How to file nil corporate tax return?

Thousands of new businesses are opened every month to be successful and produce a profit. While such companies are successful in most cases, it is still pretty common to have a loss or no income throughout the tax year. Some companies, such as startups, run with losses for years until they become profitable, and some companies stop their operation and have no income or expenses.

Nevertheless, CRA still expects a tax return from companies with zero activities (no income and no expenses). Still, CRA understands that it does not make sense to send a full T2 Corporate income tax return form in such a case. CRA introduced a T2 Short Return (T2SHORT) form or zero corporate tax return.

Compared with the full T2 Income Tax Return Form, the short version is much more compact. A short return typically consists of only a few pages, whereas a regular return can extend up to 50 pages. The T2 Short Return Form requires the absolute minimum information about your business and lets CRA know they should not expect any tax payment from your company.

As a business with no income and no expenses, you wonder how much a nil corporate tax return costs you. If you want to hire a professional account company, such as Taxory, that will depend on how many returns you need, as we usually provide a discount if you need to file multiple returns. Contact us to find the exact price.

Do you need to file tax returns for all previous years?

Before proceeding with the filing, let’s understand if you need to file tax returns for all past years. As you know, every year, you must confirm that your business is active by filing your annual return to Business Canada (which is not CRA and has nothing to do with your taxes). The filing process is straightforward, done online and costs $12 per year. If you fail to file your annual return for a couple of years, your corporation may be dissolved automatically. However, CRA will expect your corporate tax return for all the years the company was active, so even if your corporation is dissolved, you still have to file tax returns (or nil tax returns if no activity) for all previous years. In addition, if your corporation is dissolved, you need to file a final tax return which will let CRA know that your company is no longer active and they should not expect any more tax returns from you.

You can file your annual return or check if your corporation is still active on the Corporations Canada website.

Filing your nil tax return with Taxory

Our company specializes in corporate taxes and will prepare and file a nil tax return for you. The price depends on how many returns you need. Typically, we have a discount if you need to file multiple returns. You can find more information about our prices in our accounting packages or contact us to find the exact price, and our accountants will be happy to assist you.

Please notify us if you have not closed your Payroll or HST account. The CRA will expect a return for HST and Payroll accounts even if your company is filing Corporate nil returns. If you have HST and Payroll accounts open, we need to file separate nil returns for HST and another nil return for Payroll accounts.

T2 Short Form

If you prefer to file a nil corporate tax return yourself for some reason, you can do it, but it requires a little bit of time from you and some accounting background.

First, you need to figure out if your company is eligible to submit a T2 Short form.

Are you eligible to submit the T2 Short form?

Not all companies are eligible to submit a T2 Short tax return form. There are two categories of corporations that can use the form.

• First are the Canadian private corporations that have nil or loss net income for the income tax year;
• Second are companies exempt from taxes under section 149 of the income tax act, for example, non-profit organizations.

If your company falls under any of the above categories, it also needs to meet all the following requirements to be eligible to use the T2 Short form.

• Your company should be permanently established only in one province or territory;
• The company is reporting in Canadian currency;
• The company did not receive or pay out any taxable dividends;
• It does not have an amount calculated under section 34.2 of the Income Tax Act;
• And it is not claiming any refundable tax credits (other than a refund of instalments paid);
• Lastly, the company does not have an Ontario transitional tax debit.

Once submitting your T2 Short form, you have to attach

• Schedule 100, Balance Sheet Information, showing 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
• Schedule 141, Notes Checklist, for any notes to the financial statement information and to indicate the involvement of an accountant

What is the deadline to submit a zero corporate tax return?

Generally, you have to submit your nil corporate tax return within six months of the end of each tax year, which is the fiscal period for your corporation.

If you expect a tax refund in your return, you have to file it no later than three years after the end of a tax year.

You can learn more about the Corporate tax deadline in this post.

Where do you file your nil tax return?

When filing a T2 Short return, there are two options. The first is Internet filing, which requires CRA-approved commercial software. If you hired an accounting firm to do it, they would have such software, and the filing process is quick and straightforward.

But when preparing and filing yourself, you have to choose the second option, file a paper return. Once you print all the required documents, select your location’s tax service center and mail your nil tax return.

* Sudbury/Nickel Belt areas includes all postal codes beginning with P3A, P3B, P3C, P3E, P3G, P3L, P3N, P3P, P3Y, and all postal codes beginning with P0M and ending with 1A0, 1B0, 1A0, 1E0, 1H0, 1J0, 1K0, 1L0, 1M0, 1N0, 1P0, 1R0, 1S0, 1T0, 1V0, 1W0, 1Y0, 2C0, 2E0, 2M0, 2R0, 2S0, 2X0, 2Y0, 3A0, 3B0, 3C0, 3E0 and 3H0.

** North-Eastern Ontario includes all areas outside of Sudbury/Nickel Belt served by the Sudbury Tax Services Office.