Federal vs Provincial Corporate Tax Rates by Province — Canada 2026
The complete breakdown of federal and provincial corporate tax rates for every Canadian province and territory. Small business rates, general rates, combined rates, M&P credits, SBD thresholds, passive income grind and how the rates interact — with worked dollar examples.
See All Rates Province Details1. How Federal and Provincial Corporate Tax Works in Canada
Canadian corporations pay corporate income tax at two levels: federal and provincial (or territorial). The federal government sets a base rate that applies to all corporations across Canada, and each province or territory adds its own rate on top. The two rates are calculated separately but reported on a single T2 return and paid as a combined amount to CRA (except in Quebec and Alberta, which administer their own provincial corporate tax and require a separate provincial return).
The federal rate structure has two tiers. The first tier is the Small Business Deduction (SBD) rate — a reduced rate of 9% that applies to the first $500,000 of active business income earned by Canadian-Controlled Private Corporations (CCPCs). The second tier is the general rate of 15% that applies to active business income above $500,000 and to all income earned by non-CCPCs. Each province adds its own two-tier structure on top, creating a combined rate that varies significantly by province and by income level.
The distinction between the SBD rate and the general rate is the single most important factor in Canadian corporate tax planning. An Ontario CCPC earning $500,000 in active business income pays a combined rate of 12.2% (federal 9% + Ontario 3.2%). The same income in the same province, but earned by a non-CCPC or above the $500,000 threshold, is taxed at 26.5% (federal 15% + Ontario 11.5%). The difference is $71,500 per year on $500,000 of income — which is why CCPC status and SBD eligibility are the foundation of every corporate tax plan in Canada.
2. Federal Corporate Tax Rates — 2026
The federal corporate tax rate structure applies uniformly across all provinces and territories. Provincial rates are added on top.
| Rate Type | Rate | Applies To | Key Condition |
|---|---|---|---|
| Small Business Rate | 9% | First $500,000 of active business income | Corporation must be a CCPC; $500K limit shared among associated corporations |
| General Rate | 15% | Active business income above $500,000 and all non-CCPC income | After federal abatement of 10% and general rate reduction of 13% |
| Full Rate (before reductions) | 38% | All corporate income before any reductions | Starting point before the 10% federal abatement and other deductions |
| Federal Abatement | (10%) | Taxable income allocated to a province | Reduces the 38% base rate to 28% for income earned in a province |
| General Rate Reduction | (13%) | Income not eligible for SBD or M&P deduction | Reduces the 28% rate to 15% for general-rate income |
| Investment Income — CCPC | 38.67% | Aggregate investment income (interest, rents, non-eligible capital gains) | Includes 10.67% refundable portion (RDTOH); refunded when taxable dividends paid |
How the Federal Rate Reaches 9% and 15%
General rate path: 38% base – 10% federal abatement – 13% general rate reduction = 15%
SBD rate path: 38% base – 10% federal abatement – 19% small business deduction = 9%
The 19% SBD and the 13% general rate reduction are mutually exclusive — you receive one or the other, not both. Income eligible for the SBD gets the larger 19% reduction. Income not eligible for the SBD gets the 13% general rate reduction.
3. Master Rate Table — All Provinces and Territories 2026
The following table shows the provincial/territorial rate, the combined federal + provincial rate for both the small business tier and the general tier, and the M&P rate where a separate reduced rate exists. All rates are for 2026 and apply to taxation years ending in 2026.
| Province / Territory | Provincial SBD Rate | Combined SBD Rate | Provincial General Rate | Combined General Rate |
|---|---|---|---|---|
| Ontario | 3.2% | 12.2% | 11.5% | 26.5% |
| British Columbia | 2% | 11% | 12% | 27% |
| Alberta | 2% | 11% | 8% | 23% |
| Saskatchewan | 0% (first $600K) | 9% | 12% | 27% |
| Manitoba | 0% | 9% | 12% | 27% |
| Quebec | 3.2% | 12.2% | 11.5% | 26.5% |
| New Brunswick | 2.5% | 11.5% | 14% | 29% |
| Nova Scotia | 2.5% | 11.5% | 14% | 29% |
| Prince Edward Island | 1% | 10% | 16% | 31% |
| Newfoundland and Labrador | 3% | 12% | 15% | 30% |
| Northwest Territories | 2% | 11% | 11.5% | 26.5% |
| Nunavut | 3% | 12% | 12% | 27% |
| Yukon | 0% (first $500K) | 9% | 12% | 27% |
Saskatchewan's $600,000 SBD Limit: Saskatchewan is the only province with a provincial SBD limit higher than the federal $500,000. Saskatchewan's provincial small business rate of 0% applies to the first $600,000 of active business income. However, the federal SBD rate of 9% only applies to the first $500,000 — so income between $500,001 and $600,000 gets the provincial 0% rate but the federal general rate of 15%, resulting in a combined rate of 15% on that slice of income.
4. Combined Small Business Rates — Ranked Lowest to Highest
For CCPCs earning active business income within the SBD limit, the combined small business rate determines how much tax is paid on the first $500,000 of income. This is the rate that matters most for the vast majority of Canadian small businesses.
| Rank | Province / Territory | Combined SBD Rate | Tax on $500K Income |
|---|---|---|---|
| 1 | Manitoba | 9% | $45,000 |
| 1 | Saskatchewan | 9% | $45,000 |
| 1 | Yukon | 9% | $45,000 |
| 4 | Prince Edward Island | 10% | $50,000 |
| 5 | British Columbia | 11% | $55,000 |
| 5 | Alberta | 11% | $55,000 |
| 5 | Northwest Territories | 11% | $55,000 |
| 8 | New Brunswick | 11.5% | $57,500 |
| 8 | Nova Scotia | 11.5% | $57,500 |
| 10 | Newfoundland and Labrador | 12% | $60,000 |
| 10 | Nunavut | 12% | $60,000 |
| 12 | Ontario | 12.2% | $61,000 |
| 12 | Quebec | 12.2% | $61,000 |
5. Combined General Rates — Ranked Lowest to Highest
For income above the $500,000 SBD limit or for non-CCPCs, the combined general rate applies. This rate also applies to CCPCs that have lost SBD eligibility through the passive income grind or taxable capital thresholds.
| Rank | Province / Territory | Combined General Rate | Tax on $1M Above SBD |
|---|---|---|---|
| 1 | Alberta | 23% | $230,000 |
| 2 | Ontario | 26.5% | $265,000 |
| 2 | Quebec | 26.5% | $265,000 |
| 2 | Northwest Territories | 26.5% | $265,000 |
| 5 | British Columbia | 27% | $270,000 |
| 5 | Saskatchewan | 27% | $270,000 |
| 5 | Manitoba | 27% | $270,000 |
| 5 | Nunavut | 27% | $270,000 |
| 5 | Yukon | 27% | $270,000 |
| 10 | New Brunswick | 29% | $290,000 |
| 10 | Nova Scotia | 29% | $290,000 |
| 12 | Newfoundland and Labrador | 30% | $300,000 |
| 13 | Prince Edward Island | 31% | $310,000 |
6. Province-by-Province Breakdown
Ontario
Ontario's combined SBD rate of 12.2% (federal 9% + provincial 3.2%) applies to the first $500,000 of active business income for qualifying CCPCs. The general rate of 26.5% applies to income above $500,000. Ontario does not have a separate reduced M&P rate at the provincial level — the Ontario M&P deduction was eliminated in 2009. Ontario CCPCs with qualifying M&P income can claim the federal M&P deduction which reduces the federal rate but does not affect the provincial rate. Ontario administers its corporate tax through CRA (no separate provincial return required). Ontario is Canada's largest corporate tax jurisdiction with over 800,000 active corporations.
British Columbia
BC's combined SBD rate of 11% (federal 9% + provincial 2%) is the lowest among the major provinces west of Manitoba. The general rate of 27% applies to income above $500,000. BC administers its corporate tax through CRA. BC's provincial SBD limit is $500,000, matching the federal limit. BC does not have a separate provincial M&P rate.
Alberta
Alberta has Canada's lowest combined general rate at 23% (federal 15% + provincial 8%). The SBD rate is 11% (federal 9% + provincial 2%). Alberta administers its own corporate income tax separately from CRA — corporations operating in Alberta must file a separate Alberta AT1 corporate tax return with Alberta Tax and Revenue Administration (TRA) in addition to the federal T2. Alberta's low general rate makes it the most tax-efficient province for corporations with income above the SBD limit.
Saskatchewan
Saskatchewan's combined SBD rate of 9% is the lowest in Canada (tied with Manitoba and Yukon) because the provincial small business rate is 0%. Saskatchewan also has a unique $600,000 provincial SBD limit — higher than the federal $500,000. The general rate of 27% applies above the limit. Saskatchewan has a reduced M&P rate of 10% provincially (combined 25% with federal) for qualifying manufacturing and processing income.
Manitoba
Manitoba matches Saskatchewan with a combined SBD rate of 9% — the lowest in Canada — because the provincial small business rate is 0%. The $500,000 limit matches federal. The general rate of 27% applies above the SBD limit. Manitoba has a provincial M&P tax credit of 1% for qualifying manufacturing profits.
Quebec
Quebec's combined rates match Ontario: 12.2% SBD and 26.5% general. However, Quebec administers its own corporate income tax through Revenu Quebec — corporations operating in Quebec must file a separate CO-17 provincial corporate tax return in addition to the federal T2. Quebec also has a unique DPE (Déduction pour petite entreprise) that provides a reduced rate on the first $500,000 for qualifying M&P and primary sector businesses. Quebec's Innovation Tax Credit and R&D Super Deduction provide additional incentives not available in other provinces.
Atlantic Provinces (NB, NS, PE, NL)
The Atlantic provinces generally have higher combined general rates than Western Canada and Ontario. New Brunswick and Nova Scotia share a 29% combined general rate. Prince Edward Island has the highest combined general rate in Canada at 31%. Newfoundland and Labrador is at 30%. However, the SBD rates are competitive — PEI at 10% and New Brunswick and Nova Scotia at 11.5%. For small businesses earning within the SBD limit, the Atlantic provinces remain cost-competitive. The higher general rates primarily affect larger corporations and those with income above $500,000.
Territories (NWT, Nunavut, Yukon)
The territories offer competitive rates. Yukon has a 0% provincial small business rate (9% combined — tied for lowest in Canada). Northwest Territories matches Ontario and Quebec at 26.5% combined general rate. Nunavut's 27% general rate is mid-range. The territories do not require separate provincial returns — all territory corporate tax is administered through CRA on the T2.
7. Manufacturing and Processing (M&P) Rates
Certain provinces offer a reduced corporate tax rate on income derived from manufacturing and processing activities in Canada. The federal M&P deduction reduces the federal rate from 15% to 13% on qualifying M&P income. Some provinces provide additional M&P reductions at the provincial level.
| Province | Provincial M&P Rate | Combined M&P Rate (with Federal 13%) | Savings vs. General Rate |
|---|---|---|---|
| Saskatchewan | 10% | 23% | 4% savings vs. 27% general |
| Manitoba | 12% (with 1% credit) | 26% | 1% savings vs. 27% general |
| Ontario | 11.5% (no M&P reduction) | 24.5% | 2% savings (federal M&P only) |
| Alberta | 8% (no M&P reduction) | 21% | 2% savings (federal M&P only) |
| British Columbia | 12% (no M&P reduction) | 25% | 2% savings (federal M&P only) |
M&P Qualification: To qualify for the federal M&P deduction, at least 10% of the corporation's gross revenue must come from manufacturing or processing goods for sale or lease in Canada. The corporation must use labour and capital in a process that transforms raw materials into finished or semi-finished products. Service businesses, construction companies and resource extraction operations generally do not qualify for the M&P deduction.
8. Passive Income and the SBD Grind
Since 2019, CCPCs with significant passive investment income face a reduction (grind) of their Small Business Deduction limit. For every $1 of Adjusted Aggregate Investment Income (AAII) above $50,000 in the prior taxation year, the $500,000 SBD limit is reduced by $5. At $150,000 of AAII, the SBD limit reaches zero — and the corporation loses the SBD entirely on all active business income.
SBD Grind Formula
SBD Limit Reduction = 5 x (AAII – $50,000)
AAII of $50,000 or less: No reduction — full $500,000 SBD available
AAII of $80,000: Reduction = 5 x ($80,000 – $50,000) = $150,000. SBD limit reduced to $350,000.
AAII of $150,000 or more: SBD limit reduced to $0. All active business income taxed at the general rate.
CCPC with $400,000 active business income and $90,000 AAII in prior year
The SBD grind applies at the federal level and affects the combined rate in every province. A corporation that loses the SBD due to passive income pays the general rate in whatever province it operates — $14,300 more in the Ontario example above. This is why passive income management inside CCPCs is one of the most important corporate tax planning considerations in Canada.
9. Associated Corporations — Sharing the $500,000 SBD Limit
Associated corporations must share the $500,000 federal SBD limit. Two corporations are associated if one controls the other, both are controlled by the same person or group, or a person who controls one corporation is related to a person who controls the other and either person owns 25% or more of the shares of the other corporation. The association rules under Section 256 of the Income Tax Act are among the most complex provisions in Canadian tax law.
The practical impact is significant. An owner with two CCPCs must allocate the single $500,000 SBD limit between them on Schedule 23 (filed as part of the T2). If Corporation A is allocated $300,000 and Corporation B is allocated $200,000, each can only claim the SBD on their respective allocation — any active business income above their allocation is taxed at the general rate. The allocation is filed on Schedule 23 and must be agreed upon by both corporations.
10. Worked Dollar Examples — Tax by Province
All income within SBD limit — comparing 5 provinces
$500,000 at SBD rate + $300,000 at general rate
$500,000 at SBD rate + $300,000 at general rate
11. Tax Planning Considerations by Province
The provincial rate differential creates planning opportunities that depend on where the corporation has a permanent establishment. Key considerations include:
- Permanent establishment allocation: Corporations with operations in multiple provinces allocate taxable income among provinces based on revenue and payroll using Schedule 5. A corporation with a sales office in Ontario and a warehouse in Alberta allocates income to both provinces — with the Alberta portion taxed at Alberta's lower general rate
- Alberta advantage for high-income corporations: Corporations with active business income significantly above $500,000 benefit most from Alberta's low 8% provincial general rate. The $16,500 annual savings on $800,000 of income grows proportionally with income level
- Saskatchewan and Manitoba for SBD-range businesses: Small CCPCs earning within the $500,000 SBD limit pay the lowest combined rates in Saskatchewan, Manitoba and Yukon (9%). The 3.2% difference between these provinces and Ontario (12.2%) is $16,000 per year on $500,000 of income
- Passive income management is province-agnostic: The SBD grind applies at the federal level and affects all provinces equally. A corporation that loses the SBD due to passive income pays the general rate regardless of province — making passive income management important in every jurisdiction
- Quebec and Alberta separate returns: Corporations with permanent establishments in Quebec or Alberta must file separate provincial returns (CO-17 and AT1 respectively) in addition to the federal T2. This creates additional compliance costs but also provides access to province-specific credits not available federally
Need Help Optimising Your Corporate Tax Rate?
Our licensed CPA team ensures your corporation claims the correct SBD, applies the right provincial rate and maximises every available credit — flat-fee pricing, virtual across Ontario and Canada.
Book Free Consultation Corporate Tax Filing ServiceFrequently Asked Questions — Corporate Tax Rates by Province
Common questions from Canadian business owners about federal and provincial corporate tax rates.
Related Corporate Tax Guides
More resources for Canadian businesses on corporate tax rates, filing and compliance.
Need a CPA Who Knows Your Province's Tax Rules?
Gondaliya CPA files T2 returns for corporations across Ontario and Canada — correct SBD application, provincial rate allocation and every available credit. Flat-fee from $400.