Filing an annual corporate tax return is mandatory for all Canadian resident corporations. The corporation income tax or T2 return is required even if there is no tax payable. It even applies to non-profit organizations, tax-exempt corporations, and inactive corporations. Some exemptions include tax-exempt crown corporations, Hutterite colonies and registered charities.
Most corporations are now able to file corporate income tax returns electronically via the CRA’s online services. This is mandatory for certain corporations that have annual gross revenues over $1 million. For tax years starting after 2023, most corporations will also have to file this way.
Non-Resident Corporate Tax Returns
Non-resident corporations may also have to file corporate income tax returns in Canada. This is necessary if any of the following situations are applicable:
- The corporation carried on business in Canada.
- They had a taxable capital gain in Canada.
- There was a disposal of taxable Canadian property.
- Shares of corporations and other specific interests that are not valued mainly from real or immovable property in Canada during the 60-month period ending at the time of determination are exempted. This includes Canadian resource property and timber resource property.
- The corporation wants to claim a refund.
When to File a Corporate Income Tax Return
The corporate tax return needs to be filed within six months after the end of each tax year. The tax year is the corporation’s fiscal period. If the tax year ends on the last day of a month, the return needs to be filed by the last day of the sixth month at the end of the tax year. Otherwise, it must be filed on the same day of the sixth month after the end of the tax year.
If the filing date is on a Saturday, Sunday, or CRA recognized public holiday, it is due on or before the next business day. As long as the CRA receives it or it is postmarked on or before the next business day, it is considered on time.
Late or Failure to File Corporate Tax Penalties
Filing your corporate income tax return late results in financial penalties. The penalty is 5% of the unpaid tax due on the deadline plus 1% of the unpaid tax for each complete month it is late. There is a maximum of 12 months of penalties that can be charged.
If the CRA issues a demand to file the return under subsection 150(2) and assessed a failure to file penalty in any of the three previous tax years, there is an even bigger penalty. This penalty is 10% of the unpaid tax when the return was due. In addition, 2% of the unpaid tax is owed for each complete month it is late, up to a maximum of 20 months.
For more information or to get ahead of your corporate tax return filing, contact us or visit the CRA’s website and read their section on Corporate Tax.