CRA forms
The T2 Corporation Income Tax Return Explained
6 monthsafter the end of the tax year to file a T2 return. The balance of tax is due sooner, two or three months after the year end.
Sources checked October 20263 min read
Who files a T2
Every corporation resident in Canada files a T2 return for every tax year, whether or not it owes tax, and the same is true of a corporation that had no income at all. The tax year is generally the corporation's fiscal period, which can end on any date as long as it is no longer than 53 weeks.
Corporations now have to file electronically, apart from insurance corporations, non resident corporations, corporations reporting in a functional currency and those exempt from tax. A paper return from a corporation that should have filed electronically draws a penalty.
Key points
- Every resident corporation files a T2 for every tax year, even with no tax owing
- Due six months after the year end; the balance of tax is due in two or three months
- Most corporations must file electronically
- Financial statements go in as GIFI schedules 100, 125 and 141
The schedules most small corporations file
The T2 itself is a short jacket. The detail sits in schedules, and a typical owner managed corporation files a recognizable set every year.
| Schedule | What it does |
|---|---|
| Schedule 1 | Turns accounting net income into net income for tax, adding back items such as half of meals and the accounting depreciation |
| Schedule 8 | Capital cost allowance, class by class |
| Schedule 50 | Shareholder information for anyone holding 10% or more of the shares |
| Schedule 100 | Balance sheet information, in GIFI codes |
| Schedule 125 | Income statement information, in GIFI codes |
| Schedule 141 | Questions about who prepared the financial statements and what the notes contain |
| Schedule 7 | Aggregate investment income and the income eligible for the small business deduction |
| Schedule 3 | Dividends received and taxable dividends paid |
| Schedule 23 | The agreement among associated corporations sharing one small business limit |
Filing and payment deadlines
The return is due within six months of the end of the tax year. When the year ends on the last day of a month, the return is due on the last day of the sixth month after it; a year ending December 31 is due June 30.
Payment comes first. The balance of tax is generally due two months after the year end, or three months for a Canadian controlled private corporation that claims the small business deduction and whose taxable income, with any associated corporations, stayed within the business limit the year before. Instalments are due monthly, or quarterly for a small corporation that qualifies, unless the tax for the current or previous year is $3,000 or less.
Where small corporations go wrong
The common errors are rarely about the tax calculation itself. They are a missing Schedule 50 after shares change hands, associated corporations that never file Schedule 23 to share the small business limit, shareholder loans left unpaid past the deadline, and a balance paid on the filing date rather than the earlier payment date, which costs interest even when the return is on time.
Quick answers
Does a corporation with no income still file a T2?
Yes. Every resident corporation files a return for every tax year, including a year with no income or tax.
When is a T2 due for a December 31 year end?
June 30. The balance of tax is due earlier, at the end of February or March depending on the corporation.
Can a corporation file its T2 on paper?
Generally not. Most corporations must file electronically, and a paper return that should have been electronic draws a penalty.
Related pages
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.