Corporate tax compliance
How Should a Corporation Choose or Change Its Fiscal Year End?
How a Canadian corporation's fiscal year end affects T2 deadlines, instalments, bookkeeping workload, and CRA approval for a later change.
Sources checked 8 min read
Key points
- A new corporation generally chooses its first tax year end when it files its first T2 return, and a corporate tax year generally cannot exceed 53 weeks.
- The best date reflects the operating cycle, inventory, record quality, owner workload, related entities, and tax planning needs, not just December 31.
- A T2 return is generally due six months after year end, while the balance is normally due two or three months after year end depending on the corporation's facts.
- Changing an established tax year end generally requires CRA approval unless a listed exception applies.
Choose a date that improves the close
A seasonal business may prefer a year end after its quieter period, when inventory is lower and staff can complete counts and reconciliations. A professional practice may align the date with contracts or partner reporting. A corporate group may benefit from coordinated reporting, while a growing business may prioritize lender deadlines and management information.
A non calendar year end does not move every obligation. T4 and T5 information returns, many payroll processes, and personal shareholder tax still follow calendar year rules. GST/HST periods can also differ from the corporate tax year. Build one compliance calendar that shows each account separately.
Work backward from the real deadlines
The T2 is generally due six months after the tax year end. The corporation's balance due day is generally two months after year end, with a possible three month period for certain Canadian controlled private corporations that meet the CRA's conditions. Instalments may be monthly or, for eligible corporations, quarterly during the year.
A useful internal close is much earlier than the filing deadline. Schedule bank and subledger reconciliations, inventory, payroll and GST/HST ties, shareholder and related party accounts, fixed assets, estimates, tax work, management review, and final approval. Earlier reliable numbers improve tax and cash planning.
- Match the date to the operating cycle and availability of reliable records.
- Check parent, subsidiary, associated corporation, lender, and shareholder requirements.
- Map tax payment, return filing, information slip, and annual legal filing dates separately.
- Document the chosen date and the first tax period in corporate records.
Changing an existing year end
A corporation generally needs the CRA's approval to change an established tax year end. The CRA asks for the reasons and can accept or reject the request. Certain events, such as an acquisition of control, can create a deemed year end under the tax rules; those situations require transaction specific advice.
Before requesting a change, model the short or long period, filing and payment dates, instalments, losses, associated entities, bonuses, GST/HST, payroll, financial statements, and lender reporting. Update the legal and accounting systems only after the effective date and required approvals are confirmed.
Official sources
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Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.