Preparing a T2 corporate tax return can be intimidating. Whether you are a start-up or expanding your existing business operations, it can be daunting to tackle the T2 declaration requirements and tax forms. If your company does not have an internal accountant or accounting team, it is always recommended to hire a professional accountant (CPA) with experience with T2 tax returns. As your company's tax obligations grow, it's important that you keep up with the requirements to meet those obligations.
What is a T2 tax return?
Companies operating in Canada must pay income taxes, as do individuals. The T2 Corporate Income Tax Return is a mandatory general tax return form that must be used to file corporate income tax. There is also a T2 Short Return, which, as the name suggests, is a shorter form of return. Only some companies are eligible for a short T2 yield.
In addition to T2, there are other forms of corporate income tax. These are plans and GIFI (General Index of Financial Information). Companies must submit a T2 for each fiscal year. Otherwise, there is a risk of financial penalties.
Who must submit T2?
All companies resident in Canada must file a T2 with the Canada Revenue Agency (CRA).
This includes companies that:
- Are not required to pay taxes
- Are inactive with no activity (or income)
- Are a non-profit organization
- Are exempted from tax
In some situations, non-resident companies may also need to file a T2 tax return. If you do business in Canada, make a taxable capital gain, or sell your taxable Canadian assets, you will need to file a T2 with the CRA, even if it is not a Canadian company.
What information is required for the T2 tax return?
T2 business returns require a lot of information to be provided correctly. Before submitting, you should gather all required information and relevant documents to make the process smoother.
The most common information and documents needed to file a T2 business declaration include:
- Company name, registered address, and business number
- Names and addresses of all shareholders
- Whether the shareholders own shares in other companies or if the company is related or associated with other companies
- Statute
- Comprehensive financial statements (income statements, balance sheet, bank statements, and credit cards) filed in the General Financial Information Index (GIFI)
- Financial statements for the previous year and yield at T2 and, where applicable, a notice of assessment
- The main activities of the company - products, and services provided as a percentage
- Different sources of income for the company (investments, real estate, etc.)
- Where the Company does business - within or outside Canada, a province or a territory
- Whether the company has paid or received dividends
- Acquisition or sale of fixed assets
- List of changes in the company from the previous year (i.e., shareholders or addresses)
- All information on the transfer from previous years
- Any relevant government correspondence concerning the company
If you work with an accountant or use web recording software, much of this information will already be on file. Your accountant will notify you before submitting if any additional information is needed from you.
Guide to Refund of Income Tax T2
The Profit and Loss Statement T2 is an 8-page document specific to companies operating in Canada. It must be presented with the relative floor plans and GIFI. This tax form contains all related information about your business in that tax year. Revenue sources and data are disclosed, and tax refunds and reductions may apply, including small business deductions, Part I tax refunds, general tax refunds, and other tax refunds applicable to your business. The information you put on your T2 tax return also provides guidance on the plans you will need to submit.
Finally, and most importantly, there is a certification section. You or someone from a position in the company must confirm that all information provided is correct and true. Income-generating corporations in Quebec and Alberta must file separate provincial tax returns because these provinces administer their own corporate income tax systems. Companies with permanent establishments in any other province or territory calculate all applicable T2 income taxes.
What is the deadline for the T2 tax return?
The deadline for submitting a T2 application depends on the fiscal year of your company. The fiscal year ends when the company's fiscal year ends.
You must file a corporate tax return no more than six months after the end of your company's tax year. When the company's fiscal year ends on the last day of the month, file a return by the last day of the sixth month following the end of the fiscal year. If the last day of the fiscal year is not the last day of the month, file the return by the same day of the sixth month following the end of the fiscal year.
For example, if your company's fiscal year ends on March 31, the deadline for submitting T2 is September 30. If your company's fiscal year ends on March 23, the T2 submission deadline is September 23.
If the deadline for submitting T2 falls on a Saturday, Sunday, or a public holiday recognized by the CRA, the declaration is considered to have been submitted in good time if sent on the first working day following the filing deadline.