Ontario corporate tax for small business, explained
Incorporated Ontario businesses pay combined federal and Ontario corporate tax, with a lower rate on small-business income.
An incorporated Ontario business pays corporate income tax to both the federal government and Ontario, filed together through the T2. Active small-business income up to a limit is taxed at a reduced combined rate thanks to the small business deduction.
The small business deduction
Canadian-controlled private corporations get a lower tax rate on a set amount of active business income each year. Income above that limit, and passive investment income, is taxed differently.
Why current books matter
Your corporate tax is only as accurate as your bookkeeping. Current books mean the right income, the right deductions, and no surprises at filing. Confirm the current rates and limits with your accountant, since they change.
This is general information, not tax advice for your situation. Book a call and a Canadian accountant will give you the answer for your business.
Common questions
What's the small-business corporate tax rate in Ontario?
Canadian-controlled private corporations pay a reduced combined federal-provincial rate on active business income up to the annual limit. Confirm the current figure with your accountant, as it changes.
Is corporate tax filed separately for Ontario and Canada?
No. The federal and Ontario corporate returns are handled together through the T2.