Updated on 25 July 2024

When you own a corporation in Canada, you are required to file a T2 income tax return each year. Depending on your industry, structure, and income, your T2 will look very different than that of any other company.

But what if your income for this year was zero? Are you still required to file a zero, or nil, return with the CRA?

Some companies, such as start ups and new SMEs, may operate for years before becoming profitable. Other enterprises are incorporated legally, but then do not start business operations until years later. It is more common than you may think for a corporation in Canada to have zero income.

Nevertheless, the CRA (Canada Revenue Agency) still expects a corporation with zero income to file a tax return. This does not need to be a full T2 return and the CRA T2 short form exists for corporations looking to file a nil return.

Get everything you need to know about corporate nil tax returns here.

What is a Nil Return?

A nil tax return, also known as a zero income tax return, refers to the corporate income tax return that will report no income throughout that tax year. Usually, this is because a company is inactive or is operating at a loss for any number of reasons.

A nil tax return for a corporation can be completed by using a T2 short form return.

Who Has to File a Corporation Nil Tax Return?

A Canadian corporation must file corporate income taxes every year. If your corporation is reporting zero income or a loss, it must file a corporation nil tax return for each year that it has this loss or no income.

This applies to resident corporations. Non-resident corporations must file a nil tax return if:

• it carried on business in Canada
• it had a taxable capital gain
• it disposed of taxable Canadian property

If, after any of those situations apply, the non-resident corporation has a loss or zero income, it must file a nil tax return.

How to File a Nil Return in 2024

The best way to file a nil tax return in Canada is to work with a corporate tax accountant. They can ensure that your T2 nil return is filed correctly with all relevant information and on time.

In many situations, a corporation that needs to file a T2 nil return can do so using the T2 short form. This is a brief, two page tax return that was created by the CRA for corporations with zero income to use to file.

Both the T2 and T2 short can be found on the CRA website, filled, printed, and attached with the relevant schedule for your corporation. When filing a nil return, it is imperative that all your information is accurate and confirms that you had zero income or operated at a loss.

Are You Eligible To Use The CRA T2 Short Form?

The CRA T2 short form was created to simplify corporate tax return filing for eligible firms that do not need to provide large amounts of financial detail to the CRA. Not all corporations are eligible to use the T2 short form, even if they have a zero income tax return in Canada.

For a corporation to use a short form, they must either be: A Canadian-controlled private corporation (CCPC) throughout the tax year and this year operating at a nil net income or loss for income tax purposes. A corporation exempt from tax under section 149 (such as a non-profit organization).

In addition, the corporation must meet all of the following conditions to use the T2 short:

• it has a permanent establishment in only one province or territory
• it is not claiming any refundable tax credits (other than a refund of installments it paid)
• it did not receive or pay out any taxable dividends
• it is reporting in Canadian currency
• it does not have an Ontario transitional tax debit
• it does not have an amount calculated under section 34.2

If your company meets this criteria, you can use the T2 short to file your nil tax return.

What is the Deadline to Submit a Nil Return to the CRA?

The deadline to submit a nil return to the CRA for your corporation is within six months of the end of each tax year. Your corporation’s tax year is its fiscal period.

If the corporation's tax year ends on the last day of a month, the return is due by the last day of the sixth month after the end of the tax year.

If the corporation’s tax year does not end on the last day of the month, file the return by the same day of the sixth month after the end of the tax year.

A tax year ending March 31st will have a return deadline of September 30th. A tax year ending September 15th will have a return deadline of March 15.

File Your Corporation Nil Tax Return with Accountor CPA

Even when filing a nil tax return, a corporation can still have many obligations with the CRA and need to fill out the correct forms. Without professional corporate nil tax return preparation and filing, you open your business up to the consequences of missed deadlines, hefty fines, and interest payments.

The team of tax experts and Chartered Professional Accountants at Accountor CPA are dedicated to providing the CRA with accurate and transparent corporation nil tax returns for your company - for as many years as you need. We work with you throughout the year, not just during tax season, to fully leverage our expertise to benefit your business and help you grow.

Feel confident that you are working with professionals passionate about your business. Contact Accountor CPA for a free consultation to learn how we can help with your corporate nil tax return and other corporate tax services today.

FAQ

Get all the answers to your nil tax return questions here.

What is a nil corporate tax return?

A nil corporate tax return, sometimes referred to as a zero-income tax return, is filed by a corporation that reports no taxable income for the year. This is common for new startups, companies in non-operation, or those that operated at a loss.

Why is it necessary to file a nil return?

Filing a nil return maintains the company’s compliance with the Canada Revenue Agency (CRA). It ensures that corporations keep their registration active and avoids penalties for non-filing, even if there were no taxable activities or income.

What is the deadline for filing a nil return?

The deadline is six months after the end of the corporation’s fiscal year. For example, if the fiscal year ends on December 31, the nil return must be filed by June 30 of the following year.

Can non-resident corporations file a nil return?

Yes, non-resident corporations need to file a nil return if they carried out business in Canada, had taxable capital gains, or disposed of taxable Canadian property and ended up with zero income or losses after these activities.

What are the specific benefits of filing a nil return?

Besides maintaining compliance, filing a nil return helps preserve any business losses that can be carried forward to reduce taxable income in future profitable years. This strategic financial management can significantly benefit business planning and tax liability management.

What documents are needed to file a nil corporate tax return?

To file a nil return, you generally need the corporation’s last completed tax return, a statement of accounts showing no activity or income, and any relevant schedules or documents that support a zero-income claim. While the documentation might be less extensive than for a regular return, accurate record-keeping is essential to ensure compliance.

How does a nil return impact future tax audits?

Filing a nil return can have a positive impact on future tax audits by demonstrating compliance and good record-keeping practices. It shows the CRA that the corporation is up-to-date with its tax obligations, even in years of inactivity or losses, potentially simplifying future audits.

Can a corporation file a nil return if it has pending tax credits or refunds?

Yes, a corporation can file a nil return even if it has pending tax credits or refunds. The process ensures that these credits are carried forward appropriately and can be applied in future tax years when the corporation might owe taxes or could benefit from these credits.

What is the cost of filing a corporation nil tax return?

The fees associated with filing a nil return for a corporation are significantly less than those of a full T2. The rates will depend on your specific company, including whether you have zero income or a loss, where you operate, and how many, if any, schedules are needed.

Is there a penalty for not filing a nil tax return in Canada?

On a nil tax return, there would be no tax payable and therefore no direct penalties levied on your corporation from missing the deadline. However, this late filing even on a nil tax return can have unintended consequence and flag your business record within the CRA in the future. It is always advised to file a nil tax return by the deadline.

Do I have to file nil return for a company even if it does not have a bank account or assets?

Yes. Even a corporation that has only been registered and owns nothing else needs to file a nil return.

How long do I have to file a nil tax return?

You have until six months after the end of your corporation’s tax year to file a nil tax return with the CRA.

Do I need to file CRA T2 schedule 100 and 125 in my T2 short?

Schedule 100 and schedule 125 are mandatory for filing a T2 short, in addition with schedule 145. Schedule 100, Balance Sheet Information, shows the financial position of the corporation at the end of the tax year. Schedule 125, Income Statement Information, showing the corporation's income and expenses for the year (to be stated as “no income” and “no expenses” for a nil return).

Conclusion

Filing a nil corporate tax return in Canada is more than just a formality — it’s a strategic move to ensure compliance and transparency, especially for non-resident corporations. Engaging in business activities, owning property, or experiencing capital gains in Canada triggers the need for these corporations to file. This proactive approach not only maintains good standing with the Canada Revenue Agency (CRA) but also bolsters corporate integrity in the eyes of regulators and stakeholders. For a deeper understanding of these requirements, the CRA's guidelines are a useful resource, available here.