Filing annual return for Canadian corporations

Every corporation has to file an annual return with Corporations Canada (in case of a Federal corporation) or the Provincial business registry (in case of a provincial corporation). But what is the “annual return”? What role does it play in your company?

Firstly, an annual return is a way to tell the government of Canada that the corporation is active and to confirm that somebody is working in the company or taking care of it. That is to avoid a situation when a corporation becomes abandoned due to inactivity or if something happens with the owner (for example, in case of death).

Secondly, filing annual returns ensures the most up-to-date information about the corporation exists in the online database of federal corporations. When you file the annual return, you provide your corporation’s updated list of directors and the most recent address, which will be publicly available on the Corporations Canada website.

Federal Canadian corporations are required to file annual returns within 60 days after the corporation anniversary date. Typically, your anniversary date is when you opened your company; you can find it on your certificate of incorporation. Still, in some cases, you can change the anniversary date during the first year when filing your first tax return. If you are unsure what your anniversary date is, you can find it in Corporations Canada’s online database.

If you have a provincial corporation, double-check the deadline with the provincial business regulator because the deadlines vary for different provinces.

If you forget to file an annual return for your corporation, you risk getting your corporation dissolved, meaning the corporation will become “inactive.” As a result, you can’t conduct business anymore, and your clients or suppliers can’t work with you (it is easy to validate whether the company is active). That may not necessarily happen if you forget to file an annual return for the first year. Still, if you don’t submit the corporation’s annual return for two or more years, the corporation will be dissolved automatically. You may not even know about it.
That may be fine if your company is indeed not active. Yet, if you conduct business and forget to file the annual return, the damage that results in automatic dissolution may be very significant.

Dissolved corporation’s obligation to CRA

When your corporation is automatically dissolved, it does not free you from other obligations, for example, the obligation to file your corporate taxes. If you do not have any income or expenses, you still have to file a nil corporate tax return, and once your corporation is dissolved, you need to file the Final Corporate Tax Return.

We recently had a client who wanted to file a nil return with the CRA for the last three years, but once we started working, we noticed that he forgot to file the annual return. As a result, his corporation was automatically dissolved without his knowledge, so instead of filing multiple nil returns with CRA, we have to file nil returns and a Final Tax Return, which you file after the dissolution of your corporation.

Fling annual return fees are different depending on the type of corporation you have. Filing a federal corporation annual return is $12 (online) or $40 (by email or regular mail) per year.
Provincial filing depends on the province, but in the case of Ontario, that is free. Ontario annual returns can be filed online (processed immediately), by regular mail (processed within 15 days) or by email (processed within seven days).
That is a small price to keep your corporation active and in a good state.

Filing an annual return for a federal corporation is an easy online process which generally should not take more than 15 minutes. In the past, it was even faster as it did not require GCKey, but recently, the government of Canada implemented new security measures that require you to sign in with GCKey.

Once you have your GCKey, you need the following information to file:

1. Corporation name or business number
2. The “date of your last annual meeting” is when all shareholders meet to review financial statements and auditor’s reports and elect directors. If you are the only director, you can choose any date within the 60-day deadline, which will be your annual meeting date.
3. You need to know if your corporation is distributing or non-distributing. It is most likely a non-distributing corporation, meaning you do not publicly trade your company’s shares on the stock exchange.
4. To file a return, you need to be either:
   
   
   1. Director of the corporation
   2. An officer of the corporation, appointed by directors – someone who manages the day-to-day operations, for example, president, treasurer, secretary
   3. An authorized individual is a person who is authorized by directors and has relevant knowledge of a corporation; for example, a lawyer.

You can start the process from the Online Filing Center page, where you can access various business services provided by the Canadian government.

Another option is to click the link in the email you receive as a reminder to file an annual return.

Once you log in with GCKey, you need to find the corporation for which you are filing a return; you can use the corporation’s name or business number.

The process is similar if you have a provincial corporation, but you need to find all the information on the provincial website. You can start at the Ontario Business Registry website if you have an Ontario corporation.
Please refer to provincial or territorial business registry websites for provinces other than Ontario.

The process of filing a corporate annual return is very straightforward. However, pay attention to the following items where most people make mistakes:

• Missing deadlines is the most common mistake when you forget or ignore the annual return filing deadline; in that case, you risk your corporation being automatically dissolved.
• Avoid filing due to inactivity – even if your corporation is inactive, you still have an obligation to file an annual return. However, if you are no longer operating the corporation, you can dissolve it and file a final tax return to CRA. Dissolving means that you legally terminate its existence.
  
  

  Our company helps with federal corporation dissolution, and we can prepare and file a Final tax return to CRA, which will let CRA know that the corporation is closed and they should not expect any tax returns from it.

• When you mix “distributing” and “non-distributing” terms, a distributing corporation trades stocks on the stock exchange; that is typically a public corporation, and anybody can buy its stocks. Small business owners are usually “non-distributing” corporations, which has nothing to do with selling goods or services or delivering products to your clients.