Are you a new small business owner with some questions about your corporate tax returns? Read the questions we often hear at Trillium from clients navigating their annual taxes for the first time.
Which Tax Return Form Is The Right One For Corporate Entities?
The mandatory corporate income tax return form for the federal government of Canada is the T2. The proper name for it is the declaration of corporate income, and every company has to file this each taxation year.
When Do I Have To File The T2 Tax Return?
Every company must file the T2 tax return form within six months of the end of each taxation year.
Who Has To File A T2?
All companies doing business in Canada must file a T2 return with the Canada Revenue Agency, even if your company has the following qualifications:
- You do not have to pay tax or are exempt
- You’re idle and haven’t accrued an income
- You’re a non-profit organization
Very few exceptions exist for the T2; for these cases, check with your accountant or the tax authorities.
Is There Anything Else I Must File?
In addition to the T2, there are the Schedules and the General Index of Financial Information (GIFI). Schedules give the CRA supplementary information about your corporation’s tax return and filings; you’ll find them split into two categories:
- Information schedules: general information and those relating to transactions
- Calculation schedules: net income, taxable income, deductions, taxes, and credits
GIFI is the standard list of codes used to prepare financial statements. All corporations (apart from insurance corporations) must use the codes for their financial statements and file them with the T2 returns.
What If My Company Is A Non-Resident Corporation?
Non-resident corporations must also file a T2 in Canada if they did business in Canada, achieved taxable capital gain, or disposed of taxable Canadian property.
Is There More Than One Kind Of T2 Form?
There are two kinds of T2 forms: the eight-page T2 Corporate Income Tax Return and the two-page T2 Short Return. The first (the “long T2”) can be used by any company, and it has more schedules to follow. The second type (the “short T2”) has only three schedules.
Not all companies can use the short T2, and you should talk to an accountant or look at the Guide T4012, T2 Guide – Income Tax to make sure that your company can use it before filling it out.
What Information Do I Need To Prepare For The T2?
Whether you’re filing with an internal accountant or having an external accountant do the work for you, you will need to gather the following information:
- Company name and address
- The Business Number issued by the Canada Revenue Agency
- Statements of income and balance sheets filed with the General Index of Financial Information
- The company’s main activities and sources of income (investment income, etc.)
- Whether the company performs its activities or owns property abroad
- Whether you conduct activities in other Canadian provinces
- Whether the company received or paid dividends
- Any acquisition or disposal of fixed assets
If you’re a large company with shareholders, you must also have the first and last names, addresses, and country of residence for all company shareholders and authorized corporate signatory shareholders. You must also have information on whether shareholders hold shares in other companies or if the company is bound or associated with other companies.
How Do I File A T2?
The best way to file your T2 is to have a bookkeeping and tax preparation accountant. They will make sure you submit the required documents and information. Once we have completed the filing and you have reviewed the statement, all you have to do is sign the authorization T183 CORP. The T183 CORP form is a corporate return for electronic transmission; once signed, your accountant can electronically send the T2 tax return to the CRA.