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 and 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. That is why 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 does a nil corporate tax return cost you? If you want to hire a professional account company, such as Taxory, preparing and filing a nil corporate tax return would cost you $500 per one return.
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if your corporation is dissolved, you need to file a final tax return which will let CRA know that your company is no longer active and they should not expect any more tax returns from you.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.
Best way to file nil corporate tax return
The easiest way to file your nil corporate tax return is to hire an accountant who will do it for you. That is not only the most straightforward way but the safest, because your accountant knows what information is required and can prepare all documents correctly.
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.
|Corporations served by tax services offices in:||Send your return to the following tax centre:|
|Alberta, Manitoba, Northwest Territories, London, Saskatoon, Thunder Bay, and Windsor||Winnipeg Tax Centre
66 Stapon Road
Winnipeg MB R3C 3M2
|Toronto Centre, Toronto East, Toronto North, Toronto West, and Sudbury
(Sudbury/Nickel Belt only*)
|Sudbury Tax Centre
Post Office Box 20000, Station A
Sudbury ON P3A 5C1
|British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia,
Prince Edward Island, Quebec, Nunavut, Yukon, Belleville, Hamilton, Kingston,
Kitchener/Waterloo, Ottawa, Peterborough, Regina, St. Catharines, and Sudbury (North-Eastern Ontario only**)
|Prince Edward Island Tax Centre
275 Pope Road
Summerside PE C1N 6A2
* 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.
Save time ordering tax services from Taxory
As you see, you can prepare and file a nil corporate tax return yourself, but it is much safer to rely on a professional who can do it just for a small fee. Feel free to reach out to our team and get more details about our corporate tax return services. If you want to learn more about our prices, check out our pricing page
Anna Grigoryan is a public accountant who provides accounting, bookkeeping and tax services to Small Business owners and individuals. She has more than ten years of professional experience in public accounting and a bachelor’s degree in Business Accounting. Anna is the founder and CEO of Taxory, an accounting firm located in Ontario, Canada.