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T2 Corporation – Income Tax Guide – Before you start

From: Canada Revenue Agency

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References in this guide

All legislative references are to the Income Tax Act and the Income Tax Regulations of Canada, unless stated otherwise. This guide does not replace the Income Tax Act or its regulations.

This guide also refers to information circulars (ICs) and interpretation bulletins (ITs) that the CRA publishes to give you more technical information. A new series of technical publications, called the income tax folios, is progressively replacing the interpretation bulletins. This process is taking place over several years. To be notified of new or updated income tax folios, subscribe to the Electronic mailing list – Income Tax Technical Publications.

Many of CRA's publications, including forms, schedules, ICs, ITs, and folios are available at Forms and publications. A table at the end of this guide lists forms by number.

AgriStability and AgriInvest programs

The CRA is not involved in administering the AgriStability and AgriInvest programs for corporations. For more information on these programs, go to AgriStability and AgriInvest.

CRA's service pledge

The CRA will process 95% of T2 corporation income tax returns filed electronically within 45 days.

Find out if you have to file a T2 return

Resident corporations

All corporations — including non-profit organizations, tax-exempt corporations, and inactive corporations — have to file a T2 return for every tax year, even if there is no tax payable. The only exceptions to this rule are tax-exempt Crown corporations, Hutterite colonies, and corporations that were registered charities throughout the year.

Non-resident corporations

A non-resident corporation has to file a T2 return if, at any time in the year, one of the following situations applies:

This requirement applies even if the corporation claims that any profits or gains realized are exempt from Canadian income tax due to the provisions of a tax treaty.

Business is defined in subsection 248(1) and the extended meaning of carrying on business (in Canada) is defined in section 253.

The references to taxable capital gain do not include any gain resulting from the disposition of shares that are listed on a designated stock exchange (other than taxable Canadian property).

A non-resident corporation also has to file a T2 return in a number of situations, including:

Even if neither of these requirements applies, a non-resident corporation may still want to file a return if any of the following situations apply:

Note

Non-resident corporations must file their T2 return, schedules, and the General Index of Financial Information in Canadian funds only. They are not eligible to file in a functional currency per section 261.

If you have questions about non‑resident returns, go to Businesses – International and non-resident taxes.         

Dispositions of taxable Canadian property (certificates of compliance)

A non-resident corporation that disposes of taxable Canadian property must notify the CRA and may be required to get a certificate of compliance under section 116. For details, see Information Circular IC72-17, Procedures Concerning the Disposition of Taxable Canadian Property by Non-residents of Canada – Section 116.

A non-resident corporation that has a taxable capital gain or disposed of taxable Canadian property, including a corporation that may have received a certificate of compliance from the CRA, has to file a return, unless the disposition meets all the following criteria:

Taxable Canadian property excludes shares of corporations, and certain other interests, that, during the 60-month period ending at the time of determination, do not derive their value principally from real or immovable property situated in Canada (including Canadian resource property and timber resource property).

Non-resident corporations claiming treaty exemption

If you carried on a treaty-protected business in Canada or disposed of a taxable Canadian property that was treaty-protected property during the year (as defined in section 248), you have to complete all of the following lines on your return:

For each of the questions asked at lines 164, 170, and 171 on page 2 of the return to which your response is yes, complete the appropriate form or schedule and attach it to your return. In addition, you have to complete Schedule 91, Information Concerning Claims for Treaty-Based Exemptions.

Rental income from Canada

Rental income from Canada is subject to a 25% withholding on the gross rental income under Part XIII, unless the rate is reduced by a reciprocal tax treaty. A non-resident corporation can elect to be taxed under Part I on its net rental income by filing a T2 return under subsection 216(1) within two years of the end of the tax year. If the non-resident corporation has filed Form NR6, Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real or Immovable Property or Receiving a Timber Royalty, it must file a T2 return under subsection 216(4) within six months of the tax year end. For more information, see IT393R2 – Election Re: Tax on Rents and Timber Royalties Non-Residents.

Note

If you file a T2 return under section 216, include only rental income. If you have any other income, file a second T2 return.

Reference
Guide T4144, Income Tax Guide for Electing Under Section 216

Services rendered in Canada (withholding amount)

A non-resident corporation is subject to a 15% withholding under Regulation 105 on any fee or other amount paid to it for services rendered in Canada (regardless of whether the services are provided by an employee of the corporation or are sub-contracted to another party). This withholding is held on account of any potential tax liability that the corporation may have to Canada. The corporation's tax liability is determined when its Canadian income tax return is assessed.

A corporation related to a non-resident actor is subject to a 23% withholding tax under Part XIII on all amounts it receives for the acting services of the actor in a film or video production in Canada. This withholding tax represents the final tax liability for these acting services. The corporation may elect not to be taxed under Part XIII at the 23% rate by filing a return of income under Part I for the year. A non-resident corporation that has received a reduction (filed Form T1288) of this withholding tax from the CRA still has to file a return.

Note

Send your Canadian T2 return that you elected to file under section 216.1 to the tax services office that processed application Form T1288 and issued the reduction. Write “Actor's election” at the top of page 1 of the return.

Reference
Section 153

How to file your return

Using tax preparation software

Over 90% of corporations file their return electronically. To do so, you must use CRA certified software. The CRA certifies commercial software to ensure that it meets the CRA's specifications. To find a list of certified software, go to Software.

A return prepared by certified software can then be electronically filed using:

If you cannot file electronically, you can print the T2 Bar Code Return and mail it to the CRA.

Note

Do not send the T2 bar code by fax. The CRA does not accept it.

If you file through an electronic transmitter, you have to authorize the transmitter by completing Form T183 CORP, Information Return for Corporations Filing Electronically, for each tax year. As of June 22, 2023, Form T183CORP may be signed with an electronic signature.

 Do not send this form to the CRA, but keep it in case the CRA asks for it later.

T2 Auto-fill

T2 Auto-fill is a secure service that lets corporations and authorized representatives download information from the CRA to their tax preparation software. Using this service will ensure that certain return and account balances will match CRA's data. For more information on what T2 Auto-fill delivers, go to About T2 Auto-fill.

This service is not mandatory for certified software products. Some include it and others do not. If you have questions on the availability of the service, contact the software product company.

Mandatory electronic filing

All corporations with annual gross revenue of more than $1 million have to file their T2 return electronically, except for insurance corporations, non resident corporations, corporations reporting in functional currency, and corporations that are exempt from tax payable under section 149 of the Income Tax Act.

This $1 million threshold is eliminated for tax years starting after 2023. Most corporations have to file their return electronically.

Corporations are subject to a penalty for non‑compliant returns. For more information see What happens if you do not comply with mandatory Internet filing.

References
Subsection 150.1(2.1)
Regulation 205.1(2)

Corporation Internet Filing

Most corporations, including non-resident corporations and insurance corporations can file their return electronically.

You must use CRA-approved software that has been certified for Corporation Internet Filing. By filing electronically, you will receive immediate confirmation that the CRA has received your return, enjoy faster processing and refunds, save on mailing costs, and help the environment by using less paper.

The T2 Attach-a-doc service allows corporations to attach supporting documentation such as certificates when they file their T2 return or within 24 hours of filing. This service is not mandatory for certified software products. Some include it and others do not. If you have questions on the availability of the service, contact the software product company.

If you are filing your T2 return electronically and you cannot use the T2 Attach-a-doc service to file your supporting documents with your return, send them to your tax centre (see Where to file your paper return).

When sending paper documents, clearly identify your corporation's name, business number, and the applicable tax year-end on the documents.

If you are filing an election that does not have a prescribed form or prescribed manner, include it with the notes to your financial statements on the General Index of Financial Information (GIFI) to transmit the election electronically with your return, unless otherwise stated on a T2-related form.

For an up-to-date list of all special elections and returns that can be e-filed using commercial tax preparation software, go to Filing a special election or return.

For information on your eligibility, available software, and more, go to Corporation Internet Filing.

Filing without a web access code

You can file corporation returns online without a web access code using “Transmit a return” through:

North American Industry Classification System (NAICS) codes

All certified tax preparation software for T2 returns uses self-identified NAICS codes.

NAICS codes are hierarchical numerical codes designed to provide common definitions and descriptions of our industries and business activities. NAICS codes are up to six digits long. The Government of Canada as well as the governments of the provinces and territories use the data provided by NAICS codes for economic analysis and fiscal policy responses.

The integration of NAICS codes into T2 commercial tax preparation software packages means that corporations have to pick their main revenue generating business activity directly from a drop down list or a simple search. Active corporations that file their T2 returns either by Internet or on paper using 2D bar codes must choose the appropriate codes to describe their main revenue generating business activity.

Corporations using the return available on Canada.ca do not have to enter a NAICS code.

Avoid errors

It is important that you select the most accurate business activity the first time, since the first year's code is carried forward to following years, allowing for a simple validation of the description when there is no change in the main business activity.

If you do not select the business activity, problems and errors will result when you prepare the T2 return to be transmitted electronically or printed in bar-coded format.

If you have any questions on selecting NAICS codes to describe your corporation's main revenue generating business activity when filing your T2 return, call the Business Enquiries line at 1-800-959-5525.

Using the returns available on Canada.ca

Electronic-filing of the return results in the quickest processing time, with 95% of notices of assessment issued within six weeks.  For more information, you can check CRA processing times.

If you cannot file electronically, the CRA has two types of corporation return available for printing.

T2 Corporation Income Tax Return

The T2 Corporation Income Tax Return has nine pages. Any corporation can use it.

T2 Short Return

The T2 Short Return is two pages plus a Schedule 1, Net Income (Loss) for Income Tax Purposes. To complete the T2 Short, you may also have to complete a Schedule 8, Capital Cost Allowance (CCA) and a Schedule 50, Shareholder Information. The T2 Short Return is a simpler version of the T2 Corporation Income Tax Return. Two categories of corporations are eligible to use this return:

In addition, the corporation must meet all of the following conditions to use this return:

If the corporation does not fit into either of the above categories or does not meet all of the above conditions, file a regular T2 return.

When to file your return

File your return within six months of the end of each tax year. The tax year of a corporation is its fiscal period.

When the corporation's tax year ends on the last day of a month, file the return by the last day of the sixth month after the end of the tax year.

When the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year.

The CRA offers a mobile app that lets you create reminders of dates that are important for your business. For more information on the CRA Business Tax Reminders app, go to Mobile apps.

Examples

Table listing tax year-ends and filing deadlines
Tax year-end Filing deadline
March 31 September 30
June 30 December 31
April 30 October 31
September 23 March 23
October 2 April 2

When a filing due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, your return is considered filed on time if the CRA receives it or if it is postmarked on or before the next business day. See details on Public holidays.

You must file your return on time. If you do not, the CRA can charge penalties on any return that was not sent by the filing due date. See If you file your return late for details.

Note

You must file a return no later than three years after the end of a tax year to receive a tax refund.

Re-appropriation of T2 statute-barred credits

Under subsection 221.2(1), the minister of National Revenue may use discretion to re-appropriate T2 statute-barred credits to an established debt on an account associated with the same business number and administered by the CRA.

To request the re-appropriation of a T2 statute-barred credit, send the CRA a completed Form RC431, Request for Re-appropriation of T2 Statute-barred Credits, with all the supporting documents. Complete a separate form for each unique business number.

You can also use the "Enquiries service" in My Business Account. You will have to provide the same details requested on Form RC431 in your enquiry. Keep the requested documents in case the CRA asks for them later.

For more information, see the form or go to Re-appropriation of T2 statute-barred credits.

Where to file your paper return

The tax centres in Winnipeg, Sudbury, and Summerside process corporation tax returns. To find out where to mail your return, see Find a CRA address or call 1-800-959-5525.

Film and media tax credits

Film Services Units at the CRA provide services to corporations that may be entitled to receive the Canadian film or video production tax credit, the film or video production services tax credit, or other available provincial or media tax credits. For more information, including the location and contact number for the Film Services Unit serving your area, go to Film and Media Tax Credits.

When and how to pay income tax

Corporations have to pay income tax in monthly or quarterly instalments, unless the total of Part I, Part VI, Part VI.1, and Part XIII.1 taxes payable for either the previous year or the current year is $3,000 or less.

The balance of tax the corporation owes for a tax year is due within either two or three months of the end of that tax year, depending on the circumstances of the corporation.

Interest and penalties apply to late payments. To be on time, you have to make instalment payments and other payments on or before the due date by using one of the several methods for making payments:

Note

Remittance vouchers have a Quick Response (QR) code printed on them that contains all the information you need to pay with cash or debit at a Canada Post retail outlet.

For more information, go to Payments to the CRA or contact your financial institution.

The CRA considers the payment to be made on the day the CRA receives it, and not on the day you send it.

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, for calculating instalment interest and penalty, your payment is considered on time  if the CRA receives it on or before the next business day. See details on Public holidays.

Note

Sometimes, penalties and interest on late payments can be cancelled or waived. For more information, see Cancel or waive penalties and interest.

Instalment due dates

Instalment payments for Parts I, VI, VI.1, and XIII.1 taxes are due on the last day of every complete month of a corporation's tax year. The first payment is due one month minus a day from the starting date of the corporation's tax year. The rest of the payments are due on the same day of each month that follows.

Eligible small-CCPCs can make quarterly instalment payments, instead of monthly ones. For more information, see Guide T7B-Corp, Corporation Instalment Guide.

You can view your instalment due dates by using the "Calculate and pay instalment payments" service through:

Balance-due day

Generally, all corporation taxes (with the exception of Part III and Part XII.6) are due two months after the end of the tax year. However, the tax is due three months after the end of the tax year if the following conditions apply:

The business limit is provided at Line 410 – Business limit. For more information about allocating the business limit among associated corporations, see Schedule 23.

Note

For determining balance-due days, the taxable income for the previous year of corporations and associated, subsidiary, and predecessor corporations means taxable income before applying loss carrybacks.

Special rules apply to determine the balance-due day of a new corporation formed after an amalgamation or of a parent corporation after it receives the assets of a subsidiary corporation that is winding-up. For more information, go to Paying your balance of corporation tax or see Guide T7B-Corp, Corporation Instalment Guide.

Reference
Sections 125 and 157

Partnerships – Limiting deferral of corporation tax

Under section 34.2, a corporation may have to accrue additional income in respect of a partnership (other than dividends for which a deduction is available under section 112 or 113), when the fiscal period of the partnership begins in the corporation's tax year and ends in a following tax year. The corporation is then required to accrue income under the adjusted stub period accrual (ASPA) regime for the portion of the partnership's fiscal period that falls in the corporation's tax year (the stub period). These rules do not affect a corporation's capital dividend account which is to be determined without reference to section 34.2.

Since the ASPA income inclusion in a tax year is an estimate of the stub period income, the corporation is entitled to claim that same amount in the immediately following tax year. Both the ASPA income inclusion and the treatment of that same amount in the following year are subject to the characterization rules under subsection 34.2(5). They are deemed to have the same character and be in the same proportions as the partnership income that they relate to. As such, the claim in the immediately following tax year may be a deduction or a deemed allowable capital loss, whichever applies. A corporation may have ASPA in respect of more than one partnership and, in such cases, the ASPA rules apply to the corporation on a partnership by partnership basis.

In general, a corporation (other than a professional corporation) has to include in its income for a tax year its ASPA for a partnership if all of the following apply:

A corporation has a significant interest in a partnership if the corporation, or the corporation, together with affiliated or related parties, is entitled to more than 10% of the partnership's income or loss (or assets, net of liabilities, if the partnership were to cease to exist).

These rules apply to any corporation (described above), that is a member of a partnership, even if the partnership has a member that is an individual or a professional corporation that is subject to the 1995 rules limiting deferral for unincorporated businesses.

The definition of adjusted stub period accrual in subsection 34.2(1) gives the formulas for calculating a corporation's ASPA in respect of a partnership.The ASPA formula allows the corporation to designate two reductions. The first designation concerns qualified resource expenses incurred by the partnership during the corporation's stub period. The second allows a corporate partner to make a discretionary designation to reduce its ASPA to reflect its knowledge of the actual partnership income for the stub period. Once filed, the designations cannot be amended or revoked. If the amount of the discretionary designation is too high, creating an income shortfall, the corporation may be subject to an additional income inclusion. The additional income inclusion may increase if the shortfall is above a 25% threshold.

Under certain conditions, a corporation (other than a professional corporation) that becomes a member of a partnership in a tax year may make a designation to apportion its income from the partnership between two tax years:

To calculate the income inclusion under section 34.2 and, if applicable, the income shortfall adjustment and additional amount under section 34.3, use Schedule 71, Income Inclusion for Corporations that are Members of Single-Tier Partnerships, or Schedule 72, Income Inclusion for Corporations that are Members of Multi-Tier Partnerships. These are worksheets and you do not have to file them with your return. To report the amounts, file a completed Schedule 73, Income Inclusion Summary for Corporations that are Members of Partnerships, with your return.

 

Note

Schedules 1, 6, and 7 are affected by the various rules in section 34.2 and the amounts reported on Schedule 73 (as applicable). For example, the amount entered on line 275 of Schedule 73 reporting the total taxable capital gains under section 34.2 must also be entered on Schedule 6.

References
Sections 34.2, 34.3, and 249.1

Penalties

If you file your return late

If you file your return late, a penalty applies. The penalty is 5% of the unpaid tax that is due on the filing deadline, plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

The corporation will be charged an even larger penalty if the CRA issued a demand to file the return under subsection 150(2), and if it assessed a failure to file penalty for the corporation in any of the three previous tax years. The penalty is 10% of the unpaid tax when the return was due, plus 2% of this unpaid tax for each complete month that the return is late, up to a maximum of 20 months.

References
Subsections 162(1) and 162(2)

Non-resident corporations

A non-resident corporation will be subject to a failure to file penalty equal to the greater of:

This penalty applies if the amount calculated is more than the amount of penalty usually applied under subsections 162(1) and (2), as discussed above.

Reference
Subsection 162(2.1)

Large corporations

A large corporation has to file the T2 Corporation Income Tax Return and, if applicable, a Schedule 38, Part VI Tax on Capital of Financial Institutions. If a corporation fails to file these returns, in addition to any other penalty as applicable, the CRA will charge a penalty for each complete month that the returns are late, up to a maximum of 40 months. The penalty will be the sum of the following amounts:

To identify the corporation as a large corporation, answer yes to the question at line 233 on page 2 of the return.

Notes

A corporation is a large corporation if the total taxable capital employed in Canada at the end of the tax year by it and its related corporations is over $10 million.

To determine if the total taxable capital employed in Canada of the corporation and its related corporations is greater than $10 million use whichever one of the following schedules that applies:

A corporation with a permanent establishment in Newfoundland and Labrador that is a financial institution, as defined under provincial legislation, has to file Schedule 305, Newfoundland and Labrador Capital Tax on Financial Institutions. See Newfoundland and Labrador capital tax on financial institutions.

For tax years starting after October 31, 2021, a corporation with a permanent establishment in Nova Scotia at any time in the tax year that is a financial institution, as defined under provincial legislation, has to file Schedule 352, Nova Scotia Financial Institutions Capital Tax. See Nova Scotia Financial Institutions Capital Tax.

If schedules 305 or 352 are not filed, the corporation will be liable to a penalty similar to the one for failure to file Schedule 38 (described above), in addition to any other penalty.

Reference
Section 235

If you do not comply with mandatory electronic filing

The CRA will charge a $1,000 penalty for non-compliance if a corporation that is required to file electronically does not comply with the requirement.

Reference
Subsection 162(7.2)

If you do not report income

The CRA will charge a penalty if a corporation does not report an amount equal to or greater than $500 that is required to be included in computing its income on its return in a tax year and any of the three previous tax years.

This penalty will not be applied if the corporation is liable under subsection 163(2) for the same unreported amount.

The repeated failure to report income penalty is equal to the lesser of:

References
Subsections 163(1) and 163(1.1)

False statements or omissions

The CRA will charge a penalty if a corporation, either knowingly or under circumstances of gross negligence, makes a false statement or omission on a return. The penalty is the greater of either $100 or 50% of the amount of understated tax.

Reference
Subsection 163(2)

Note

If a corporation is charged a penalty for making a false statement or omission under subsection 163(2), the corporation cannot be charged a penalty on the same amount for failing to report income under subsection 163(1).

Misrepresentation in tax matters by a third party

The CRA will charge a penalty if a person advises or helps another person to file a false return or knowingly allows a taxpayer to submit false tax information.

References
IC01-1, Third-Party Civil Penalties
Section 163.2

Other penalties

The CRA can also charge penalties for late or incomplete instalment payments and for not providing information on an authorized or prescribed form.

The most common forms are:

References
Sections 162 and 163.1

Cancel or waive penalties and interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties and interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA's discretion to grant relief is limited to any period that ends within 10 calendar years before the year in which a relief request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to interest that accrued in 2013 or later.

Taxpayer relief requests can be made online using the CRA’s My Account, My Business Account (MyBA) or Represent a Client digital services:

You can also fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest, and send it with one of the following ways:

See the details on how to submit documents online.

For more details on the required supporting documents, relief from penalties and interest, and other related forms and publications, go to Cancel or waive penalties and interest at the CRA.

References
Subsection 220(3.1)
IC07-1R, Taxpayer Relief Provisions

Voluntary Disclosures Program

The Voluntary Disclosures Program (VDP) gives you a second chance to correct a tax return you previously filed or to file a return that you should have filed. This has to be done before the CRA starts any enforcement action or investigation against you.

Applications are processed under one of the two programs: the limited program and the general program.

The limited program limits the level of relief for corporations who intentionally avoided their tax obligations. Under this program, corporations will not be referred for criminal prosecution or charged gross negligence penalties. However, they will be charged other penalties and interest as applicable.

The general program provides relief to corporations that want to correct unintentional errors. Under this program corporations will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for the years preceding the three most recent years of returns required to be filed.

For more details on the VDP, get the most recent version of Information Circular IC00-1, Voluntary Disclosures Program, or go to Voluntary Disclosures Program.

If you want, you can discuss your situation first on a no-name or hypothetical basis. To speak with a CRA official, contact General Enquiries at 1-800-959-5525. For complex technical reporting issues or questions, you will be referred to a CRA official in a specialized area. This pre-disclosure discussion does not constitute acceptance into the VDP anymore.

The process of making disclosures on a no-name basis has ended.

Information reporting of tax avoidance transactions

Taxpayers, advisors and promoters who engage in or who are entitled to certain fees in relation to certain tax avoidance transactions are subject to reporting requirements.

Note

Under provincial legislation:

  • Ontario corporations are subject to the same requirements for reportable transactions entered into after May 1, 2014, or reportable transactions that are part of a series of transactions completed after May 1, 2014
  • British Columbia corporations are subject to the same requirements for reportable transactions entered into after February 20, 2018, or reportable transactions that are part of a series of transactions completed after February 20, 2018

Several new measures affecting the mandatory disclosure rules apply after June 21, 2023.

The definition of avoidance transaction is amended so that a transaction is considered an avoidance transaction if it can reasonably be concluded that one of the main purposes of entering into the transaction is to get a tax benefit.

The following changes apply to the mandatory disclosure rules:

Reportable transactions

Effective for transactions entered into after June 21, 2023, a transaction is reportable if it is an avoidance transaction as defined in subsection 237.3(1) (previously 245(3)) of the federal Act and has one (previously two) of the following three characteristics:

Note

The definition of tax benefit under subsection 245(1) was amended to include tax attributes that have not yet become relevant to the calculating of tax. This is important in determining whether there is an avoidance transaction for the purposes of the reportable transaction rules.

A reportable transaction does not include a transaction that is, or is part of, a series of transactions that includes the acquisition of a tax shelter or issuance of a flow-through share for which an information return has been filed with the minister of National Revenue under subsection 237.1(7) or 66(12.68) respectively.  This is the case unless it is reasonable to conclude that one of the main reasons for the acquisition of a tax shelter, or the issuance of a flow‑through share, was to avoid the reportable transactions provisions under subsection 237.3.

Notifiable transactions and reportable uncertain tax treatments

New requirements have been enacted:

Filing requirements

Form RC312

For reportable transactions and notifiable transactions entered into after June 21, 2023, you must file Form RC312, Reportable Transaction and Notifiable Transactions, within 90 days of the earlier of the day the corporation, or a person transacting for it:

The previous version of Form RC312, Reportable Transaction Information Return, had to be filed on or before June 30 of the calendar year following the calendar year in which the transaction first became a reportable transaction for the person. That version of the form applies to transactions entered into before June 22, 2023.

For more information, see the Mandatory disclosure rules – Guidance.

Form RC3133

For tax years that start after 2022, if you have one or more reportable uncertain tax treatments for a tax year, you must file Form RC3133, Reportable Uncertain Tax Treatments Information Return, for each reportable uncertain tax treatment, on or before the corporation's tax return filing-due date for the year.

Reassessment

If the information return is not filed as required, the reassessment period is extended by three years (if the corporation is a CCPC) or four years (if the corporation is not a CCPC) after the day on which the information return is filed as required. The scope of an assessment, reassessment, or additional assessment during the extended reassessment period for a taxpayer's tax year is limited to the extent that it can reasonably be regarded as relating to the deduction, claim, or tax benefit. If a corporation has a reporting requirement for a transaction relevant to the corporation's income tax return for a tax year, the normal reassessment period will not start for the transaction until the corporation has complied with the reporting requirement. As a result, if a corporation does not comply with a mandatory disclosure reporting requirement for a tax year for a transaction, a reassessment of the year for the transaction will not become statute-barred.

Penalties

Failure to report could result in suspension of the tax benefit, a penalty for failure to report, or both.

For transactions entered into after June 21, 2023, penalties will apply for each failure to report a reportable transaction or a notifiable transaction:

In addition, a penalty will apply for each failure to report an uncertain tax treatment. The penalty is equal to $ 2,000 for each week (or each part of a week) during which the failure continues, up to a maximum of $100,000. This penalty applies to tax years starting after June 21, 2023.

File the return separately from your tax return. Before you file it, make a copy for your records. Mail the original or amended return, and any related information to:

Winnipeg Tax Centre
Data Assessment and Evaluation Programs
Validation and Verification Section
Foreign Reporting Returns 
66 Stapon Road
Winnipeg MB R3C 3M2

Reference
Sections 237.3 to 237.5

Country-by-country reporting

Country-by-country reporting applies to multinational enterprise groups that have a total consolidated group revenue of €750 million or more, as reflected in their consolidated financial statements in the immediately preceding fiscal year.

If the ultimate parent entity or surrogate parent entity of such a multinational enterprise group is resident in Canada, it has to file Form RC4649, Country-by-Country Report, with the CRA. This has to be done no later than 12 months after the end of the reporting fiscal year.

Beginning on October 1, 2021, Canadian corporations required to file Form RC4649 must do so electronically using EFILE or Web Access Code (WAC), available through CRA-T2-certified software that supports the preparation of country-by-country reports. This includes all filings by Canadian corporations as the ultimate parent entity or surrogate parent entity, and most filings by a constituent entity under the secondary reporting requirement. Failure to file electronically may result in the application of penalties.

For more information, see Guide RC4651, Guidance on Country-by-Country Reporting in Canada, and Form RC4649.

References
Sections 162 and 233.8

After you file your return

After the CRA receives your return, it sends it to Corporation Services of the responsible tax centre for processing. To find your tax centre, go to Find a CRA address.

After assessing your return, the CRA will either:

The default method of correspondence for businesses that use My Business Account will become electronic, effective on the date of royal assent. However, with a 30 days notice, businesses may still choose to also receive paper correspondence. See Signing up for email notifications when filing your T2 return.

As soon as you get the notice of assessment, compare it to your copy of the corporation's return. Contact the CRA if you need the CRA to clarify or explain any part of the assessment. You can call the telephone number provided in the CRA's correspondence. If you do not have contact information, see how to Contact the Canada Revenue Agency. 

Enquiries service

You can ask an account-related question online and the CRA will provide an answer online. You can also view answers to common enquiries online.

The CRA will try to respond within 10 business days, depending on the complexity of the question. To view the response, select the “Mail” link under the “View” tab.

With the “Enquiries service”, you can also make other online requests, such as ordering more remittance vouchers.

To access these online services, go to:

When the CRA can reassess your return

Within certain time limits, the CRA can reassess your return or make additional assessments of tax, interest, and penalties. These time limits vary, depending on the type of corporation and the nature of the reassessment.

Normal reassessment period

The CRA can usually reassess a return for a tax year:

Extended reassessment period

The normal reassessment period can be extended for an extra three years for several reasons, including any of the following:

Non-resident non-arm's length person (extra six years)

For losses incurred in a particular tax year,  the reassessment period for a preceding tax year to which those losses are carried back is extended six years beyond the normal reassessment period if both of the following apply:

Provincial income reallocation (extra one year)

If the reassessment results from a provincial income reallocation, the normal reassessment period can be extended for one year from the later of:

Substantive CCPCs – Deferring tax using foreign entities (extra one year)

The reassessment period for substantive CCPCs is extended one year beyond the normal reassessment period for any resulting assessment of Part IV tax because of a corporation being assessed or reassessed a dividend refund. This measure generally applies to tax years that end after April 6, 2022, with some exceptions.

Requirements for information and compliance orders

When a corporation contests a requirement for information or an application for a compliance order in court, a “stop‑the‑clock” rule applies. This rule extends the corporation's reassessment period by the period of time during which the requirement for information or compliance order is contested. The period generally starts when the corporation makes its first court filing to contest the requirement for information or compliance order and ends on the final disposition of the application (including any appeals).

Note

The CRA can send requirements for information, including those for foreign-based information, to banks and credit unions electronically, rather than delivering them in person or by registered or certified mail. Written consent of the bank or credit union is required before requirements can be sent electronically.

Unlimited reassessment period

The CRA can reassess a return at any time for any of the following reasons:

Note

If you want to revoke a waiver that was previously filed to extend the normal reassessment period for a certain tax year, file Form T652, Notice of Revocation of Waiver, at your tax services office. The revocation will take effect six months after you file Form T652.

Sale or disposition of real estate

The CRA may at any time reassess an income tax return beyond the normal reassessment period for any of the following reasons:

If the corporation does not report the disposition in its initial return for the tax year, but later amends its return (for example by filing a request for adjustments under subsection 245(6)), the CRA may still make a reassessment outside of the normal reassessment period within three years of the amendment being filed.

Under this extended reassessment period, the reassessment is limited to amounts reasonably relating to the unreported or previously unreported disposition of real or immovable property that is capital property of the corporation or partnership, as the case may be.

References
Subsections 152(3.1), 152(4), 152(4.01), and 152(4.1)
IC75-7, Reassessment of a Return of Income

How to request a reassessment

You can request a reassessment electronically using the latest commercial tax preparation software packages, or send a letter to the tax centre that serves the corporation. If you send a letter, state the name of the corporation, the business number, the tax year, and any details that apply. With your letter, include any relevant supporting information, such as revised financial statements or the General Index of Financial Information (GIFI) and schedules. If you are preparing your return using tax preparation software, submit the bar codes that contain the information needed to reassess your return. Do not send the entire T2 return.

To ask to carry back a loss or tax credit to a prior tax year, file whichever of the following schedules apply:

You can file these schedules with the return on which you report the loss or earn the credit, or you can forward them separately to the tax centre that serves the corporation.

Reference
Subsection 152(6)

How to file a formal dispute

Many misunderstandings are caused by a lack of information or by a simple miscommunication. That's why the CRA says: “Talk to us”.

If you have new or additional information, you or your authorized representative can ask for a change online at My Business Account, Represent a Client, or by writing to the CRA. Many disputes are resolved this way.

If you disagree with an assessment or a determination, you can make a formal objection.

Filing an objection is the first step in the formal process of resolving your dispute. You have 90 days after the date of the notice of assessment or determination to file an objection.

You can file an objection:

In all cases, you have to explain why you disagree and include all relevant facts and supporting documents.

For large corporations, your objection must:

Reference
Section 165

A large corporation that objects to an assessment will have to pay 50% of the disputed amount. A corporation is a large corporation if the total taxable capital employed in Canada at the end of the tax year by the corporation and its related corporations is over $10 million. The corporation also has to pay the full amount of taxes not in dispute.

Reference
Subsection 225.1(7)

For more information about objections and appeals, see Guide P148, Resolving your dispute: Objection rights under the Income Tax Act, or go to File an objection.

Disputing loss determinations

The formal process of resolving a dispute does not usually apply to loss amounts under dispute, because there is no tax, interest, or penalty involved.

However, a corporation may request a loss determination if it does not agree with the amount of the losses assessed by the CRA. The CRA will determine the amount of the loss and confirm in writing by issuing Form T67AM, Notice of Determination/Redetermination of a Loss.

Once the corporation has received the notice of determination, it can file an objection within 90 days after the date of the notice.

Note

You cannot request a loss determination if the CRA assessed your loss to be the same as what you reported.

If the corporation asks, the CRA will make determinations of the following amounts:

Send any requests for loss determinations to your tax services office or tax centre.

References
Subsections 152(1.1) and 152(1.2)

Keeping records

Keep your paper and electronic records for six years from the end of the last tax year that they relate to. If you file your income tax return late, keep your records for six years from the date you file your return.

Certain records must be kept longer. These include minute books, which have to be kept until sometime after dissolution. However, if you want to destroy your records early, complete Form T137, Request for Destruction of Records. For more information, go to Keeping records.

References
Subsections 230(4), 230(4.1), 230(5), and 230(6)
Regulation 5800
IC78-10, Books and Records Retention/Destruction

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