Filing a Nil Corporate Tax Return Canada
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 a 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
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 that are 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.
Get all the answers to your nil tax return questions here.
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 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).
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