Corporations in Canada are required to file taxes on an annual basis. But when do you need to file taxes for corporation? The answer depends on the type of income your company has and how it is taxed. In this article, we’ll discuss when you should be filing taxes for corporations in Canada as well as some tips to help make the process easier. With this information, you can ensure that your corporation is following all of the necessary rules and regulations and staying in compliance with the law.
Determining your corporation’s tax year
For corporations operating in Canada, determining the tax year is an important part of ensuring compliance with the law. It is also a key factor in calculating how much tax liability your corporation will have. The Canadian government requires all corporations to abide by certain rules and regulations when it comes to setting their tax year. To ensure that your corporation is complying with these regulations, you should understand the different types of tax years and how they can affect your company’s financial situation. By understanding these rules, you can make sure that your corporation is meeting its obligations while minimizing its taxes as much as possible.
Resident corporations
In Canada, even if a corporation has no tax liability, it is still required to file a T2 annual report, and this includes charities, tax-exempt businesses, and dormant businesses. Companies that were registered charities throughout the year, Hutterite colonies, and Crown companies are the only entities exempt from paying taxes.
Any time during the year when one of the following occurs, the non-resident corporation must file a T2 return:
- It operated a business presence in Canada.
- It generated a capital gain that was subject to taxation.
It divested itself of Canadian assets subject to taxation unless the sale meets all of the following conditions:
- Even if the company argues that any gains or profits are exempt from Canadian income tax under the terms of a tax treaty, it must nevertheless comply with this rule.
- Subsection 248(1) defines “business,” while subsection 253 defines “carrying on business” in its broadest sense (in Canada).
- Gain from the sale of stocks traded on a recognized exchange is excluded from the definition of taxable capital gain (other than taxable Canadian property).
When to file your return
In general, you should submit your return within six months after the tax year-end. The corporate fiscal year corresponds to the calendar year for tax purposes.
File the return no later than 6 months after the end of the year if the corporation’s tax year finishes on the final day of a month.
If your tax year ends on a day that is not the last day of the month, you must file your return by the same day of the sixth month following the end of your tax year.
Conclusion
Understanding the tax year of your corporation is an important step for any business owner in Canada. It’s important to choose the right year-end for your corporation to benefit from various deductions, credits and other tax advantages. For corporations operating in Canada, the fiscal or taxation year usually ends on December 31st, but there are exceptions.