Canada Corporate Tax 2026: 15% Federal Rate, GST/HST & Business Guide
How much corporate tax does your business pay in Canada in 2026? Federal 15% general rate, 9% CCPC small business rate, GST/HST 5-15%, SR&ED credits up to 35%, and T2 filing rules for all provinces.
Want to pay less tax?
Upload your documents, track income across currencies, and get an AI report with specific savings strategies.
Get started freeCorporate Tax Rates by Business Structure
Tax Residency and Federal Rates
Corporations resident in Canada pay tax on worldwide income. Non-resident corporations pay tax only on Canadian-source business income and capital gains from taxable Canadian property. The federal base rate is 38%, reduced by a 10% abatement (for provincial room) and a 13% general rate reduction, giving an effective federal rate of 15% for general corporations. CCPCs get a small business deduction that brings the federal rate to 9% on the first CAD 500,000 of active business income. Provincial and territorial rates are added on top of the federal rate.
Residents: taxed on worldwide income at federal + provincial rates
Non-residents: taxed only on Canadian-source income
Federal general rate: 15% effective (38% base minus reductions)
CCPC small business rate: 9% federal on first CAD 500,000
Provincial rates: 8-16% added on top of federal rate
CCPC (Canadian-Controlled Private Corporation)
Small Business Rate
9%
Federal, on first CAD 500K
General Rate
15%
Federal, above CAD 500K
Combined Range
9-31%
Federal + provincial
Small business deduction on first CAD 500,000 active income
Enhanced 35% refundable SR&ED tax credit on first CAD 6M
Eligible and non-eligible dividend integration
Must be Canadian-controlled, private, and resident
Most common structure for small and medium businesses
General Corporation (Public / Non-CCPC)
Federal Rate
15%
After abatement and reduction
Combined Range
23-31%
Federal + provincial
SR&ED Credit
15%
Non-refundable basic rate
Includes public companies and non-CCPC private corporations
No small business deduction available
15% basic SR&ED credit (non-refundable)
Pays eligible dividends with higher gross-up
Subject to provincial general corporate rates
Branch of Foreign Company
Federal Tax
15%
On Canadian-source profits
Branch Tax
25%
On after-tax profits (treaty may reduce)
WHT Default
25%
On passive income to non-residents
Taxed at federal 15% + provincial rate on Canadian income
Additional 25% branch tax on repatriated profits
Tax treaties can reduce branch tax to 5-15%
No separate legal entity from parent company
Parent company fully liable for branch obligations
Sole Proprietorship / Partnership
Tax Rate
15-33%
Federal personal income rates
Combined Rate
Up to 54%
Federal + provincial personal
Incorporation
Not required
No separate legal entity
Not a separate taxpayer — income flows to owner's personal return
Taxed at personal income tax rates (federal 15-33%)
Partnerships: each partner taxed on their share
Unlimited personal liability
Simpler setup but no small business deduction benefits
Corporate Tax Rate Overview 2026
| Business Type | Federal Rate | Combined Rate (Fed + Prov) |
|---|---|---|
| CCPC — small business income (≤ CAD 500K) | 9% | 9-12.2% (varies by province) |
| CCPC — general income (> CAD 500K) | 15% | 23-31% |
| General corporation (public / non-CCPC) | 15% | 23-31% |
| Branch of foreign company | 15% + branch tax | 23-31% + up to 25% branch tax |
| Sole proprietorship / partnership | Personal rates 15-33% | Up to ~54% (personal rates) |
Provincial small business rates range from 0% (Manitoba, Saskatchewan, Yukon) to 3.2%. Provincial general rates range from 8% to 16%. Combined rates depend on the province where income is earned.
GST/HST Sales Tax Rates and Rules
Federal GST and Provincial Sales Tax 2026
Canada has a multi-layer sales tax system. The federal GST is 5% and applies nationwide. Five provinces combine GST with a provincial portion into a single Harmonized Sales Tax (HST): Ontario 13%, Nova Scotia 14% (reduced from 15% in April 2025), New Brunswick 15%, Newfoundland and Labrador 15%, and Prince Edward Island 15%. British Columbia, Saskatchewan, and Manitoba charge separate PST/RST on top of GST. Quebec charges QST at 9.975% alongside GST. Alberta, Yukon, Northwest Territories, and Nunavut have GST only at 5%. Businesses with annual revenue over CAD 30,000 must register for GST/HST.
GST/HST Rate Structure by Province 2026
| Province / Territory | Tax Type | Total Rate |
|---|---|---|
| Alberta, Yukon, NWT, Nunavut | GST only | 5% |
| British Columbia | GST + PST (7%) | 12% |
| Saskatchewan | GST + PST (6%) | 11% |
| Manitoba | GST + RST (7%) | 12% |
| Ontario | HST | 13% |
| Quebec | GST + QST (9.975%) | 14.975% |
| Nova Scotia | HST | 14% |
| New Brunswick, NL, PEI | HST | 15% |
Registration for GST/HST is required when annual revenue exceeds CAD 30,000. Basic groceries, prescription drugs, and most medical services are exempt. Nova Scotia reduced HST from 15% to 14% effective April 1, 2025.
SR&ED Tax Credit — Canada's Largest R&D Incentive
Enhanced refundable rate for CCPCs (15% basic for others)
Corporate Tax Deductions and Incentives
SR&ED Investment Tax Credit
CCPCs get 35% refundable credit on first CAD 6 million of eligible R&D spending. Other corporations get 15% non-refundable credit. Capital expenditures are eligible again for property acquired after December 16, 2024. Eligible activities must involve technological uncertainty and systematic investigation. Claims filed with T2 return within 18 months of year-end.
Non-Capital Loss Carryforward / Carryback
Business operating losses (non-capital losses) can be carried forward 20 years or carried back 3 years. No annual utilization limit — losses can fully offset taxable income. Capital losses carry forward indefinitely but can only offset capital gains. Carryback requests filed using Schedule 4 or Form T1A.
Capital Cost Allowance (CCA) — Depreciation
Canada uses a declining-balance method for most assets. Accelerated Investment Incentive allows full expensing in the first year for certain manufacturing and clean energy property. Various CCA classes with rates from 4% (buildings) to 100% (computers, software). Enhanced first-year deductions available for eligible property.
Small Business Deduction (SBD)
Reduces the federal corporate tax rate to 9% on the first CAD 500,000 of active business income for CCPCs. Available only for Canadian-controlled private corporations. The business limit is reduced when taxable capital exceeds CAD 10 million or adjusted aggregate investment income exceeds CAD 50,000. Associated corporations must share the CAD 500,000 limit.
Withholding Tax on Payments to Non-Residents
Part XIII Withholding Tax Rates
Canada imposes a 25% withholding tax (Part XIII) on dividends, interest, royalties, rents, and management fees paid to non-residents. Tax treaties can reduce these rates. Under the Canada-US tax treaty, dividends are generally reduced to 15% (5% if the US shareholder owns 10%+ of voting stock). Interest paid to arm's-length non-residents is generally exempt from withholding tax. Branch profits repatriated to a foreign parent are subject to a 25% branch tax, reducible by treaty. Non-residents must file Form NR301 to claim treaty benefits.
Default WHT rate: 25% on dividends, interest, royalties to non-residents
Canada-US treaty: 15% on dividends (5% for 10%+ corporate shareholders)
Interest to arm's-length non-residents: 0% WHT
Royalties: 0-10% under most treaties
Branch tax: 25% on repatriated profits (treaty may reduce)
Canada has 90+ tax treaties to reduce double taxation
Employer Payroll Contributions
CPP, EI, and Other Employer Obligations 2026
Employers must match employee CPP contributions at 5.95% on earnings from CAD 3,500 to CAD 74,600 (YMPE). A second CPP2 contribution of 4% applies on earnings between CAD 74,600 and CAD 85,000. Employers pay EI premiums at 1.4 times the employee rate (employee rate: CAD 1.63 per CAD 100 of insurable earnings up to CAD 68,900). Maximum employer EI premium is approximately CAD 1,572 per employee. Provincial payroll taxes apply in some jurisdictions: Ontario Employer Health Tax (0.98-1.95%), Quebec Health Services Fund (1.65-4.26%), Manitoba Health and Education Levy (2.15-4.3%).
CPP employer contribution: 5.95% on earnings CAD 3,500-74,600
CPP2 employer contribution: 4% on earnings CAD 74,600-85,000
EI employer premium: 1.4x employee rate (CAD 1.63/$100)
Maximum employer CPP: CAD 4,230.45 per employee
Provincial payroll taxes vary: 0-4.3% depending on province
Pillar Two Global Minimum Tax
15% Global Minimum Tax (GMTA)
Canada's Global Minimum Tax Act (GMTA) implements the OECD Pillar Two framework. It applies to multinational enterprise (MNE) groups with consolidated revenue of at least EUR 750 million in two of the prior four fiscal years. The rules ensure a 15% minimum effective tax rate in every jurisdiction. The Act includes the Income Inclusion Rule (IIR) and a domestic minimum top-up tax (DMTT). The first GMTA returns are due June 30, 2026 for fiscal years ending in 2024. Returns must be filed via CRA's API — no paper forms are available.
Applies to MNE groups with EUR 750M+ consolidated revenue
15% minimum effective tax rate per jurisdiction
IIR and domestic top-up tax implemented
First returns due June 30, 2026
Filed via CRA API — no PDF forms available
Corporate Tax Filing and Compliance
T2 Return Deadlines and Payment Rules
Every resident corporation must file a T2 Corporate Income Tax Return within six months of its fiscal year-end, even if no tax is owed. For a December 31 year-end, the filing deadline is June 30. Tax payment is due two months after year-end (three months for qualifying CCPCs). Most corporations must pay monthly installments when annual tax exceeds CAD 3,000. Late filing penalty: 5% of balance owing plus 1% per month (up to 12 months). Repeat offenders face 10% plus 2% per month (up to 20 months). GST/HST returns are filed monthly, quarterly, or annually based on revenue.
T2 filing deadline: 6 months after fiscal year-end
Tax payment: 2 months after year-end (3 months for qualifying CCPCs)
Monthly installments required when tax exceeds CAD 3,000
Late filing penalty: 5% + 1% per month up to 12 months
All corporations must file T2, even with no income
Incorporation and Registration
Setting Up a Corporation in Canada
You can incorporate federally (CAD 200 online through Corporations Canada) or provincially (CAD 100-450 depending on the province). Federal incorporation gives nationwide name protection and the right to operate in any province. Provincial incorporation is limited to that province. Federal corporations must also register extra-provincially in each province where they do business. You need articles of incorporation, a registered office address, and at least one director. A NUANS name search costs about CAD 50-60. After incorporation, register for a Business Number (BN) with the CRA for income tax, GST/HST, and payroll accounts.
Federal incorporation: CAD 200 online
Provincial incorporation: CAD 100-450 by province
NUANS name search: ~CAD 50-60
Annual return: CAD 12 (federal)
Must register for BN, GST/HST, payroll with CRA
2026 Key Changes and Updates
SR&ED Enhancement: CAD 6M Limit, Capital Costs Restored
The enhanced SR&ED expenditure limit doubled from CAD 3 million to CAD 6 million for taxation years beginning on or after December 16, 2024. Capital expenditures are eligible again after being excluded since 2012. Taxable capital phase-out thresholds increased to CAD 15-75 million. CCPCs can choose between taxable capital and gross revenue for phase-out calculations.
CPP2 Contributions Fully In Effect
The second additional CPP (CPP2) contribution rate of 4% applies on earnings between CAD 74,600 and CAD 85,000. Maximum CPP contribution for 2026 is CAD 4,646.45 (including CPP2). Employers match these contributions. The CPP base rate remains at 5.95%.
Nova Scotia HST Reduced to 14%
Nova Scotia reduced its HST rate from 15% to 14% effective April 1, 2025. The provincial component dropped from 10% to 9%. This was the first HST change in Nova Scotia in 14 years.
Global Minimum Tax Returns Due
First GMTA returns are due June 30, 2026 for fiscal years ending in 2024. Returns must be submitted through CRA's API using XML/JSON schemas — no paper forms. MNE groups with EUR 750M+ revenue must register for a PT program account with CRA.
Personal Income Tax Rate Cut to 14%
The lowest federal personal income tax rate decreases from 14.5% (2025) to 14% for 2026 under Bill C-4. This affects the dividend tax credit rate and overall tax integration for business owners choosing salary vs. dividends.
Frequently Asked Questions
What is the corporate tax rate in Canada for 2026?
The federal general corporate tax rate is 15% (38% base rate minus 10% abatement minus 13% general rate reduction). CCPCs pay 9% federal tax on the first CAD 500,000 of active business income through the small business deduction. Provincial rates add 8-16% on top. Combined rates range from 9% (CCPC small business in Manitoba/Saskatchewan/Yukon) to about 31% (general rate in high-tax provinces).
What is the small business tax rate in Canada for 2026?
CCPCs pay 9% federal tax on the first CAD 500,000 of active business income. Provincial small business rates range from 0% (Manitoba, Saskatchewan, Yukon) to 3.2%. Combined federal and provincial small business rates range from 9% to 12.2%. The business limit is reduced when taxable capital exceeds CAD 10 million or adjusted aggregate investment income exceeds CAD 50,000.
What are the GST/HST rates in Canada for 2026?
GST is 5% and applies across all of Canada. HST combines GST with provincial tax in five provinces: Ontario 13%, Nova Scotia 14%, New Brunswick 15%, Newfoundland 15%, PEI 15%. British Columbia charges 7% PST on top of GST (12% total). Quebec charges 9.975% QST alongside GST. Alberta, Yukon, NWT, and Nunavut have GST only (5%). Registration is required when annual revenue exceeds CAD 30,000.
How does the SR&ED tax credit work in Canada?
SR&ED provides investment tax credits for eligible R&D work in Canada. CCPCs get a 35% refundable credit on the first CAD 6 million of qualifying expenditures (increased from CAD 3M). Other corporations get a 15% non-refundable credit. Capital expenditures are eligible again for property acquired after December 16, 2024. Combined with provincial credits, total benefits can reach 68% of eligible costs. Claims must be filed within 18 months of year-end.
When is the T2 corporate tax return due in Canada?
The T2 return is due six months after the fiscal year-end. For a December 31 year-end, the deadline is June 30. Tax payment is due two months after year-end for most corporations, or three months for qualifying CCPCs. Late filing triggers a 5% penalty plus 1% per month up to 12 months. All corporations must file a T2 return even with no income or tax owing.
What is Canada's withholding tax on dividends to non-residents?
Canada imposes a default 25% withholding tax on dividends, interest, royalties, and other passive income paid to non-residents. Tax treaties reduce this rate — for example, the Canada-US treaty cuts dividend WHT to 15% (5% for corporate shareholders owning 10%+ voting stock). Interest paid to arm's-length non-residents is generally exempt. Non-residents must file Form NR301 to claim treaty benefits.
How much does it cost to incorporate in Canada?
Federal incorporation costs CAD 200 online through Corporations Canada. Provincial fees vary: Ontario CAD 300, British Columbia CAD 350, Alberta CAD 450, Manitoba CAD 300. A NUANS name search adds about CAD 50-60. The federal annual return costs CAD 12. Legal fees for incorporation typically add CAD 1,000-2,000. You can also use online services for CAD 300-500 all-in.
What employer payroll contributions are required in Canada for 2026?
Employers must contribute CPP at 5.95% on earnings from CAD 3,500 to CAD 74,600, plus CPP2 at 4% on earnings from CAD 74,600 to CAD 85,000. EI employer premiums are 1.4x the employee rate (CAD 1.63 per CAD 100 of insurable earnings up to CAD 68,900). Some provinces add payroll taxes: Ontario EHT (0.98-1.95%), Quebec HSF (1.65-4.26%), Manitoba HEPL (2.15-4.3%).
Calculate Your Canadian Corporate Tax
Estimate federal and provincial corporate tax, GST/HST obligations, SR&ED credits, and withholding taxes. Compare CCPC small business rate vs. general corporate rate for your business.