Corporate Tax Service

Are you incorporated? Great idea! You will be able to access lower tax rates with your corporation and pay less tax.

Who has to file a corporate tax return?

All corporations, non-profit, tax exempt and inactive corporations, have to file a tax return EACH year even if there is no tax payable! It is a criminal offence not to file.

A non-resident corporation has to file a T2 return if, at any time in the year, it carried on business in Canada, it had a taxable capital gain, or, in some cases, it disposed of taxable Canadian property. If you are having trouble sleeping at night, section 248(1) and 253 of the ITA defines a few of these terms.

What is taxable Canadian property? The 2010 Federal Budget changed the definition. Before the 2010 Federal Budget, it generally included:

  • Canadian real estate
  • Shares of private corporations in Canada
  • Property used to carry on business in Canada
  • Certain trust interests of Canadian resident trusts
  • Substantial holdings of shares in public companies (more than 25% owned by non-arm’s length individuals)
  • Interests in partnerships

After the 2010 Federal Budget, shares of private corporations and certain trusts that derive less than 50% of its value from real property, Canadian resource property or timber resource property are excluded from the definition. The value test must be met for 60 months before the sale.  This change encourages foreign investment in Canada. As a result, non-resident owners of such properties are no longer taxable in Canada on any capital gain arising on their disposition, and treaty relief is no longer required. Non-resident vendors no longer need to obtain clearance certificates from the CRA or file Canadian income tax returns.

A non-resident corporation also has to file when it would like to pay Part 1 tax on net rental income under subsection 216(1); or it applied for a reduction in withholding tax on income earned from acting in a film production, and would like to pay Part 1 tax on the net amount of acting services under subsection 216.1(1).

If you are a non-resident corporation claiming a treaty exemption for the business or for property sold, you will need to file a corporate income tax return. There is also withholding tax on any fee paid to the non-resident corporation for services rendered in Canada. The tax is required to be withheld by the payer regardless of whether the services rendered are provided by an employee of the corporation or are sub-contracted to another party. This withholding tax is held on account for any potential tax liability. If the non-resident corporation would like a refund of this withholding tax, it will have to file a tax return and pay Part 1 tax, if any, on the net income earned in Canada. For example 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.

When do you have to file your corporate tax return?

File your corporate income tax 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 corporate income tax 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 corporate income tax return by the same day of the sixth month after the end of the tax year.

When do you have to pay the corporate income tax owing?

Corporations have to pay corporate income tax in monthly or quarterly instalments when the total of the taxes payable for either the previous year or the current year is more than $3,000. 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. If you are a Canadian Controlled Private Corporation (CCPC) and are claiming the small business deduction (and a few other criteria) you can pay three months after your year end.

The tax department considers the payment to have been made on the day they receive it, and not on the day you mail it. So, mail it a little early.

Get your corporate tax return done and avoid interest and penalties. Contact or call the Tax Doctors toll free at 1 855 TAX DOCS (855 829 3627) for all your corporate income tax needs. For complete financial planning and services (Investments, Insurance, Mortgages etc.) contact our parent company GTA wealth management Inc. or request a referral from your Tax Doctors Canada representative.

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