Schedule 500 Ontario: 11.5% tax, less a 9.3% OSBD from July 1, 2026

What does Schedule 500 calculate, and where does each amount go?

Schedule 500, Ontario Corporation Tax Calculation, is the CRA worksheet for a corporation that had a permanent establishment in Ontario at any time in the year and had Ontario taxable income. It isn't filed with the T2 canada.ca. Its four parts feed Part 2 of Schedule 5, where the Ontario tax is actually reported canada.ca.

On Schedule 5, line 270 less line 402 gives subtotal 5A, and the Ontario credits, minimum tax and refundable credits follow before the net Ontario amount on line 290 goes into line 255 canada.ca. The CRA's Ontario page confirms the basic rate is 11.5% and that you enter the basic income tax on line 270 of Schedule 5 canada.ca.

Part 1 has one trap. If the corporation had a permanent establishment only in Ontario, 1A is simply line 360 of the T2. If it had one in any other jurisdiction, 1A is the Ontario figure from column F of Schedule 5 Part 1, which for most corporations (Regulation 402) is the average of the Ontario share of salaries and wages and the Ontario share of gross revenue.

How does Part 2 build the Ontario small business deduction?

Complete Part 2 only if the corporation claimed the federal small business deduction under ITA 125(1) canada.ca. It reuses the federal figures from page 4 of the T2 but rebuilds the business limit its own way canada.ca.

Notice what 2I leaves out. On the T2, line 417 picks up adjusted aggregate investment income, and line 422 takes the greater of the taxable capital reduction and the passive income reduction canada.ca. Schedule 500 never reads line 417 or line 426. It only subtracts the taxable capital reduction and the assigned limit. That matches Ontario's rule: it does not parallel the federal phase out of the $500,000 limit for passive investment income between $50,000 and $150,000 ontario.ca. Ontario does follow the taxable capital phase out, and an assignment of the federal limit cuts the Ontario limit by the same amount ontario.ca. The passive income rules themselves are in the SBD grind, and assignments are in specified corporate income.

The denominator of the ODF is taxable income for all provinces, which includes the territories and the Nova Scotia and Newfoundland and Labrador offshore areas but not income allocated outside Canada. A corporation with all its taxable income in Ontario has an ODF of 1.

What does Schedule 500 show for an $800,000 CCPC with a BC branch and $90,000 of passive income?

Take a CCPC with a December 31, 2026 year end, $800,000 of taxable income, all of it active business income, no associated corporations, taxable capital under $10 million and $90,000 of adjusted aggregate investment income in 2025. It has permanent establishments in Ontario and British Columbia. Ontario has $600,000 of its $800,000 of salaries (75%) and $2 million of its $4 million of gross revenue (50%), so Ontario gets (75% + 50%) ÷ 2 = 62.5% of taxable income, or $500,000.

Federally, the same $90,000 of AAII cuts the business limit by $500,000 ÷ 100,000 × ($90,000 less $50,000) = $200,000, so line 426 is $300,000 and the federal SBD is $300,000 × 19% = $57,000. Ontario still starts from the full $500,000 at 2C. The allocation, not the grind, is what shrinks the Ontario figure to $312,500.

Had you used the 8.3% printed on the form for the whole year, line 402 would show $25,937.50 and Ontario tax would be overstated by $1,575.34.

Why the printed 8.3% is wrong for years ending after June 30, 2026

The latest Schedule 500 on canada.ca is still the 2023 version, and it hard codes 8.3% at line 2O canada.ca. The 2026 Ontario Budget cut the small business rate from 3.2% to 2.2% effective July 1, 2026, prorated for taxation years that straddle that date budget.ontario.ca. Bill 97 enacted it as S.O. 2026, c. 2, setting the deduction rate at 9.3% for days in a taxation year after June 30, 2026 ola.org. The CRA lists the cut on its what's new page for corporations canada.ca, but as of October 2026 its Ontario page still quotes 3.2% canada.ca.

Weight the two rates by days. Here is the deduction on $500,000 of Ontario small business income for common year ends.

Check that your software applied the split, and override the worksheet if it did not. The combined federal and Ontario rates these produce are on Ontario corporate tax rate 2026.

Which Ontario schedules sit next to Schedule 500?

Schedule 500 only covers basic tax, the small business deduction and the credit union reduction. Everything else on the Ontario section of Schedule 5 comes from its own schedule canada.ca.

Corporate minimum tax applies when total assets are $50 million or more and total revenue is $100 million or more, counting associated corporations through Schedule 511. The rate is 2.7% of adjusted net income, and the corporation pays only the amount by which it exceeds Ontario corporate income tax canada.ca. For the R&D and innovation credits, see Ontario SR&ED credits.