Ontario Cuts Small Business Corporate Tax Rate to 2.2%

Ontario's small business corporate income tax rate fell from 3.2% to 2.2% effective July 1, 2026, under the province's 2026 budget. The lower rate applies to Canadian-controlled private corporations on active business income, and the province also raised the business limit eligible for the small business rate from $500,000 to $600,000.

What it means for combined rates

Factoring in the federal small business rate, the total effective small business tax rate in Ontario dropped to 11.2% from 12.2%.

• For corporations with a taxation year that straddles the July 1, 2026 effective date, the rate cut is prorated rather than applied for the full year. - This is general news information, not individualized tax advice; business owners should confirm how the change applies to their own corporation.

More in Taxes

• First Canada Groceries and Essentials Benefit Payment Lands, Replacing GST/HST Credit
• BC's Higher Income Tax Rate Starts Showing Up on Paycheques
• Ontario's Small Business Tax Cut: What the Drop to 2.2% Actually Means