How to file corporate tax in Canada

It has been observed that many corporate bodies today find it difficult when filing their income tax, especially for the first time. Some however, do not know the first step they are to take when it comes to the matter of income taxes. Hence, in this article, we are going to highlight the procedures/steps to ensure a successful and smooth filing of corporate tax return either online or on paper. Most Canadians now choose the online method because it’s faster and they get their refund sooner, especially if they also signed up for direct deposit.

Important point to note:

The first and foremost point to note is that your corporation shall be obligated to file a T2 corporate tax return annually within six months of the end of its fiscal year.

Here is a case study to explain the point above: for instance, your corporation’s fiscal year ends June 28th then counting six months from that date your corporation’s T2 tax return would have to be filed by December 28th. Also, in the event that the filing deadline falls on a Saturday, Sunday or a public holiday, a consideration will be granted by the Canada Revenue Agency provided the return is filed on the very first working or business day after the actual deadline

The beautiful advantage of incorporating your business is the fact that you wouldn’t need to have a fiscal year which tallies with calendar year. Instead, you can have a fiscal year which start from any chosen month of the year and end exactly twelve (12) months from that date.

Filing a Corporate Income Tax

Now, let’s talk about the main point for filing a corporate income tax. As noted in the previous article on filing personal income tax, returns can be filed using the offline or the online method and this applies to the corporate income tax. If you choose the electronic method, you should have it in mind that your tax return is going to be prepared mainly by tax preparation software or application that has the approval or certification of Canada Revenue Agency. An example of such software that has been certified by CRA is Turbo Tax Business Incorporated which can assist you in filing your T2 tax return with ease.

Except for some selected corporation which have special exemption from tax payable under section 149 of the Income Tax Act which includes non-resident, insurance, as well as corporations reporting in functional currency, all other corporations with total yearly revenue above one million dollars ($1,000,000) have to file their T2 tax return electronically.

There are three categorical methods you can employ for filing corporate income tax electronically:

  • You can make use of the Corporation Internet Filing service, or
  • Possibly the CRA’s My Business Account; or
  • Using another very effective method which is the T2 Bar Code Return and mailing or delivering it to the CRA.

You can as well refer to The Canada Revenue Agency guide for more information about these methods as this can be found on their website

  • It is also very much possible to file your T2 tax return electronically even if you have to file a certificate or an election form with your return; you can send the documents only, clearly labeled with your corporation’s name, business number, and the applicable tax year end, to your tax centre.
  • If you choose to file manually which translates to mean using the offline (paper) method, you would be required to deliver, or mail it to the appropriate tax centre. There is a section reference at the end of this article which list the addresses of the different tax services for both resident and Non-resident Corporation, it is in form of a chart.
  • Lastly, it doesn’t matter which way or method you employ while filing your T2 corporate return. The most important thing is that you keep all related document in a safe and secure place as you can refer to it at any point in time. Like the previous article mentioned, keep all your related receipts and documents for at least six years after sending your report to the Canada Revenue Agency, as the agency can request for it on short notice.

References:

https://turbotax.intuit.ca/tips/when-and-how-to-file-corporate-income-tax-1972

For the T2 Corporation – Income Tax Guide that contains a pair of charts that list the addresses of the different tax services offices for both resident and non-resident corporations. See the link below:

http://www.cra-arc.gc.ca/E/pub/tg/t4012/t4012-02-e.html#P448_3137