Corporate Tax Rates in Canada: Federal and Provincial
federal 9% and 15% rates plus small business deduction mechanics
Canada's federal corporate income tax rate is 9% on the first $500,000 of active business income for Canadian-controlled private corporations claiming the small business deduction, and 15% on general active business income. Each province and territory adds its own rate on top, and Quebec and Alberta administer their corporate taxes themselves.
What is the federal corporate tax rate?
9% on the first $500,000 of active business income for a CCPC claiming the small business deduction, and 15% general. The $500,000 federal business limit is the amount the reduced rate applies to.
How the small business deduction works
The small business deduction reduces Part I tax on active business income up to the business limit. The limit is shared among associated corporations and is ground down by passive investment income and by taxable capital, so a corporation's effective access to the 9% rate is not automatic.
How provincial rates stack on top
Every province and territory sets its own small-business and general rates, and several set their own business limit. Manitoba and Yukon levy 0% on small-business income; Nunavut's 3% is the highest. Saskatchewan and Prince Edward Island apply a $600,000 provincial limit and Nova Scotia applies $700,000, each above the federal $500,000.
Who administers corporate tax?
The CRA administers corporate income tax for every province and territory except Quebec and Alberta, which run their own systems. A Quebec corporation files a CO-17 with Revenu Québec in addition to the federal T2; an Alberta corporation with a permanent establishment in the province files an AT1 with Alberta Tax and Revenue Administration.
Verify provincial numbers before you use them
Provincial rates and limits change on budget cycles and often mid-year. Ontario's small-business rate falls from 3.2% to 2.2% on July 1, 2026; Quebec's falls on the same schedule for taxation years beginning after April 29, 2026; Prince Edward Island cut its general rate to 15% on July 1, 2025. Confirm the rate against the province's own source for the specific taxation year before relying on it.
Frequently asked questions
What is the small business tax rate in Canada?
The federal small-business rate is 9%, applied to the first $500,000 of active business income of a Canadian-controlled private corporation claiming the small business deduction. Each province adds its own rate, ranging from 0% in Manitoba and Yukon to 3% in Nunavut.
What is the general corporate tax rate in Canada?
The federal general rate is 15% on active business income above the small business limit, before provincial tax. Provincial general rates vary — Alberta's 8% is the lowest in the country — so the combined rate a corporation actually pays depends on where it has a permanent establishment.
Which provinces have their own corporate tax return?
Quebec and Alberta. Quebec corporations file a CO-17 with Revenu Québec alongside the federal T2, and Alberta corporations with a permanent establishment in the province file an AT1 with Alberta Tax and Revenue Administration. Everywhere else, the CRA collects provincial corporate tax through the T2.
Is the small business limit always $500,000?
Federally, yes. Provincially, no: Saskatchewan and Prince Edward Island apply a $600,000 limit and Nova Scotia applies $700,000. Above the federal limit, income taxed at the provincial small-business rate is still taxed at the federal general rate.
Can a corporation lose access to the small business deduction?
Yes. The business limit is shared among associated corporations and is reduced by significant passive investment income and by large taxable capital. A corporation that accumulates investments inside the operating company can find its access to the 9% rate shrinking without any change to its business.
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