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Corporate tax
Corporate returns for Ontario companies, usually prepared alongside the year end financial statements since the same numbers feed both. Below: the deadlines, a full list of what to gather, and the schedules that quietly get missed on owner-managed returns.
For most owner-managed companies the T2 and the financial statements are one job. The statements are prepared, generally as a compilation engagement, and the return is built from the same trial balance with the tax adjustments applied on top. Splitting them between two firms means the same file gets understood twice and reconciled once, which costs more and works less well.
See financial statements for what that side involves.
The other thing worth doing early is authorizing access to your CRA business account, which lets me see instalments, balances and correspondence directly instead of reconstructing them from what arrived in the post.
| Filing the return | Six months after the end of the fiscal period |
|---|---|
| Paying the balance | Two months after year end, or three months for a Canadian-controlled private corporation meeting the conditions, which most small companies do |
| Instalments | Monthly, or quarterly for eligible small CCPCs. They begin in the second year, which is when they surprise people |
The three month version is not automatic. It rests on the corporation having claimed the small business deduction, and on its taxable income in the prior year, together with that of any associated companies, having stayed within the business limit. Three situations fall outside it regularly. A holding company, whose income is investment income rather than active business income. A corporation holding rental property, because rent is generally treated as income from property rather than from an active business, unless the company employs more than five full-time people in that business throughout the year. And an operating company whose prior year income has grown past the business limit. In each case the balance is due at two months, and interest runs from there.
The gap between the payment deadline and the filing deadline is the thing to notice. Tax is due months before the return is required, so waiting until month five to start means paying interest on an amount nobody had calculated yet.
Late filing attracts a penalty based on the unpaid tax plus a monthly amount, and it increases for repeated lateness. A corporation with no tax owing still has to file. A dormant corporation still has to file.
Two separate questions sit behind this, and they are often run together.
Whether the corporation is resident in Canada is the first. A company incorporated in Canada is treated as resident here, and a Canadian-resident corporation is taxed on its worldwide income. A company incorporated elsewhere can still be resident here if it is centrally managed and controlled from Canada, which is a question about where the real decisions get made rather than where the registered office is.
Which province taxes it is the second, and it does not follow from where the company was incorporated. An Ontario corporation is not automatically an Ontario taxpayer, and a federally incorporated company is not somehow provincially neutral. What matters is where the corporation has a permanent establishment, meaning a fixed place of business such as an office, branch, workshop, warehouse or yard. There are also deemed cases, including having an employee or agent with general authority to contract on the company's behalf, or substantial equipment in use in a province.
With a permanent establishment in only one province, all of the income is taxed there. With establishments in more than one, taxable income is allocated between them on Schedule 5, generally by averaging two measures: the share of gross revenue attributable to each, and the share of salaries and wages paid at each.
This is worth attention because provincial rates differ, and because the trigger is lower than people expect. A yard in another province, a salesperson working from home across a border, or equipment stationed on a long-term site can each create an establishment. The reverse also happens: a company assumes it is filing in two provinces when it only ever had one establishment, and pays at the wrong rate for years.
It comes up when work moves across a border and the company's footprint moves with it, or when the owner relocates and the business does not. If any part of your operation sits outside Ontario, it is worth raising rather than assuming it follows the head office.
When I take over a file, I will ask for your permission to contact the firm that prepared it before me. Professional rules ask me to do that, and refusing is your right, but it is worth knowing what the request is actually for. It is not a courtesy call and it is not about you.
What I am after is the running balances that only exist in their working papers. Undepreciated capital cost by class, so this year's depreciation starts from the right number. Loss carryforwards, with the years they arose, so they can still be used before they expire. Share capital continuity, adjusted cost base and paid-up capital. And the tax account balances that build up quietly over a company's life: the capital dividend account, refundable dividend tax on hand, and the general rate income pool.
Those balances are cumulative. They are not on the return, they are not in your bookkeeping, and if nobody has them they have to be rebuilt from every year the company has existed. That is expensive, and in the case of the capital dividend account it is also risky: paying a capital dividend larger than the account holds triggers a penalty tax on the excess. A balance nobody can verify is a balance that should not be relied on.
Getting this by asking takes one email. Reconstructing it takes hours you would be paying for.
Separately from the year end papers, a company accumulates documents that matter once and then matter again decades later.
To be clear about scope: if you are coming to me for a single year's return, I do not need most of this. The return can be prepared from the trial balance and the continuity balances above. What follows is a list worth keeping regardless of who prepares your return, because these are the documents that are difficult or impossible to replace and are usually needed at the least convenient moment.
If your permanent documents are scattered across a lawyer's office, a filing cabinet and a former accountant's archive, that is normal and not a problem today. It becomes a problem on the day the company is sold, refinanced or wound up, and on that day it is on a deadline. Pulling it into one place is the sort of thing best done in a quiet month.
A T2 is a short return with a long tail of schedules. These are the ones that most often go unconsidered on owner-managed files, and several carry penalties out of proportion to the work involved.
Required for anyone holding 10% or more of any class of shares, with their name, address and identification number, meaning a SIN for an individual, a business number for a corporation or a trust number for a trust.
Clients ask why their accountant needs a family member's SIN, and the answer is that the CRA uses this to connect the dots: to identify associated corporations sharing a business limit, to match dividends reported here against personal returns, and to test whether shareholder loans and benefits have been reported on both sides. The information has a purpose, and an incomplete schedule invites the question of what else is incomplete.
This one sits unused for years at a time, which is why it is worth being clear about when it should not be. It is not a general disclosure of everything the owner did with the company. Three specific things trigger it.
So the honest answer on a typical owner-managed file is that if the owner drew salary and dividends and nothing else passed between them and the company, the schedule is correctly blank. Most years, nothing happened.
Where it does apply, it usually applies to something that matters. A shareholder loan left outstanding past the deadline can be included in the shareholder's personal income. A sale of property between the owner and the company at a price nobody supported can be adjusted to fair market value, with the difference taxed as a benefit. Completing the schedule is the point at which those transactions get looked at properly rather than posted to a suspense account and forgotten, and it is worth having it agree with what the personal returns say.
Easy to overlook entirely, and the exposure is real. It captures amounts paid or credited to non-residents in nine categories:
For each recipient it asks who they are, where they are resident, which category the payment falls into, the amount, and the tax withheld.
When you can leave a payee off: where the total paid or credited to that payee for the year is under $100, the schedule does not have to be completed for them. That is the whole of the de minimis, and it is small. A single annual software licence fee to a foreign vendor will usually clear it.
The reason it matters is that many of these payments also carry a withholding obligation under Part XIII. A company that pays a foreign contractor, licenses software from abroad, or pays a parent company overseas may have been required to withhold and remit, and where it did not, the liability falls on the payer rather than the recipient. The schedule is often the first place the issue becomes visible.
One thing the schedule does not do is discharge the separate filing. A corporation paying amounts of this kind generally has to file the applicable information return as well, an NR4 or a T4A-NR depending on the payment. Reporting it on Schedule 29 is not a substitute for that, and the two are due at different times.
Required where the corporation earns income from webpages or websites. It asks how many you earn income through, the addresses of up to five of the main ones, and the percentage of your gross revenue generated from the internet.
The percentage is the part that gets guessed at, and the definition is wider than people assume. It is not limited to running your own online store. Selling through a marketplace or platform counts. So does advertising and affiliate income earned on your own site, and so does a site that takes orders even where payment happens elsewhere. A company that thinks of itself as having a brochure website may still have a figure to report.
If you control more than one corporation, the small business limit is shared rather than duplicated, and Schedule 23 is the agreement allocating it between them. Schedule 49 does the same for the SR&ED expenditure limit. Schedule 28 is the election not to be associated in certain circumstances.
Association turns on control and family relationships rather than on whether the businesses have anything to do with each other. See owner-managed businesses.
Charitable donations made by a corporation are not an expense. They are deducted from taxable income on Schedule 2, subject to an annual limit based on income, with unused amounts carried forward. Recording them as an expense in the books and stopping there produces the wrong answer, and the receipt needs to be in the company's name rather than the owner's.
Tracks non-capital and net capital losses, what arose, what was applied and what remains. It matters most in the years when nothing is happening with it, because a loss balance that is not carried forward accurately is a loss balance you cannot use later. Carry-forward periods are finite.
Miscellaneous payments such as royalties and research grants paid to Canadian residents, where they have not been reported elsewhere.
A first return has its own schedule setting out the corporation's history and structure, and the same schedule deals with the wind-up of a subsidiary.
| Form | When it applies |
|---|---|
| T1135 | Specified foreign property with a total cost over $100,000 Canadian. This includes foreign bank accounts, shares of foreign companies held outside a registered plan, and real estate held for investment. It does not include personal use property or foreign property held inside a Canadian mutual fund |
| T1134 | An interest in a foreign affiliate, meaning a foreign corporation in which the Canadian company holds a significant interest. Specialist territory |
| T106 | Non-arm's length transactions with non-residents above a threshold. Brings transfer pricing into play |
| Schedule 21 | Foreign tax credits, claiming relief for tax paid to another country on income also taxed here. Separate calculations for business and non-business income, and the credit is limited |
| Schedule 25 | Investments in foreign affiliates, filed alongside the T1134 |
The penalties on T1135 and T1134 are among the harshest in the Act and are not proportionate to the tax at stake. They apply for failing to file even where no tax was owing. If you own anything abroad, say so early rather than at the end. If it has already been missed, see voluntary disclosure.
A non-profit corporation is generally exempt from tax, and it still has to file a T2 every year. Boards are frequently unaware of this, and a run of unfiled returns for an organization that never owed anything is a common discovery.
Separately, an NPO may also need to file the T1044 information return, depending on the passive income it receives and the value of its assets. Registered charities file the T3010 instead.
Owner-managed corporate tax is what I do. Some things sitting next to it are not, and the honest position is to say so at the start.
Bringing a specialist in for a defined piece of work is normal, and considerably cheaper than unwinding something afterwards.
Six months after the end of your fiscal period. But the balance owing is due earlier, two months after year end, or three months for most small Canadian-controlled private corporations. That gap is the thing to plan around, because tax is payable before the return that calculates it is required.
Yes. A dormant corporation files a return every year, as does a corporation with no tax owing. Not filing is how a company ends up with a stack of overdue returns and a compliance problem that costs more than the filings would have.
Schedule 50 requires the name, address and identification number of anyone holding 10% or more of a class of shares. The CRA uses it to identify associated corporations, match dividends against personal returns, and check that shareholder transactions have been reported consistently on both sides.
Not necessarily the one you incorporated in. Provincial tax follows where the corporation has a permanent establishment, meaning a fixed place of business such as an office, yard or workshop, or in some cases an employee with authority to contract there. With establishments in more than one province, taxable income is allocated between them on Schedule 5, generally using a blend of revenue and payroll at each location.
It may. Payments to non-residents are reported on Schedule 29, and many such payments carry a withholding obligation under Part XIII. Where withholding was required and not done, the liability sits with the payer. It is worth raising any foreign payment rather than assuming it is like paying a Canadian supplier.
No. A corporation's donations are deducted from taxable income on Schedule 2, subject to an annual limit, with unused amounts carried forward. The receipt also has to be in the company's name. Treating a donation as an ordinary expense produces the wrong result.
It is usually simpler and cheaper. The return is built from the same trial balance as the financial statements, with tax adjustments applied. Splitting the work between two firms means the file is understood twice and reconciled once.
This page describes corporate filing requirements in general terms as at August 2026 and is not advice for your company. Deadlines, thresholds and reporting obligations depend on the specific circumstances. The CRA's T2 Corporation Income Tax Guide is the authority.
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