CORPORATE TAX I RETURN

Corporate Tax Return

T2 Checklist

To help you assemble your financial information for the preparation of your Corporate Income Tax Return, please keep this checklist handy. The checklist should be completed and returned to us together with the financial information assembled.

Resident corporations

All resident corporations (except tax-exempt Crown corporations, Hutterite colonies and registered charities) have to file a T2 return for every tax year, even if there is no tax payable. This includes:

• Non-Profit Organizations

• Tax-Exempt corporations

• Inactive Corporations

Non-resident corporations

A non-resident corporation must file a return if, at any time in the year, one of the following situations applies:

• it carried on business in Canada

• it had a taxable capital gain

• it disposed of taxable Canadian property

This requirement applies even if the corporation claims that any profits or gains realized are exempt from Canadian income tax due to the provisions of a tax treaty.

Determining your corporation’s tax year

The corporation’s tax year is its fiscal period, which cannot be longer than 53 weeks (371 days).

New corporations

You can declare your tax year on your first T2 return after incorporation. Make sure the financial statements or the General Index of Financial Information (GIFI) you attach to the return match the tax year of the return.

The first day of your tax year (tax year start)

On your first T2 return after incorporation, use the date of incorporation as the tax year start. For all subsequent returns, your tax year start will be the day after your tax year-end.

When to file your corporation income tax return

File your return no later than six months after the end of each tax year. The tax year of a corporation is its fiscal period.

When the corporation’s tax year ends on the last day of a month, file the return by the last day of the sixth month after the end of the tax year.

When the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year.

When and how to pay income tax

Corporations have to pay income tax in monthly or quarterly instalments, unless the total of Part I, Part VI, Part VI.1, and Part XIII.1 taxes payable for either the previous year or the current year is $3,000 or less.

The balance of tax the corporation owes for a tax year is due within either two or three months of the end of that tax year, depending on the circumstances of the corporation.

Interest and penalties apply to late payments. To be on time, you have to make instalment payments and other payments on or before the due date

Balance-due day

Generally, all corporation taxes (with the exception of Part III and Part XII.6) are due two months after the end of the tax year. However, the tax is due three months after the end of the tax year if the following conditions apply:

• the corporation is a CCPC throughout the tax year

• the corporation is claiming the small business deduction for the tax year, or was allowed the small business deduction in the previous tax year and either of the following applies:

  • the corporation’s taxable income for the previous tax year does not exceed its business limit for that tax year (if the corporation is not associated with any other corporation during the tax year)

  • the total of the taxable incomes of all the associated corporations for their last tax year ending in the previous calendar year does not exceed the total of their business limits for those tax years (if the corporation is associated with any other corporation during the tax year)

Penalties

If you file your return late

If you file your return late, a penalty applies. The penalty is 5% of the unpaid tax that is due on the filing deadline, plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

The corporation will be charged an even larger penalty if we issued a demand to file the return under subsection 150(2), and if we assessed a failure to file penalty for the corporation in any of the three previous tax years. The penalty is 10% of the unpaid tax when the return was due, plus 2% of this unpaid tax for each complete month that the return is late, up to a maximum of 20 months.