A corporation files its own return
A corporation is a separate legal person. It owns property and signs contracts in its own name, pays tax on its own income and files its own return, the T2. Every resident corporation files a T2 every year, even with no tax to pay. That includes inactive corporations, non-profit organizations and tax-exempt corporations. Registered charities file a different return instead.
Type of corporation
The type at the end of the tax year decides which rates and deductions apply. Most small businesses are Canadian-controlled private corporations (CCPCs): private, resident in Canada, not controlled by non-residents or public corporations, and with no shares listed on a stock exchange. A CCPC can claim the small business deduction, a lower rate on active business income up to its business limit.
The other types are other private corporations, public corporations, corporations controlled by a public corporation, and other corporations such as credit unions and cooperatives. A change of type during the year can change the tax.
Deadlines
| What | When |
|---|---|
| T2 return | Six months after the tax-year end. A March 31 year-end files by September 30 |
| Balance of tax | Two months after the year-end, or three months for a CCPC that claimed the small business deduction and stayed within its business limit |
| Instalments | Monthly, or quarterly for some small CCPCs. Not needed if tax was $3,000 or less in the current or previous year |
A deadline on a weekend or public holiday moves to the next business day. Interest runs on anything paid late, so the payment deadline matters even more than the filing one.
Filing electronically
For tax years starting after 2023, almost every corporation has to file its T2 electronically. The exceptions are insurance corporations, non-resident corporations, corporations reporting in a functional currency, and tax-exempt corporations. Filing on paper when you should file electronically costs a $1,000 penalty.
Paying yourself
Owners can take salary, dividends or both. Salary goes through a payroll account and a T4 slip. Dividends go on a T5 slip, and both are due by the last day of February. Which mix works best depends on your income and plans, so ask us before the year-end.
Filing with us
- New clients fill out the new corporation form. Existing clients use the service order form and tick Corporation Income Tax Return.
- We email you a list of everything we need for the return.
- We send you the draft financial statements and return to review.
- Once you approve them, you sign an authorization for us to file, and we send our invoice.
- After you sign and pay, we file the return with the CRA and send you a confirmation with copies of all forms and schedules.