What is a T2 tax return?

In Canada, the T2 is the official form used to report corporate income to the federal government. It is the specific tax return for corporations. Each company is required to file a corporate income tax return (T2) for each taxation year. The Canada Revenue Agency offers two different types of T2 forms from which companies can choose to complete their return.

T2 Corporation Income Tax Return

The 8-page T2 corporate income tax return is a document that can be used by all companies. However, in addition to the T2 form, there are several additional elements. It's important to understand that completing only the T2 Corporation Income Tax Return is not enough to satisfy your company's obligations to the Canadian federal government. It is also necessary to submit additional financial statements, along with the appropriate schedules, in the General Index of Financial Information (GIFI).

What is a short T2 declaration?

The second type of declaration, known as the "T2 short" in common tax parlance, is an abbreviated version of the T2 form, consisting of just 2 pages and 3 appendices. However, it is essential to note that not all companies are eligible to use the T2 - Short Return. Before completing this form, we recommend that you consult Guide T4012, T2 Corporation Income Tax Guide, to check your eligibility.

What information is required to prepare a T2 income tax return?

• Whether you're responsible for preparing your own corporate tax returns, or use the services of an accountant, you need the following information:
• Company name and address.
• Canada Revenue Agency business number.
• Names (first and last), addresses and countries of residence of all company shareholders.
• Names (first and last), addresses and country of residence of all authorized signing corporate shareholders.
• Complete financial statements, including income statements and balance sheet, filed in the General Index of Financial Information (GIFI).
• Detailed description of the company's main activities.
• Identification of the company's various sources of income, such as investment income, etc.
• Indication of any shareholdings by shareholders in other companies, or of the company's links or associations with other companies.
• Declaration of any foreign activity or ownership of assets by the company.
• Details of activities in other Canadian provinces.
• Indication of any dividends received or paid by the company.
• Notification of fixed asset acquisitions or disposals.

This list is not exhaustive, but it gives you a good idea of the type of information required to file a T2 return in Canada.

Who has to file a T2 tax return?

All companies established in Canada are required to file a T2 return with the Canada Revenue Agency. The law is strict and applies to all businesses, even in the following cases:

• The company has no tax liability.
• The company is inactive, with no activity or income.
• The company is a non-profit organization.
• The company is tax-exempt.

That's why it's essential to take your corporate tax liability very seriously. Certain exceptions apply to certain types of company, and you can check with the tax authorities to find out more.

In certain situations, non-resident corporations may also be required to file a T2 return in Canada. For example, a non-resident corporation may have carried on business in Canada, realized a taxable capital gain or disposed of taxable Canadian property.

How do I file my T2 tax return?

Hiring an Accountant:

The easiest way to file our company's Canadian tax return is to hire an accountant who specializes in preparing tax returns. He or she will request the required documents and information mentioned above. Once completed, he or she will have you sign the T183 CORP authorization. The T183 CORP form is a business declaration intended for electronic filing. After reviewing your statement and signing the T183 CORP, your accountant will be able to electronically transmit the T2 tax return to the Canada Revenue Agency.

Using Solution Software :

You can file your T2 return using T2 software and send it either via the Internet or using a printed form. If you wish, you can always complete the declaration in paper PDF format. However, we advise against filing directly on the government website, as the risk of calculation errors or omission of important appendices is too high.

Please note that if your company has gross revenues in excess of $1 million, it is not permitted to file a paper tax return. The Canada Revenue Agency imposes a $1,000 penalty on companies that fail to file online.

What are the deadlines for filing T2 tax returns?

Every business in Canada is required to file a T2 income tax return within six months of the end of each taxation year. The tax year ends on the last day of a given month.

If your company has chosen a tax year ending on the last day of a given month, you must file your T2 tax return no later than the last day of the sixth month following the end of the tax year. Here are a few concrete examples:

• If your company's tax year ends on December 31, the filing deadline will be June 30.
• If your company's taxation year-end is July 31, the filing deadline will be January 31.
• If your company's tax year does not end on the last day of a given month, you must file the T2 income tax return by the same day of the sixth month following the end of your company's tax year. For example, if your company's taxation year-end is September 14, the filing deadline will be March 14.

It's essential to file your T2 tax return on time, because the Canada Revenue Agency has various legal means of imposing penalties and interest on your business.

To determine your company's tax year :

• For a company that is not in its first year of existence: If your company has already filed a T2 tax return in the past, you must keep the same end date for your company's tax year. If you wish to change this date, you must send a letter to your company's tax center explaining the reason for the change. Without the agreement of the tax authorities, you must strictly adhere to the end date you have set.
• For a company in its first year of existence: If your company is in its first year, you can choose the end date of the tax year. However, please note the following rules:

A corporation's taxation year cannot exceed 53 weeks or 371 days.

In the first year, you must choose the date of incorporation of the company as the start date of the tax year, and calculate the 371st day from that date.

You are free to choose your company's tax year-end date; you are not obliged to use the calendar year or December 31. It is advisable to choose a tax year-end during a period of reduced activity for your company. If you have several companies, it's more practical to choose the same end date for all your companies.

What other schedules must I complete on my T2 income tax return?

The list of schedules required with the T2 form is too extensive to be displayed on this site. However, we will provide you with a short list of the most important times.

In addition to the T2, the following financial statement schedules must be completed:

• T2SCH100: Balance sheet information
• T2SCH101: Opening balance sheet information
• T2SCH125: Income statement information
• T2SCH141: Notes and checklist

Companies must also complete the following appendices:

• T2SCH1: Net income (loss) for income tax purposes
• T2SCH50: Shareholder information

Schedule 50 on shareholder information is relatively straightforward. However, Schedule 1 on net income is more complex. It aims to reconcile accounting income with taxable income, a task not suited to a non-specialist. Indeed, accounting profit is not necessarily the taxable income used to calculate the corporate tax rate. First there are non-deductible expenses (tax penalties, personal expenses, golf, book depreciation, etc.), then there are expenses that are 50% deductible, such as entertainment expenses, not to mention numerous other exceptions.

Next, here are the appendices most commonly used by companies:

• T2SCH2: Donations and charitable gifts: This schedule concerns companies that have made donations to charitable organizations or political contributions.
• T2SCH3: Dividends received, taxable dividends paid and Part IV tax calculation: This schedule applies if you have paid dividends to your shareholders or received dividends from other corporations.
• T2SCH4: Continuity and application of the company's losses: This appendix is used to calculate the history of losses incurred by the company over time.
• T2SCH5: Tax Calculation Supplement - Corporations: This schedule is used to allocate income to the provinces where the company has a permanent establishment, in order to tax it correctly in the provinces concerned.
• T2SCH6: Summary of Disposals of Fixed Assets: This schedule is required if you have sold or disposed of assets such as shares, property, bonds, etc., in the past.
• T2SCH7: Total investment and active business income: This schedule is used to distinguish your investment income from your active business income, as tax rates and small business deductions differ.
• T2SCH8: Capital Cost Allowance (CCA): This schedule is used to calculate the tax depreciation of eligible expenses. As mentioned above, depreciation is not deductible for tax purposes, but you are entitled to tax depreciation calculated according to pre-established rates per asset class, in compliance with tax laws.
• T2SCH9: Related and associated companies
• T2SCH10: Cumulative deduction of eligible capital

Here's a link to the Canada Revenue Agency website, where you'll find most of the schedules you'll need to complete your T2 tax return: http://www.cra-arc.gc.ca/formspubs/clntgrp/bsnss/crprtn-fra.html

Where to send paper T2 statements?

If your company is not required to file online because its gross revenue is less than $1 million, you have the option of sending your paper return to the Canada Revenue Agency.

It's important to send your return to the tax center corresponding to the address of your company's head office. You can consult the Canada Revenue Agency website to find the tax center corresponding to your company.

Here's a list of the various penalties associated with filing a T2 tax return, with links to the Canada Revenue Agency website for more information:

• Penalty for non-declaration
• Penalty on payments
• Sanctions for large companies
• Penalty for failure to declare income
• Penalty for misrepresentation or omission
• Penalties for false tax returns by third parties
• Penalty for non-resident companies
• Penalty for non-compliance with electronic submission obligation
• Other penalties

You'll find more details on these penalties by following the corresponding links on the Canada Revenue Agency website.

Bankeo: Platform to find your ideal accountant for your T2 in Quebec and Canada

In conclusion, finding a competent and experienced accountant to help you prepare your T2 tax return in Quebec and Canada can be simplified by using a platform like Bankeo to easily find the ideal accountant to meet your specific needs.

By calling on a qualified professional, you can ensure that your return is accurately prepared and complies with current tax laws. Don't hesitate to use these resources to find a reliable accountant and benefit from expert support in your corporate tax obligations.

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