Determining your corporation's tax year
The corporation's tax year is its fiscal period, which cannot be longer than 53 weeks (371 days).
You can declare your tax year on your first T2 return after incorporation. Make sure the financial statements or the General Index of Financial Information (GIFI) you attach to the return match the tax year of the return.
The first day of your tax year (tax year start)
On your first T2 return after incorporation, use the date of incorporation as the tax year start. For all subsequent returns, your tax year start will be the day after your tax year-end.
A corporation was incorporated May 18, 2022. It chose October 9 as its tax year-end. Its first tax year will be from May 18, 2022, to October 9, 2022. Its second tax year will be from October 10, 2022, to October 9, 2023.
Exception for members of a partnership
A professional corporation that is a member of a partnership and carries on business in Canada has to have a tax year ending December 31.
A professional corporation was incorporated May 18, 2022. It is a member of a partnership. For this reason, it has to have a tax year ending on December 31. Its first tax year will be from May 18, 2022, to December 31, 2022. Its second tax year will be from January 1, 2023, to December 31, 2023.
Any other new corporation may choose any tax year-end as long as its first tax year is not longer than 53 weeks from the date it was either incorporated or formed as a result of an amalgamation.
Changing your tax year
Generally, unless you have received approval to change the tax year, the corporation's tax year is the same from year to year.
To change a tax year:
- write a letter to your tax services office asking for approval
- include details to explain the reasons for the change as well as its effective date, otherwise the processing of your request may be delayed
In some situations, you do not need approval to change the tax year. These situations include any of the following:
- the corporation has wound-up and you are filing its final return with an abbreviated tax year
- the corporation has to end its tax year at a certain time because it is emigrating to another country, becoming exempt from tax, or ceasing to be exempt from tax
- a person or group of persons acquired control of the corporation under subsection 249(4)
- the corporation becomes or ceases to be a Canadian-controlled private corporation
A corporation that becomes bankrupt must get CRA's approval to change its tax year.
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