All resident corporations have to file a corporation income tax (T2) return every tax year, even if there is no tax payable. The CRA has two types of corporation returns, the T2 Corporation Income Tax Return and the T2 Short Return.
The T2 Corporation Income Tax Return is a 9-page form that serves as a federal, provincial, and territorial corporation income tax return unless the corporation is located in Quebec or Alberta. If the corporation is located in one of these provinces, they have to file a separate provincial corporation return.
The T2 Short Return is a simpler version of the T2 Corporation Income Tax Return. Corporations can use this return if they are a Canadian-controlled private corporation throughout the tax year and have either a loss or a nil net income for income tax purposes this year; or if they are exempt from tax under section 149 of the Income Tax Act (such as a non-profit organization).
The CRA recommends filing the T2 return electronically using CRA-certified software since it’s safe, convenient, and faster than paper filing. Learn the standard processing times for tax returns and other tax-related requests sent to the Canada Revenue Agency (CRA).
All corporations — including non-profit organizations, tax-exempt corporations, and inactive corporations — must file a T2 return for every tax year, even if there is no tax payable. The only exceptions to this rule are tax-exempt Crown corporations, Hutterite colonies, and corporations that were registered charities throughout the year.
A non-resident corporation has to file a T2 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 unless the disposition meets all the criteria listed below
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. Some exceptions may be applicable, so get more details here.
How to File Your Corporation Tax Return
1. Using Tax Preparation Software
Over 90% of corporations file their return electronically. A return prepared by certified software can then be electronically filed using the following:
- The CRA's Corporation Internet Filing service (more information below)
- My Business Account if you are a business owner
- Represent a Client if you are an authorized representative or employee
2. T2 Auto-fill
This service will ensure that certain return and account balances match CRA's data. This service is not mandatory for certified software products. Some include it, and others do not. If you have questions about the availability of the service, contact the software product company.
3. Corporation Internet Filing
Most corporations, including non-resident corporations and insurance corporations, can file their return electronically. Corporation Internet Filing streamlines the tax filing process, provides the filer with immediate confirmation of receipt and results in faster refunds. To file a T2 Corporation income tax return directly to the CRA online, it is required to have one of the following:
- A Web Access Code - generally used if filing for one corporation; orThe CRA's Corporation Internet Filing service (more information below)
- An EFILE number and password - generally used if filing tax returns for multiple corporations.
4. File on Paper
The tax centres in Winnipeg, Sudbury, and Summerside process corporation tax returns. Find out where to mail your return, or call 1-800-959-5525.
When and How to Pay the Corporation Income Tax
Corporations must 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 tax balance the corporation owes for a tax year is due within two or three months of the end of that tax year, depending on the corporation's circumstances. To be on time, they have to make instalment payments and other payments on or before the due date by using one of the several payment methods:
- Their Canadian financial institution's banking services
- The CRA's My Payment service
- Using either of the two options available through My Business Account:
- Calculate and pay instalment payments > Proceed to pay
- View and pay account balance > Payment on filing and interim balance
- Pre-authorized debit using My Business Account
- Credit card, PayPal or Interac e-transfer through one of CRA's third-party service providers
- In person at a Canadian financial institution (after using a remittance form requested in My Business Account)
Do you have any questions about the corporation income tax (T2) return? Drop them in the comments section to get help from our members.
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I am doing a few corporate tax returns, Always let to have a updated manual getting to learn more about T2 Returns2 months ago