Skip to main content
Calculators/

Corporate Tax Calculator

2025
Corporate Details
$
$

SBD clawed back when capital exceeds $10M

Tax Summary

Total Corporate Tax

$61,000.00

After-Tax Income

$439,000.00

Effective Tax Rate

12.20%

SBD Tax Savings

$71,500.00

Rate Breakdown

SBD Eligible Portion (first $500,000.00)

Income at SBD Rate$500,000.00
Federal Rate9.00%
Provincial Rate (Ontario)3.20%
Combined SBD Rate12.20%
Federal Tax$45,000.00
Provincial Tax$16,000.00
Total Corporate Tax$61,000.00
After-Tax Income$439,000.00
Provincial Rate Comparison
ProvinceSmall BizGeneralCombined SBDCombined Gen
Ontario3.2%11.5%12.2%26.5%
Quebec3.2%11.7%12.2%26.7%
British Columbia2.0%12.0%11.0%27.0%
Alberta2.0%8.0%11.0%23.0%
Saskatchewan1.0%12.0%10.0%27.0%
Manitoba0.0%12.0%9.0%27.0%
Nova Scotia2.5%14.0%11.5%29.0%
New Brunswick2.5%14.0%11.5%29.0%
Prince Edward Island1.0%16.0%10.0%31.0%
Newfoundland & Labrador3.0%15.0%12.0%30.0%
Yukon0.0%12.0%9.0%27.0%
Northwest Territories2.0%11.5%11.0%26.5%
Nunavut3.0%12.0%12.0%27.0%
More Information
Frequently Asked Questions
The Small Business Deduction reduces the federal corporate tax rate from 15% to 9% on the first $500,000 of active business income for Canadian-Controlled Private Corporations (CCPCs). This represents a significant tax savings of 6% on qualifying income. Each province also provides a reduced small business rate, making the combined rate considerably lower than the general rate.
A Canadian-Controlled Private Corporation (CCPC) must be a private corporation that is incorporated in Canada and not controlled directly or indirectly by non-residents or public corporations. The corporation must not have any class of shares listed on a designated stock exchange. Most small and medium-sized Canadian businesses organized as corporations qualify as CCPCs.
Starting from 2019, the SBD limit of $500,000 is reduced when a CCPC and its associated corporations earn aggregate investment income (passive income) exceeding $50,000. The SBD limit is reduced by $5 for every $1 of investment income over $50,000, completely eliminated at $150,000 of investment income. This encourages CCPCs to deploy capital into active business operations rather than passive investments.
The SBD limit is also reduced when a corporation's taxable capital employed in Canada exceeds $10 million. The $500,000 SBD limit is reduced on a straight-line basis and fully eliminated when taxable capital reaches $15 million. Taxable capital generally includes share capital, retained earnings, and loans and advances to the corporation.
Integration is a fundamental principle of Canadian tax policy that aims to ensure the total tax paid on corporate income distributed as dividends is approximately equal to the tax that would have been paid if the income were earned directly by an individual. This is achieved through the gross-up and dividend tax credit mechanism. While perfect integration is theoretical, the system works reasonably well in practice.
Provincial corporate tax rates vary significantly across Canada. General rates range from 8% (Alberta) to 16% (PEI), while small business rates range from 0% (Manitoba, Yukon) to 3.2% (Ontario, Quebec). The combined federal-provincial rate for small businesses can be as low as 9% in Manitoba or Yukon, while the general combined rate ranges from 23% (Alberta) to 31% (PEI). Choosing the right province of incorporation can have a meaningful impact on your tax burden.
Only active business income qualifies for the small business rate. This includes income from a business carried on by the corporation, including manufacturing, services, construction, and retail. Investment income (interest, rents, royalties, and taxable capital gains) does not qualify for the SBD and is taxed at higher rates. The distinction between active and passive income is critical for corporate tax planning.
Incorporation is generally advantageous when your business earns more than you need personally, allowing you to defer tax by leaving profits in the corporation at the lower corporate rate. Other factors include liability protection, credibility with clients, and succession planning. However, incorporation involves additional costs (legal fees, annual filings, separate tax returns), so the benefits should outweigh these costs. Consult a tax professional for your specific situation.

CRA-Aligned: This calculator uses 2025 federal and provincial corporate tax rates as published by the Canada Revenue Agency. It provides estimates for general planning purposes and does not constitute tax advice. Consult a qualified tax professional for your specific situation.

Understanding Corporate Tax in Canada

How Canadian corporations are taxed at the federal and provincial level

What is the federal corporate tax rate?

The general federal corporate tax rate in Canada is 15% on taxable income. However, Canadian-Controlled Private Corporations (CCPCs) can benefit from the small business deduction, which reduces the effective federal rate to 9% on the first $500,000 of active business income. This lower rate is one of the key advantages of incorporating.

How does provincial corporate tax work?

On top of federal tax, each province charges its own corporate tax. Rates vary widely — from about 8% in some provinces to 16% in others. Most provinces also offer a small business rate on the first $500,000 of active business income. The combined federal-provincial rate for small businesses typically ranges from 10% to 14%, depending on the province.

What is the small business deduction?

The small business deduction (SBD) lets CCPCs pay a reduced federal rate of 9% instead of 15% on the first $500,000 of active business income. To qualify, the business must be a Canadian-Controlled Private Corporation. The $500,000 limit is shared among associated corporations. The SBD starts to phase out when the corporation's taxable capital exceeds $10 million.

What is the difference between active and passive income?

Active business income comes from the normal operations of the business — selling goods, providing services, etc. Passive income includes things like interest, dividends, rental income, and capital gains from investments. Passive income is taxed at a higher rate (about 50.67% combined) because it does not qualify for the small business deduction.

How are dividends paid from a corporation?

When a corporation pays dividends to its shareholders, the shareholders pay personal tax on those dividends. Canada uses a gross-up and dividend tax credit system to reduce double taxation. Eligible dividends (from income taxed at the general rate) receive a larger credit than non-eligible dividends (from income taxed at the small business rate).

What is the refundable dividend tax on hand (RDTOH)?

When a CCPC earns passive investment income, it pays a high tax rate, and part of that tax is added to the RDTOH account. When the corporation pays taxable dividends to shareholders, it gets a refund of $38.33 for every $100 of dividends paid. This mechanism ensures passive income is ultimately taxed at the shareholder's personal rate.

When must a corporation file its tax return?

A corporation must file its T2 return within six months of the end of its fiscal year. Taxes owing, however, are due within two or three months of year-end, depending on the corporation's size. Late filing results in a penalty of 5% of the unpaid tax plus 1% per month for up to 12 months. Interest is charged daily on unpaid amounts.

CRA-Aligned: Based on 2025 CRA rates and thresholds. For personal advice, speak to a qualified accountant or tax professional.

Disclaimer: This calculator provides estimates based on current CRA rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant before making financial decisions. Read our terms

Related Calculators

Capital Cost Allowance (CCA)

Calculate depreciation on business assets using CRA CCA classes and rates.

Dividend vs Salary

Compare the tax impact of paying yourself dividends vs salary as a business owner.

Employer Cost Calculator

Total employment cost including CPP, EI, WCB, and provincial payroll taxes.

GST/HST Calculator

Add or remove GST/HST/PST by province — from 5% GST to 15% HST.

Small Business Deduction

Calculate the SBD on the first $500,000 of active business income.

Sole Proprietor vs Corporation

Compare tax outcomes of operating as a sole proprietor vs incorporating.