Canadian Corporate Tax Demystified

By Author: Ken Donaldson
Total Articles: 48
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In Canada, corporation have to pay tax on their income generated. Canadian Corporate tax only makes for a small portion of the entire taxes that are collected and the major share of the revenue is from personal income tax. Canadian Corporate tax has to be paid by the corporation before dividends are distributed among the individual shareholders. For the people who receive dividends from Canadian corporations, some credit is given for underlying tax. All resident corporations in Canada have to pay corporate taxes and have to file a corporation tax return (T2) every year. Even if there is no tax payable to the CRA, corporations have to file the T2 return.

Who Have to File T2 Returns And When

All resident corporations have to pay Canadian corporate tax and file the T2 return except charities that are registered, Crown corporations and Hutterite colonies. T2 return has to be filed by the corporation even if they have no corporation tax to pay and non-profit organizations, inactive corporations and tax-exempt corporations should file the returns mandatorily. Non-resident corporations are also required to file T2 return ...
... if any of the following situations can be applied to them:

• The corporation has carried on business in the country

• The corporation has disposed of taxable Canadian properties

Any disposition that has been done after 2008 will have a few additional criteria that it will have to consider and there have been other amendments to the definition of taxable Canadian property . T2 return forms have to be submitted to the CRA no later than 6 months from the end of the year. The date of filing will change according to the when the tax year ends and one has to ensure that it is not beyond six months of the end of the year or else they may have to pay a penalty.

How to Determine the Tax Year of The Corporation

If you want to pay your corporation tax promptly and file the T2 return on time, you need to know the tax year end of your corporation. The fiscal period of a corporation or the corporation’s tax year has to be less than 53 weeks. New corporation can choose the tax year end while filing the first T2 return and the subsequent tax year can be calculated according. If the professional corporation is a partnership firm, then the tax year will end on December 31. The tax year end cannot be changed by the corporation unless approved by the CRA and they have to pay their corporation tax and file the T2 returns before the deadline until they get a notification of change of tax year end.

Filing A T2 Return Form

IF the annual gross revenue of the corporation exceeds $1 million, then the corporation will have to file the T2 return online. Some companies are exempted from this rule and they are

• Nonresident corporations

• Insurance corporations

• Corporations that are exempted from paying tax under section 149 of the Canadian Income Tax Act

• Corporations that are reported in functional currency

Corporations that have less than $1 million revenue can send their T2 return forms to their respective tax centers and the nonresident corporations can send their forms to the International Tax Services Office.

About Author:-

Ken Donaldson is a chartered accountant who practices as an independent tax consultant. He also author of Canadian taxation of non-residents, in this article he provides Canadian Corporate tax tips. For more information you can visit Taxca.com.