Ontario's small business corporate income tax rate dropped from 3.2% to 2.2% on July 1, 2026, applying to Canadian-controlled private corporations on their first $500,000 of active business income. This brings the combined federal-Ontario small business rate down to 11.2% from 12.2%, saving an eligible corporation up to about $5,000 per year; for fiscal years straddling July 1 the rate is prorated.
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Ontario cuts small business corporate tax rate to 2.2%, effective July 1, 2026
Why this matters for founders
Ontario-incorporated founders (CCPCs) automatically pay less tax on active business income after July 1, 2026, so ask your accountant to prorate a straddling year-end and revisit salary-vs-dividend planning.
Source: TurboTax Canada (Intuit)
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