Corporate tax is the federal and provincial income tax for Canadian corporations. Federal tax is filed as a T2 corporate return, while provincial tax is handled by each province. All Ontario-incorporated businesses must file a T2 corporate tax return, with due dates depending on their articles of incorporation. It is recommended to hire an experienced and affordable tax preparation service prior to filing. 

Who Has to Pay Tax?

All corporations operating in Canada, including non-profits, tax-exempt corporations, and inactive corporations, must file a T2 return. Most corporations in Canada will have to pay corporate income tax, even if they are not actually in Canada. This is because the corporation carried on business in Canada had a taxable capital gain, or disposed of taxable Canadian property. Taxes must be filed for all corporations, regardless of their income for the year.

Who gets Exemption/Relief?

Crown corporations, Hutterite colonies, and registered charities are tax-exempt but have distinct filing obligations with the government. Canadian-owned and controlled small businesses may be eligible for the small business deduction, reducing the tax rate to 10.5%. The business limit is $500,000, meaning corporate income up to $500,000 is eligible. The CRA provides a worksheet for quick corporate tax estimates, but a CPA is recommended for accurate assessments.

Corporate Tax Amount

Corporate tax rates vary based on business size and province. The baseline rate is 38% of taxable income, known as Part 1 tax. However, Canadian income can be eligible for a federal tax abatement, reducing Part 1 corporate tax to 28%. Other deductions and tax credits are also available.

Filing Corporate Income Tax

In Canada, the filing of corporate taxes is influenced by the corporation’s fiscal year and income level. 

Filing Essentials

Taxes must be filed within six months of the end of the tax year, with deadlines being six months later if the year ends on the last day of the month or mid-month if it ends on the same day. If the due date falls on a weekend or holiday, the tax can be filed the next business day.

How to File?

To file corporate income taxes, use the CRA’s My Business Account portal for business owners or Represent a Client for employees and representatives. For paper copies, print the T2 Barcode Return. Electronic filing is mandatory for corporations with annual gross revenue over $1 million. 

How to pay corporate income tax?

The text provides an overview of the process of obtaining money from the CRA, including payment details and filing deadlines.

Payment Schedule: Canada’s corporations pay taxes in installments, either monthly or quarterly. New corporations or those with less than $3,000 in taxes may not need to make installment payments. The CRA provides worksheets to help calculate installment payments, including 2018 taxes, and monthly and quarterly installments.

Payment Methods: Payment methods for Canadian currency include debit, pre-authorized debit, online banking, credit card, wire transfer, service provider, cash, or at a Canadian financial institution, except Bitcoin, with detailed instructions provided by the CRA.

End-Year Tax Balance:  Despite making payments throughout the year, if you calculate year-end taxes, you may still owe a balance to the CRA. Corporate taxes typically come due two months after the tax year-end, with exceptions.

Prepaying Tax: Advance payments can be made for unassessed tax years, unassessed periods on corporation and GST/HST accounts, or remittances due on employer accounts, provided a specific payment voucher from the CRA is required.