Every corporation resident in Canada must file a T2 return each year, including corporations that are inactive or had no income. The deadlines are easy to mix up because the filing date and the payment date are different.
The two dates that matter
- Filing deadline: six months after your corporation's fiscal year-end. A December 31 year-end means a June 30 deadline.
- Payment deadline: generally two months after year-end. Eligible Canadian-controlled private corporations (CCPCs) that meet certain conditions, including claiming the small business deduction, generally get three months.
Filing on time does not extend the payment date. If you owe tax and pay after the payment deadline, you are charged interest from that date even if the return is filed on time.
What late filing costs
If you file late and have a balance owing, the CRA's late-filing penalty is generally 5% of the unpaid tax, plus 1% of the unpaid tax for each full month the return is late, up to 12 months. The penalty is higher for repeat late filers: generally 10% plus 2% per month, up to 20 months, if a penalty was assessed in any of the previous three years.
Interest also builds on the unpaid balance and on the penalty itself, and it compounds daily. Small delays get expensive quickly.
Inactive corporations still file
A corporation with no revenue must still file. Not filing can lead to penalties, and a long record of non-filing can create bigger problems, including trouble with a bank, a sale of the business or dissolution.
Instalments
Profitable corporations often must pay tax by monthly or quarterly instalments during the year instead of waiting until year-end. Missing instalments can trigger instalment interest and penalties even when the final return is filed on time.
How to stay on time
- Close your books soon after year-end. A return can only be as accurate as the records behind it, so see our guide to what records the CRA requires you to keep.
- Have financial statements prepared early. We prepare these through our financial statements service.
- Estimate the balance owing before the payment deadline, not after.
- Set calendar reminders for both dates, plus instalments if they apply.
If you have missed a year, file as soon as you can. The CRA's Voluntary Disclosures Program may help in some situations, and our CRA audit support team can advise.
If you want it handled, our corporate tax accountants prepare and file T2 returns, and you can also read how salary and dividends affect what your corporation reports.
This article is general information, not tax advice for your situation. Confirm deadlines and penalty rules on the CRA website.
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