Corporate Income Tax
The basic income tax rate is 14% on taxable income allocated to Ontario. This rate has been in effect since January 1, 2004.
For Canadian-controlled private corporations claiming the Incentive Deduction for Small Business (IDSB) Corporations the effective tax rate is 5.5% on the first $400,000 of active business income.
Corporations involved in manufacturing and processing, fishing, farming, mining and logging may qualify for a 2% Manufacturing and Processing Profits (M&PP) tax credit. The effective income rate on M&PP income is 12%.
Expanding eligibility for the small business corporate income tax rate
As announced in the 2007 Ontario Economic Outlook and Fiscal Review, the government proposes to increase the small business deduction threshold to $500,000 from $400,000, effective January 1, 2007. In addition, the small business deduction would be phased out once income reaches $1,500,000, rather than $1,128,519. The increase in the threshold would be pro-rated for taxation years straddling the effective date.
