CCPC corporate tax estimate.
Corporate tax
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After-tax profit (retained or dividend-able)
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Your breakdown
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The small business deduction is the heart of it
Canadian corporate tax has two speeds, and which one applies to a given dollar of profit depends on the small business deduction. A Canadian-controlled private corporation, or CCPC, pays a sharply reduced federal rate of 9 percent on its first $500,000 of active business income each year. Profit above that $500,000 ceiling is taxed at the general federal rate of 15 percent. Layer each province’s corporate rate on top of the federal figure and you get the combined rate this tool reports. The whole design exists to let owner-operated companies retain more profit for reinvestment in their early years.
This calculator asks for your active business income and your province, then splits the profit at the $500,000 line. The portion under the limit is taxed at the federal 9 percent plus your province’s small business rate, and any portion above is taxed at the federal 15 percent plus the province’s general rate. The result is the corporate tax owing and the after-tax profit left to retain or pay out as dividends.
Active business income versus passive income
The small business rate only applies to active business income, the profit from actually running the business. Investment income earned inside the corporation, such as interest, rents or portfolio dividends, is passive and is taxed differently, often at a high rate that is partly refundable when dividends are paid out. There is also a clawback worth knowing: once a CCPC earns more than $50,000 of passive investment income in a year, its access to the $500,000 small business limit begins to grind down, disappearing entirely at $150,000 of passive income. So a corporation that builds up a large investment portfolio can quietly lose the cheap rate on its operating profit.
An Ontario CCPC earning $200,000
Take the default: $200,000 of active business income in Ontario. The whole amount sits under the $500,000 small business limit, so none of it touches the general rate. Ontario’s small business rate is about 3.2 percent, which on top of the federal 9 percent gives a combined small business rate of 12.2 percent. The tax is therefore $24,400, leaving $175,600 of after-tax profit inside the company.
Push the profit to $700,000 and the split appears: the first $500,000 stays at 12.2 percent, while the extra $200,000 is taxed at the general combined rate of roughly 26.5 percent in Ontario. Province changes the answer too. Manitoba sets its small business rate at zero, so a Manitoba CCPC pays just the 9 percent federal rate on income under the limit, while Quebec runs its own corporate tax system with its own rates and rules through a separate provincial return.
Why low corporate tax is only half the story
The 12.2 percent rate looks irresistible next to personal rates that climb past 50 percent, but it is not the end of the tax. That after-tax profit is still trapped inside the corporation. The moment you pay it to yourself as a dividend, personal tax applies, and Canada’s integration system is designed so that the combined corporate-plus-personal tax roughly equals what you would have paid earning the income personally in the first place. The corporation buys you deferral, the ability to keep more money working now and pay the personal tax later, not a permanent escape. That deferral is genuinely valuable, but it is not free money.
This calculator is for incorporated consultants and small business owners estimating their corporate tax bill, founders deciding how much profit to retain versus distribute, and anyone weighing whether to incorporate at all. A practical tip: the small business limit must be shared among associated corporations, so splitting a business across multiple companies does not multiply the $500,000 ceiling. The most common mistake is treating the low corporate rate as your final tax. Until the money leaves the company, the personal layer is still waiting, which is exactly what a dividend-versus-salary analysis is for.
Do I still pay personal tax on money I leave in the company?
No, not until you take it out. Profit retained inside the corporation is taxed only at the corporate rate, here 12.2 percent, and personal tax is triggered only when you withdraw it as salary or dividends. This is the deferral advantage of incorporating: you can reinvest the full after-tax corporate profit and defer the personal tax until a year when it suits you, perhaps a lower-income year. The catch is that the personal tax is deferred, not avoided, so the eventual withdrawal will be taxed in your hands.
Does every corporation get the 9 percent rate?
No. The 9 percent federal small business rate is reserved for Canadian-controlled private corporations on their active business income up to $500,000. Public companies, foreign-controlled corporations, and income above the limit are taxed at the 15 percent general federal rate. The limit also shrinks if the CCPC earns more than $50,000 of passive investment income, and it must be shared among associated companies under common control, so the cheap rate is narrower in practice than the headline suggests.