Ontario cut its small business corporate tax rate from 3.2% to 2.2% today, lowering the combined federal-Ontario rate on the first $500,000 of active business income for eligible Canadian-controlled private corporations. The change applies automatically, with no election required, though corporations whose fiscal year straddles July 1 must prorate between the old and new rates. Ontario's personal dividend tax credit does not adjust until January 2027, opening a six-month window where dividends paid from this income carry a lower effective personal cost than usual.
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