T2 filing deadline: when corporate tax is due in Canada

The six-month rule for filing the T2

The CRA says to file your return within six months of the end of each tax year. A corporation's tax year is generally its fiscal period.

When the tax year ends on the last day of a month, the T2 is due by the last day of the sixth month after year-end. When the year ends on any other day, it is due by the same day of the sixth month after year-end.

If a filing due date falls on a Saturday, Sunday or public holiday recognized by the CRA, the return is on time if the CRA receives it, or it is postmarked, on or before the next business day. Several provinces and territories have their own holidays, so due dates can depend on where you are.

• CRA: When to file your corporation income tax return

The tax is due before the return: the balance-due day

The balance-due day is the date by which the rest of the tax for the year has to be paid, under paragraph 157(1)(b) of the Income Tax Act. Generally, all corporation taxes (except Part III and Part XII.6) are due two months after the end of the tax year. That is months before the six-month filing deadline.

For Part I, VI, VI.1 and XIII.1 tax, the balance is due three months after year-end if the corporation was a CCPC throughout the tax year, claimed the small business deduction for the current or previous tax year, and its taxable income for the previous tax year didn't exceed its business limit. If it is associated with other corporations, the test uses the total taxable income of all the associated corporations against the total of their business limits.

For this test, previous-year taxable income is measured before things like loss carrybacks. Amalgamations and wind-ups can change a corporation's balance-due day.

• CRA: Balance-due day

Instalment dates during the year

Corporations generally pay tax in instalments during the year, with the rest due on the balance-due day. The first monthly instalment is due one month less a day from the start of the tax year. The first quarterly instalment, where allowed, is due one quarter less a day from the start. The rest fall on the same day of each following month or quarter.

For a corporation whose tax year is the calendar year, the CRA's example has monthly instalments due on the last day of each month, and quarterly instalments due March 31, June 30, September 30 and December 31.

Quarterly instalments are open to a CCPC with a perfect compliance history over the previous 12 months that, together with associated corporations, had taxable income of $500,000 or less and taxable capital employed in Canada of $10 million or less in the current or previous tax year. A payment due on a weekend or CRA-recognized holiday is on time if received by the next business day. Interest is compounded daily at a rate set every three months.

• CRA: Instalment due dates

Who has to file, and how

All resident corporations have to file a T2 every tax year even if no tax is payable, except tax-exempt Crown corporations, Hutterite colonies and registered charities. That includes non-profit, tax-exempt and inactive corporations. A non-resident corporation files if, at any time in the year, it carried on business in Canada, had taxable capital gains or disposed of taxable Canadian property.

For tax years starting after 2023, all corporations have to file the T2 electronically, except insurance corporations, non-resident corporations, corporations reporting in functional currency and corporations exempt under section 149. The CRA charges a $1,000 penalty when a corporation required to file electronically doesn't. A corporation filing through an electronic transmitter authorizes it on Form T183CORP each year.

The T2 includes the provincial or territorial return, except for corporations in Quebec or Alberta, which file separate provincial corporate returns. Records are kept for at least six years from the end of the tax year, or six years from the filing date if the return was late. A return has to be filed within three years after year-end to get a refund.

• CRA: Corporation income tax return
• CRA: Filing the T2 return electronically using certified software
• CRA: Tax gap compliance results
• CRA: When to file your corporation income tax return

Late-filing penalties

The standard penalty for a late T2 is 5% of the unpaid tax due on the filing deadline, plus 1% of that unpaid tax for each complete month the return is late, up to 12 months.

If the CRA issued a demand to file and charged a failure-to-file penalty in any of the three previous tax years, the penalty is 10% of the unpaid tax plus 2% for each complete month late, up to 20 months. A non-resident corporation can instead face the greater of $100 or $25 for each complete day late, up to 100 days, if that is more.

A large corporation, with more than $10 million of taxable capital employed in Canada, also pays a monthly penalty for up to 40 months of 0.0005% of that capital plus 0.25% of its Part VI tax payable. When instalment interest is more than $1,000, the CRA may also charge an instalment penalty.

Aldro prepares and files the T2, with the provincial return where it applies, for one flat yearly price that covers everything tax.

• CRA: Avoiding penalties (corporations)