Canadian Corporate Tax Explained
How Canadian corporations are taxed: rates by income type, salary vs dividends, returns, deadlines and common traps.
The short version
- A corporation is a separate taxpayer. It files its own T2 return every year, within six months of its year-end, even if it had no income.
- Federal corporate tax is 15% on most income after the general reduction; a Canadian-controlled private corporation (CCPC) pays 9% on its first $500,000 of active business income thanks to the small business deduction. Provinces add their own rates.
- Investment income in a private corporation is taxed at a high rate up front, with part refunded when the corporation pays dividends.
- Most corporations pay tax by the end of the second or third month after year-end, and pay monthly or quarterly instalments once their tax tops $3,000.
- The owner pays personal tax only on what comes out as salary, bonus or dividends. Choosing the mix is one of the main decisions of owning a corporation.
Canadian Corporate Tax Explained
Once you incorporate, there are two taxpayers: you and the company. Each has its own return, rates, deadlines and rules, and money moving between them is taxed on the way. It sounds like double tax, and it would be, except the system is built so that corporate tax and personal tax on dividends fit together. Here's the map of how it works, and where to go for each piece.
How a Corporation's Income Is Taxed
| Type of income | Federal rate (2026) | Notes |
|---|---|---|
| Active business income of a CCPC, first $500,000 | 9% | Small business deduction; see small business deduction |
| Active business income above $500,000, or of a non-CCPC | 15% | General rate |
| Investment income of a CCPC (interest, rent, taxable capital gains) | 38 2/3% | Part is refundable when taxable dividends are paid |
| Personal services business income | 33% | No small business deduction, very limited deductions |
Provinces add their own small business and general rates; Ontario's are 2.2% (since July 1, 2026; it was 3.2%) and 11.5%. The full table is on corporate tax rates.
Questions about your corporation's tax?
Describe your corporation's income, province and how you pay yourself. The assistant explains the rates that apply, your filing and payment deadlines, and what to watch for.
Getting Money Out: Salary or Dividends
| Salary or bonus | Dividends | |
|---|---|---|
| Deductible to the corporation | Yes | No (paid from after-tax profit) |
| CPP | Yes, both halves | No |
| Creates RRSP room | Yes | No |
| Personal tax | Employment income rates | Dividend rates, with a dividend tax credit |
| Paperwork | Payroll account, remittances, T4 | T5 slip, director's resolution |
The numbers, worked out both ways, are on salary vs dividends.
Paying family members through the corporation has its own rules: wages for real work, and dividends limited by the tax on split income. See paying your spouse and paying your children.
Returns and Deadlines
| Obligation | Deadline |
|---|---|
| T2 corporation income tax return | 6 months after the end of the tax year |
| Balance of tax owing | 2 months after year-end; 3 months for many CCPCs claiming the small business deduction |
| Instalments | Monthly, or quarterly for eligible small CCPCs, once tax is over $3,000 |
| Payroll remittances, T4s | Monthly (usually) and the end of February |
| T5 for dividends | End of February |
| GST/HST | By filing period; see GST/HST filing periods |
Every date, with examples, is on corporate tax deadlines, and what goes into the return on the T2 corporate tax return. Ontario corporations file one combined T2 with the Ontario schedules; Alberta and Quebec corporations file separate provincial returns.
Things Owners Trip Over
- Shareholder loans: personal spending paid by the company and not repaid within a year after the year-end can become personal income; see shareholder loans.
- Personal expenses through the company: taxable benefits to you, non-deductible to the corporation.
- Passive investments: investment income over $50,000 a year shrinks the small business deduction.
- Director liability: unremitted payroll deductions and GST/HST can become the directors' personal debt.
- Records: minute book, share register and corporate records must be kept permanently; see recordkeeping requirements.
Start Here
- Not incorporated yet? Read corporation vs sole proprietorship and try the should I incorporate calculator.
- The small business rate: small business deduction.
- Every province's rates: corporate tax rates.
- Depreciation on company assets: capital cost allowance, and the practical side on buying equipment through a corporation.
- Company vehicles and the standby charge: corporate vehicle expenses.
- Paying yourself: salary vs dividends and paying dividends.
- A second company for surplus and investments: holding companies.
- Shutting it down: closing a corporation.
- Sales tax: the GST/HST guide.
- Running a small business in general: small business taxes.
Corporate Tax Questions
What is the corporate tax rate in Canada?
The federal rate is 15% on most corporate income after the general reduction, or 9% on the first $500,000 of active business income of a Canadian-controlled private corporation. Provinces add their own rates.
When is a corporate tax return due?
The T2 return is due six months after the end of the corporation’s tax year. Any balance owing is generally due two months after year-end, or three months for many small CCPCs.
Does a corporation have to file a T2 if it had no income?
Yes. Every resident corporation must file a T2 return every year, even if it had no income or tax owing, except some inactive non-profit and tax-exempt cases.
How do I pay myself from my corporation?
Through salary or bonus, which is deductible to the corporation and creates RRSP room, or through dividends paid from after-tax profit. Most owners use a mix.
How is investment income taxed in a corporation?
Investment income of a CCPC is taxed at a high rate up front, with part refunded when the corporation pays taxable dividends, so the total is roughly what you would pay personally.
Sources: CRA, Corporation tax rates; T4012 T2 Corporation Income Tax Guide. Checked October 2026. The investment income and personal services business rates are the combined federal rates as we understand them for 2026; refundable tax mechanics are summarized.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.