When can we reassess your T2 return
There are different time limits for reassessing your T2 return, depending on the type of corporation and the nature of the reassessment.
Normal reassessment period
The normal reassessment period for a T2 return depends on whether or not the corporation was a Canadian-controlled private corporation (CCPC) at the end of the tax year.
We can usually reassess a return for a tax year:
- within three years of the date we sent the original notice of assessment for the tax year, if the corporation was a CCPC at the end of the year
- within four years of the date we sent the original notice of assessment for the tax year, if the corporation was not a CCPC at the end of the year
The normal reassessment period can be extended for various reasons.
Extended reassessment period
The normal reassessment period can be extended for an extra three years for any of the following reasons:
- you want to carry back a loss or credit from a later tax year
- a non-arm's length transaction involving the corporation and a non-resident affects the corporation's tax
- the corporation pays an amount or receives a refund of foreign income or profits tax
- a reassessment of another taxpayer's tax for any of the above reasons affects the corporation's tax
- a reassessment of another tax year (it must be a prior tax year if the reassessment relates to a loss or credit carryback) for any of the above reasons affects the corporation's tax
- the reassessment results from a non-resident corporation's allocation of revenue or expenses for the Canadian business, or from a notional transaction, such as "branch advance", between the non-resident corporation and its Canadian business
- to give effect to the application of the non-resident trust rules in section 94 or to the application of the foreign investment rules under sections 94.1 and 94.2
- for tax years of a corporation that begin after February 26, 2018, the reassessment results from income, loss or other amount related to a foreign affiliate of the corporation
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:
- the day on which the CRA is advised of the provincial reassessment
- 90 days after the notice of the provincial reassessment was sent
Non-resident non-arm's length person (extra six years)
For losses incurred in a particular tax year that ends after February 26, 2018, 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:
- the losses are reduced as a result of a reassessment made to the particular tax year beyond the normal reassessment period for the year
- the reassessment to the particular tax year is made as a consequence of a transaction involving the corporation and a non-arm's length non-resident person
"Stop-the-clock" rule for requirements for information and compliance orders
For challenges made after December 13, 2018, a reassessment period of a corporation is extended by the amount of time that a requirement for information or a compliance order is contested. Previously, this only applied to challenges to requirements for information that involved foreign-based information.
Unlimited reassessment period
We can reassess a return at any time for any of the following reasons:
- the corporation has made a misrepresentation because of neglect, carelessness, wilful default, or fraud in either filing the return or supplying information required by the Income Tax Act
- the corporation filed Form T2029, Waiver in respect of the normal reassessment period or extended reassessment period, with a tax services office before the normal reassessment period expires. The waiver can be filed up to three more years after the end of the normal reassessment period if the waiver applies to one of the situations described above under Extended reassessment period
- the reassessment is to carry back losses or certain tax credits and deductions where a prescribed form requesting the amendment has been filed on time
- a court instructs us to reassess
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:
- the corporation does not report in its income tax return a sale or other disposition of a real or immovable property that is capital property of the corporation
- the corporation does not file an income tax return but the CRA issues an assessment of tax (for example, after a review of a corporation that did not file a return)
- the corporation owned the capital property directly or indirectly through a partnership and the partnership did not report the sale or other disposition in the partnership information return
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.
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.
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