Estimate your company's federal and provincial taxes based on your net income—with just one click.
Your company's profit before corporate income tax.
Enter your company's annual taxable income, before corporate income tax.
SMEs eligible for the DPE, or passive investment income. The tool applies the correct 2026 rates.
Federal and Quebec provincial income tax, effective combined tax rate, and net income after tax.
A Quebec corporation pays two types of income tax: federal tax (T2 return) and provincial tax (CO-17 return). The combined tax rate depends on two main factors: the type of income (active or passive) and the corporation’s status (eligible or ineligible for the DPE). Annual tax planning can help optimize the tax bill.
A Quebec SME eligible for the DPE (SPCC, active income, more than 5,500 paid hours) pays a combined federal-provincial tax rate of 12.2% on the first $500,000 of active income. Above that amount, the combined rate rises to 26.5%. The $500,000 threshold is shared among affiliated companies and is gradually reduced between $10 million and $50 million of consolidated taxable capital.
The passive investment income of a CCPC (interest, net rent, royalties, foreign dividends) will be taxed at a combined rate of 50.17% in 2026. This high rate includes a refundable tax (IMRTD) that the corporation recovers when it pays a taxable dividend to its shareholders. The effective net rate after the refund is close to the personal tax rate on dividends, thereby achieving tax integration.
| Type of income | Federal | Quebec | Combination |
|---|---|---|---|
| Active income (DPE, up to $500,000) | 9,00 % | 3,20 % | 12,20 % |
| Earned income (over $500,000) | 15,00 % | 11,50 % | 26,50 % |
| Passive investment income (SPCC) | 38,67 % | 11,50 % | 50,17 % |
| Annual DPE limit (earned income) | $500,000 (reduces taxable income by between $10 million and $50 million) | ||
Sources: CRA, Revenu Québec (2026 rates for SPCC).
A Quebec SME eligible for the DPE pays a combined rate of 12.2% on the first $500,000 of active income. Above that amount, the rate rises to 26.5%. The Quebec SME rate is 3.2% (subject to a requirement of 5,500 paid hours), and the federal SME rate is 9%.
Active income is derived from ordinary business operations (sales, services). It qualifies for the EITC and is taxed at a combined rate of 12.2%. Passive income (interest, rent, royalties) is taxed at 50.17%, but a refund mechanism (IMRTD) applies when dividends are paid.
The DPE is a tax benefit that reduces the corporate tax rate on the first $500,000 of a CCPC’s active income. It lowers the federal rate from 15% to 9% and the Quebec rate from 11.5% to 3.2% (subject to certain conditions).
The calculation starts at 28%; first, the 10% provincial tax credit is subtracted, followed by the 13% general tax reduction (net rate: 15%), or the 19% SME tax credit for SME income (net rate: 9%). Passive income is taxed at a federal rate of 38.67%.
The T2 and CO-17 returns must be filed within 6 months of the end of the fiscal year. Net corporate income tax is due within 2 months (3 months for a CCPE eligible for the DPE). Monthly instalments are required if the tax liability exceeds $3,000.
For active income, the combined rate increases from 12.2% to 26.5% when income exceeds $500,000 (the DPE threshold). For passive income, the DPE is gradually reduced when passive investment income exceeds $50,000 per year.
If passive investment income exceeded $50,000 in the previous year, the $500,000 EITC limit is reduced by $5 for every dollar of passive income above the threshold. At $150,000 in passive income, the federal EITC is eliminated.
Bankeo connects shareholders and executives of Quebec-based companies with CPA accountants specializing in corporate tax and planning. This service is free. We understand your type of business and connect you with accountants who can handle T2, CO-17, and annual strategy.
Understand the two corporate statements.
Read the article →The Basics of Corporate Taxation in Quebec.
Read the article →Strategies for reducing your tax bill.
Read the article →Find an accountant who specializes in T2 and CO-17.
Read the article →Bankeo connects Quebec SME owners with accountants who specialize in corporate tax. This service is free for entrepreneurs.
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