Who has to file a corporate tax return?
All corporations – including non-profit organizations, tax-exempt corporations, and inactive corporations – have to file a T2 return for every tax year, even if there is no tax payable. The only exception to this rule is a corporation that was tax-exempt Crown corporations, Hutterite colonies and registered charity throughout the year.A non-resident corporation require filing 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; or ;
  • it disposed of taxable Canadian property, unless a disposition that takes place after 2008 that meets all the related criteria

This requirement applies even if any profits or gain(s) realized are claimed by the corporation to be exempt from Canadian income tax due to the provisions of a tax treaty. A corporation requires filing income tax return within six months of the end of each tax year. The tax year of a corporation is its fiscal period. When the corporation’s tax year ends on the last day of a month, file the return by the last day of the sixth month after the end of the tax year. When the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year. A corporation requires paying income tax in monthly or quarterly installments when 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 more than $3,000. The balance of tax the corporation owes for a tax year is due within either two or three months of the end of that tax year, depending on the circumstances of the corporation. If you file your corporate tax return late, a penalty applies. The penalty is 5% of the unpaid tax that is due on the filing deadline, plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

Who are required to file an individual tax return?

You must file a return for a tax year usually if:

  • You have to pay tax.
  • We sent you a request to file a return.
  • You and your spouse or common-law partner elected to split pension income for a tax year.
  • You received working income tax benefit advance payments in a tax year.
  • You disposed of capital property in a tax year (for example, if you sold real estate, your principal residence, or shares) or you realized a taxable capital gain (for example, if a mutual fund or trust attributed income to you, or you are reporting a capital gains reserve you claimed on your prior year tax return).
  • You have to repay any of your old age security or employment insurance benefits.
  • You have not repaid all amounts withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan.
  • You have to contribute to the Canada Pension Plan (CPP). This can apply if for a tax year the total of your net self-employment income and pensionable employment income is more than $3,500.
  • You are paying employment insurance premiums on self-employment and other eligible earnings.

Even if none of these requirements apply, you should file a return if:

  • You want to claim a refund.
  • You want to claim the working income tax benefit for a tax year.
  • You want the goods and services tax/harmonized sales tax (GST/HST) credit (including any related provincial credits).
  • You or your spouse or common-law partner wants to begin or continue receiving Canada child benefit payments, including related provincial or territorial benefit payments.
  • You have incurred a non-capital loss in a tax year that you want to be able to apply in other years.
  • You want to carry forward or transfer the unused part of your tuition, education, and textbook amounts.
  • You want to report income for which you could contribute to an RRSP and/or a pooled registered pension plan (PRPP) to keep your RRSP/PRPP deduction limit for future years current.
  • You want to carry forward the unused investment tax credit on expenditures you incurred during the current year.
  • You receive the guaranteed income supplement or allowance benefits under the old age security program. You can usually renew your benefit by filing your return by April 30. If you choose not to file a return, you will have to complete a renewal form. This form is available from Service Canada.

Corporate & Business Tax

1. Do I have to file corporation tax return even if my corporation is inactive?2. Do I have to file corporation tax return even if my corporation is inactive?Yes, you have to file your corporation tax returns even if your corporation is inactive.

3. Do I have to file corporation income tax returns even if there is no tax payable?Yes, you have to file your corporation income tax returns even if there is no tax payable.

4. I don’t have a tax preparer or an accountant, how can I file corporate tax returns by myself?Yes, you can file your corporate income tax returns either electronically or paper return. It is mandatory to file electronically if your annual gross revenues exceed $1 million, otherwise there is a penalty of $1000 for non-compliance. There are two different forms of T2 return, namely, (a) T2 corporation income tax return and (b) T2 short return. However, you have to be eligible to file T2 short return, which you can check in the CRA guide T4012, T2 corporation income tax guide.

5. I have a new corporation, how do I determine my corporation’s tax year?You can choose your corporate tax year (also known as fiscal year) starting from the date of incorporation to the date of year-end within maximum 53 weeks (or 371 days). For example, you incorporated on July 26th 2017 you can choose July 31st 2018 as the year-end. For subsequent years, the tax year would be August 1st to July 31st.

6. How can I change my corporate tax year?In order to change the corporate tax year you can write a letter, by showing the reasons, to your tax service office asking for their approval. It is mandatory for all bankrupt corporations. However, such approval is not required in few situations such as winding up, merger and acquisition, becoming or ceasing to be exempt from tax and emigration in which they will file the final tax returns.

7. When to file corporation income tax returns?Timeline for filing corporate income tax returns is six months from the date of tax year-end. If your corporation’s year ends on the last day of a month the filing deadline would be last date of 6 months after the tax year end. For example, corporation’s year ends on June 30th the filing deadline is December 31st. However, if it is on August 31st then deadline is February 28th. If the year ends on any other dates then filing deadline is on the same date of 6 months after the tax year end. For example, corporation’s year ends on June 10th the filing deadline is December 10th.

8. I am late in filing my corporation’s tax returns for last five years and I expect refund in all years, am I entitled to get tax refunds for all five years?In order to receive a tax refund you must file a tax return no later than three years after the end of a tax year.

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