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T2 Corporation Income Tax Return

What is a T2 Corporation Income Tax Return?

Corporations must pay income taxes on their earnings, just like individual tax-filers must. The Canada Revenue Agency (CRA) has created the T2 Corporation Income Tax Return, for corporations to fill out in order to file their taxes. All Canadian controlled private corporations must use the T2 to file their taxes annually, based on their fiscal year.

Who Has to File a T2 Corporation Income Tax Return?

All resident corporations in Canada need to file a corporate tax return, with a few exceptions. Crown corporations, Hutterite colonies and registered charities do not have to. However, non-profit organizations, tax-exempt corporations, inactive corporations and all other resident corporations must file income tax returns, regardless of whether there are any taxes payable.

Sometimes, non-resident corporations must file a return if they had a taxable capital gain, disposed of taxable Canadian property or carried on business in Canada.

Can I Use the T2 Short Return?

This shorter and simpler version of the T2 corporate income tax return can be used by corporations in either of these two circumstances:

  • A Canadian-controlled private corporation (CCPC) the entire year that is also posts a net nil income or a loss for income tax.
  • A non-profit organization of another corporation that is exempt from tax under Section 149 of the Income Tax Act.

If you meet one of these two requirements, you must still meet these other conditions to use the short form:

  • Permanent establishment in only one territory or province
  • Not claiming refundable tax credits
  • Not paying or receiving taxable dividends
  • Reporting only in Canadian currency
  • Does not have Ontario transitional tax debit
  • Does not have a Section 34.2 amount

How Can I File A Corporation Income Tax Return?

It is most convenient to file your corporation income tax return using tax preparation software dedicated for corporate returns, like TurboTax Business Incorporated.

When considering filing on paper, the form is a bit more extensive than individual tax returns and there are several steps to completing it.

  • Identification: The T2 form asks for a great deal of information about your corporation from its business number to the location of the corporation’s books and records.
  • Attachments: This section asks a series of questions. If you answer yes, you will need to include an additional schedule for the tax return. Several of the questions ask about claims for tax credits the corporation may be making for the year.  For most corporations there are several schedules that are added with the return; all corporations will have a Schedule 100 and 125 for the Balance Sheet and Income Statement, and most a Schedule 50 for the Shareholder information.
  • Additional information: Here the CRA asks for other information, including what the corporation produces or provides and what percentage of the revenue each product or service represents.
  • Taxable income: This is the income section of the T2, which includes information from several of the initial attached schedules.
  • Small business deduction: Those Canadian-controlled private corporations, which are small businesses, can claim a deduction in this section, whether or not they are associated.
  • General tax reduction: These two additional sections of tax deductions are also for Canadian-controlled private corporations.
  • Refundable portion of Part I Tax: You may be able to recover part of the tax paid investment income here.
  • Refundable dividend tax on hand: This is income earned from passive investments.
  • Dividend refund: If you paid shareholders you may be able to get a dividend refund in this section.
  • Part I Tax: This is a calculation of the basic tax. The schedules you attached in an earlier step may modify this amount.
  • Summary of tax and credits: This is a straightforward summary of the rest of the document.
  • Certification: You or someone of position, office or rank in the company must certify the information on the return is correct.

 

Where Do I Send My Corporation Income Tax Return? 

You cannot send your corporation income tax return where you send your personal income tax. Instead, use the Canada Revenue Agency’s list of where to send T2 forms to complete your corporate income taxes.

When Do I Need to File My Corporation Income Tax Return?

Unlike individuals, corporations have a choice about their tax year. It is still a 12-month period, but you can choose when it starts and ends; your first tax year is when you set your fiscal year end, and it depends on when the business was incorporated. However, no matter when your tax year ends you must file the tax return for that year no later than six months after it ends, and pay any taxes potentially owing within 3 months.