Ontario's 2026 budget lowers the small-business corporate income tax rate for Canadian-controlled private corporations (CCPCs) from 3.2% to 2.2%, effective July 1, 2026, prorated for tax years straddling that date. Combined with the 9% federal small-business rate, this drops the effective rate on the first $500,000 of active business income in Ontario to 11.2%, worth up to about $5,000 in annual savings. Ontario's non-eligible dividend tax credit rate will fall from 2.9863% to 1.9863% on January 1, 2027 to preserve integration.
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Ontario cuts small-business corporate tax rate to 2.2% on July 1, 2026
Why this matters for founders
Ontario founders running a CCPC keep more retained earnings inside the company from mid-2026, which can fund hiring or reinvestment. The paired dividend-credit reduction means pulling profits out as dividends becomes slightly less favourable, so revisit your salary-versus-dividend mix with your accountant before year end.
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