies depending on whether your business qualifies as a small business or falls under the general corporate category. If you are new to how business taxes work in Canada, our guide to small business tax in Canada explains the full framework from the ground up.

2026 Ontario Corporate Tax Rates at a Glance

Here are the exact rates Toronto business owners need to plan around.

General Corporate Tax Rate

The Ontario general corporate tax rate remains at 11.5% for 2026. This rate has not changed since July 1, 2011. When you add the 15% federal rate, general corporations in Ontario pay a combined rate of 26.5% on active business income above the small business deduction limit.

This rate applies to all active business income that is not eligible for the SBD. It also applies to corporations that are not CCPCs, including public companies and foreign controlled private corporations. For manufacturing and processing income, Ontario offers a reduced provincial rate of 10%, bringing the combined rate down to 25%.

Small Business Tax Rate

This is where the big change happens in 2026. The Ontario small business corporate income tax rate will decrease from 3.2% to 2.2%, effective July 1, 2026. This was announced in the 2026 Ontario Budget and applies to the first $500,000 of active business income earned by eligible CCPCs.

For tax years that straddle July 1, 2026, the rate will be prorated based on the number of days before and after the effective date. For a CCPC with a December 31, 2026 fiscal year end, the blended Ontario small business rate for the year will be approximately 2.7%, giving a combined federal and Ontario rate of roughly 11.7%.

Combined Federal and Ontario Corporate Tax Rates 2026

This table shows what Toronto corporations actually pay after both levels of tax.

Income Type	Federal Rate	Ontario Rate (Before July 1)	Ontario Rate (After July 1)	Combined Rate (2027 Onwards)
Small Business Income (CCPC)	9%	3.2%	2.2%	11.2%
General Active Business Income	15%	11.5%	11.5%	26.5%
Manufacturing and Processing	15%	10%	10%	25%
CCPC Investment Income	38.67%	11.5%	11.5%	50.17%

The small business rate of 11.2% combined is one of the lowest corporate tax rates available in Canada for active business income. This makes Ontario increasingly competitive with provinces like Alberta, which has a combined small business rate of 11%. For Toronto business owners operating a CCPC, this rate reduction means real savings that add up every year. If you want to learn more about how CCPCs work and the advantages they offer, our blog on Canadian Controlled Private Corporations (CCPCs) goes into much more detail.

What Changed in the 2026 Ontario Budget?

The Ontario government announced a 1% cut to the small business rate along with other tax related measures. On March 26, 2026, Ontario Finance Minister Peter Bethlenfalvy tabled the provincial budget with several measures that directly affected Toronto corporations. The headline change is the reduction of the small business corporate income tax rate from 3.2% to 2.2%, effective July 1, 2026. The $500,000 small business deduction limit and the general corporate rate of 11.5% remain unchanged.

There is an important detail that many business owners overlook. To align with the lower corporate rate, Ontario will also reduce the non eligible dividend tax credit from 2.9863% to 1.9863%, effective January 1, 2027. This means that while your corporation pays less tax on retained earnings, you will pay slightly more personal tax when those earnings are eventually distributed as non eligible dividends.

At Tax Return Filers Ltd., we help Toronto business owners with corporate tax returns in Toronto, bookkeeping in Toronto, HST returns in Toronto, and personal income tax in Toronto so you can make informed decisions about salary versus dividend planning and maximize every dollar you keep.

How the Small Business Deduction Works for Toronto Businesses?

The SBD is the key to accessing the lowest Ontario corporate tax rate. The small business deduction applies to the first $500,000 of active business income earned by a CCPC in a tax year. If your corporation is associated with other corporations, this $500,000 limit must be shared among all associated companies. Active business income means income from the normal operations of your business.

There are two important thresholds that can reduce or eliminate your access to the SBD. First, if your corporation’s taxable capital employed in Canada exceeds $10 million, the SBD begins to phase out and is completely eliminated at $50 million. Second, if your CCPC earns more than $50,000 in passive investment income in the prior tax year, the SBD limit is reduced by $5 for every $1 of passive income over $50,000. At $150,000 of passive income, the SBD is completely eliminated.

This is why proper corporate tax planning matters. If your business is growing and generating investment income, you could lose access to the 11.2% rate without even realizing it. Our blog on understanding corporate tax planning covers strategies to help you stay within these limits.

Ontario vs. Other Provinces: How Toronto Compares?

See where Ontario stands compared to other Canadian provinces for corporate tax rates.

Province	Small Business Combined Rate	General Combined Rate	SBD Limit
Ontario (After July 1, 2026)	11.2%	26.5%	$500,000
Alberta	11%	23%	$500,000
British Columbia	11%	27%	$500,000
Saskatchewan	9%	27%	$600,000
Manitoba	9%	27%	$500,000
Quebec	12.2%	26.5%	$500,000
New Brunswick	11.5%	29%	$500,000
Nova Scotia	10.5%	29%	$700,000

After the July 2026 reduction, Ontario’s small business rate becomes very competitive nationally. While Saskatchewan and Manitoba offer the lowest combined small business rates at 9%, Ontario’s general corporate rate of 26.5% is lower than most provinces, making it attractive for larger corporations as well. For Toronto business owners specifically, the combination of a low general rate and access to the country’s largest consumer market makes the city a strong place to grow a business.

Tax Planning Tips for Toronto Business Owners in 2026

Smart planning ensures you pay the lowest Ontario corporate tax rate legally available. Review your corporate structure to confirm you qualify as a CCPC and that your business income stays within the $500,000 SBD limit. If your active business income is expected to exceed $500,000, consider paying a year end management bonus to bring corporate income back within the SBD threshold. This strategy is explained further in our blog on how to reduce your year end tax bill in Canada.

Monitor your passive investment income closely. If it is approaching the $50,000 threshold, consider distributing excess corporate funds as dividends before year end or restructuring investments through a separate holding company. Also make sure your bookkeeping is accurate and up to date so you have real time visibility into your financial position. Our bookkeeping checklist for small businesses in Toronto provides a structured approach to staying organized all year long.

With the dividend tax credit change coming in 2027, now is also a good time to review your compensation strategy. Depending on your personal tax situation, a different salary and dividend mix could save you thousands. Avoid the common tax mistakes small businesses make in Toronto by working with a professional who understands both corporate and personal tax integration.

Final Thoughts

The Ontario corporate tax rate changes in 2026 bring real savings for Toronto small business owners, especially CCPCs that keep their active business income within the $500,000 SBD limit. The reduction from 3.2% to 2.2% at the provincial level may seem small, but it adds up to thousands of dollars in tax savings every year. However, the upcoming dividend tax credit change in 2027 means you need to plan your compensation strategy carefully.

If you need expert guidance, Tax Return Filers Ltd. is here to help Toronto business owners with corporate tax filing, tax planning, bookkeeping, and HST returns so you can take full advantage of every rate reduction and keep more of what you earn.