Corporate Tax Filing Services in Ontario
Corporate tax filing in Ontario requires every resident corporation—active, inactive, or tax-exempt—to file a T2 Corporation Income Tax Return with the Canada Revenue Agency within six months of each fiscal year-end. The Acctax Company prepares and files T2 returns for Ontario corporations, handling federal and provincial tax calculations, Schedule 1 reconciliations, small business deduction claims, and mandatory electronic filing through Corporation Internet Filing.
Whether your corporation earned $50,000 or $5 million, owes tax or carries losses forward—the T2 must be filed. Miss it, and CRA penalties start at 5% of unpaid tax plus 1% per month up to 12 months. We make sure that doesn’t happen.
Who Must File a T2 Return in Canada?
All resident corporations must file a T2 Corporation Income Tax Return for every tax year. If your Ontario corporation exists—even if it did nothing all year—CRA expects a T2 return.
Corporations Required to File
Active corporations earning business or investment income
Inactive corporations with no business activity during the year
Non-profit organizations (unless registered charities)
Tax-exempt corporations under specific ITA sections
Holding companies with passive investment income
Professional corporations (doctors, lawyers, accountants, engineers)
Note: The only corporations exempt from T2 filing are registered charities (filing T3010), Crown corporations, and Hutterite colonies.
Common Misconception
“My corporation had no activity, so I don’t need to file.”
Reality: Inactive corporations must file.
Failure to file triggers penalties, and after two years of non-filing, CRA may dissolve your corporation administratively. File every year, even with zeros.
The T2 Return and Ontario Permanent Establishment
Ontario does not require a separate provincial corporate tax return. The T2 Corporation Income Tax Return serves as both the federal and provincial return for corporations carrying on business in Ontario through a permanent establishment.
What Is Permanent Establishment?
A corporation has a permanent establishment in Ontario when it maintains:
- A fixed place of business (office, warehouse, factory, branch)
- Employees or agents acting on behalf of the corporation
- Substantial equipment or inventory stored in Ontario
If your corporation operates from Kitchener, Waterloo, Cambridge, or anywhere in Ontario with a physical presence, you have a permanent establishment. Income allocated to Ontario is taxed at Ontario rates on the same T2 return filed with CRA.
Provincial Allocation (Schedule 5)
Corporations operating in multiple provinces complete Schedule 5 – Tax Calculation Supplementary – Corporations to allocate taxable income based on:
- Gross revenue attributable to each province
- Salaries and wages paid in each province
Ontario-only corporations allocate 100% of income to Ontario. Multi-province corporations split income proportionally, and each province’s rates apply to their respective allocation.
Ontario Corporate Tax Rates (2024–2025)
Current combined federal and provincial rates for corporations.
| Rate Type | Federal | Ontario | Combined |
|---|---|---|---|
| Small Business Rate (CCPC, active business income ≤ $500k) | 9.0% | 3.2% | 12.2% |
| General Rate (income above business limit or non-CCPC) | 15.0% | 11.5% | 26.5% |
Small Business Deduction Eligibility
The small business deduction (SBD) reduces the federal corporate tax rate from 15% to 9% on the first $500,000 of active business income for Canadian-controlled private corporations (CCPCs).
Ontario's parallel small business deduction reduces the provincial rate from 11.5% to 3.2% on the same $500,000 business limit.
To qualify:
- Corporation must be a CCPC throughout the tax year
- Income must be active business income (not passive investment income)
- Business limit may be reduced if taxable capital exceeds $10 million or aggregate investment income exceeds $50,000
Proper classification of income as active vs. passive directly affects your combined tax rate—12.2% vs. 26.5%. This is where professional preparation pays for itself.
Filing Deadlines vs. Payment Deadlines
These are different dates. Confusing them costs money.
| Deadline Type | When Due | What Happens If Missed |
|---|---|---|
| T2 Filing Deadline | 6 months after fiscal year-end | 5% penalty on unpaid tax + 1%/month (max 12 months) |
| Balance-Due Day (CCPC) | 3 months after fiscal year-end | Interest accrues on unpaid balance |
| Balance-Due Day (General) | 2 months after fiscal year-end | Interest accrues on unpaid balance |
Example: December 31 Year-End
| Corporation Type | Payment Due | Filing Due |
|---|---|---|
| CCPC (qualifying) | March 31 | June 30 |
| Non-CCPC or large CCPC | Last day of February | June 30 |
Critical Distinction
You have 6 months to file the return, but only 2–3 months to pay the tax. Filing on time with an unpaid balance means interest charges. Filing late with any unpaid balance means interest plus penalties.
Instalment Payments
Corporations expecting to owe more than $3,000 in the current year (and that owed more than $3,000 in the prior year) must make monthly instalment payments throughout the year. Instalments are due on the last day of each month.
Failure to make required instalments triggers instalment interest—even if you eventually pay the full balance by the balance-due day.
Mandatory Electronic Filing
For tax years starting after 2023, the CRA requires all corporations to file their T2 returns electronically. Paper returns are no longer accepted for most businesses, with non-compliance carrying a $1,000 penalty.
Exceptions to Mandatory E-Filing
- Insurance corporations filing T2FSR
- Non-resident corporations
- Corporations reporting in functional currency
- Tax-exempt corporations under ITA s.149
How Electronic Filing Works
What We Prepare: T2 Return Components
Corporate tax filing is a package of schedules and calculations. We handle the technical reconciliation from accounting profit to taxable income.
| Schedule | Purpose & Calculation |
|---|---|
| Schedule 1 | Net Income (Loss) for Income Tax Purposes — reconciles accounting income to taxable income. |
| Schedule 3 | Dividends Received, Taxable Dividends Paid, and Part IV Tax Calculation. |
| Schedule 4 | Corporation Loss Continuity and Application. |
| Schedule 8 | Capital Cost Allowance (CCA) — depreciation for tax purposes. |
| Schedule 50 | Shareholder Information — ownership details for private corporations. |
| Sch 100–141 | General Index of Financial Information (GIFI) — standard financial statements. |
What We Need From You
To ensure accuracy and maximize deductions, please provide the following documents:
Filing Timeline
Standard returns are typically filed within 10–15 business days of receiving all required documents. Complex returns involving multiple schedules, inter-company transactions, or SR&ED claims may require additional time.
Reducing Audit Risk
The CRA selects T2 returns for review based on high-risk indicators. Our filing process is designed to proactively address these triggers.
CRA Audit Triggers
- Unusual deductions relative to industry revenue benchmarks
- Shareholder loan balances without repayment documentation
- Inconsistent reporting of capital gains vs. prior years
- Scientific Research (SR&ED) claims without technical logs
- Related-party transactions without arm's-length pricing
The Acctax Approach
- Documentation of every major deduction and credit claimed
- Reconciliation of accounting profit to taxable income
- Maintenance of audit-defensible files for 6 years
- Direct representation if the CRA requests clarification
- Rigorous review of shareholder and associated accounts
Maximizing Deductions & Credits
T2 Short Return: When It Applies
Some corporations qualify for the simplified T2 Short Return—a two-page filing plus Schedule 1 reconciliation.
Eligibility Requirements
- CCPC status throughout the entire tax year
- Permanent establishment in only one province (Ontario)
- No taxable income OR claiming only the Small Business Deduction
- No refundable tax credits, associated corporations, or dividends
Our Recommendation
Even if eligible, most businesses benefit from full T2 preparation. The "short" form limits your ability to properly document CCA, shareholder loans, and loss carryforwards which are vital for future tax years.
What Happens After Filing
Notice of Assessment
The CRA issues this document confirming your taxable income, tax calculated, and any credits applied. If paper filed (exceptions only), expect 8–16 weeks.
Right to Object
If the CRA adjusts your return due to mathematical errors or disallowed deductions, you have 90 days from the NOA date to file a Notice of Objection.
Why Professional Corporate Tax Filing?
"Can I file corporate taxes myself?"
Technically, yes—the CRA provides Web Access Codes for self-filers, and modern software handles the transmission. However, corporate tax law is built on reconciliation, not just data entry.
⚠️ Common Self-Filing Gaps
- Schedule 1 Errors: Failing to add back non-deductible items (like 50% of meals or club dues) or misclassifying accounting gains.
- Provincial Allocation: Improperly calculating income earned in Ontario vs. other provinces, leading to incorrect tax rates.
- Passive Income Drag: Missing the "Grind" rules where passive investment income can reduce your Small Business Deduction.
- Loss Carryforwards: Losing track of non-capital losses (20-year limit) or capital losses, leaving future refunds on the table.
✓ The Professional Advantage
- Audit-Defensible Records: Every deduction is mapped back to the General Ledger and supported by CRA-compliant schedules.
- Entity Optimization: Identifying associated corporation rules to ensure your $500,000 Small Business Limit is shared correctly.
- CCA Strategy: Deciding when to take full depreciation vs. "preserving" it for higher-income future years.
- Direct Representation: If the CRA sends a letter, we handle the technical response and provide the electronic confirmation logs.
The "Subsection 15" Trap
A single error in documenting a shareholder loan can trigger ITA Section 15, causing the CRA to include the entire loan amount as personal income on your T1. Without professional reconciliation, you risk converting tax-free corporate capital into highly-taxed personal income by mistake.
The cost of professional filing is typically recovered through avoided penalties, maximized credits, and the elimination of "hidden" tax liabilities.
Service Areas in Ontario
The Acctax Company serves Ontario corporations through a network of local offices and robust remote capabilities.
FAQs
All resident corporations must file a T2 Corporation Income Tax Return for every tax year. This includes active corporations, inactive corporations, non-profit organizations, and tax-exempt corporations. The only exceptions are registered charities (file T3010), Crown corporations, and Hutterite colonies.
The T2 return must be filed within six months after the corporation's fiscal year-end. For a December 31 year-end, the filing deadline is June 30. Payment deadlines differ: generally 2 months after year-end (or 3 months for qualifying CCPCs).
Yes, for tax years starting after 2023. All corporations must file the T2 return electronically through Corporation Internet Filing, except insurance corporations, non-resident corporations, functional-currency filers, and certain tax-exempt corporations.
Yes, using certified software and a Web Access Code. However, accurate Schedule 1 reconciliation, provincial allocation, shareholder loan compliance, and loss tracking require accounting expertise. Professional filing ensures proper deduction claims and audit protection.
No. The T2 Corporation Income Tax Return serves as both the federal and provincial return for Ontario corporations. Corporations with a permanent establishment in Ontario allocate income to Ontario on Schedule 5, and Ontario tax is calculated on the same T2.
Late-filing penalty is 5% of unpaid tax plus 1% per month for up to 12 months. If you filed late in any of the three preceding years, the penalty doubles to 10% plus 2% per month. Interest accrues on unpaid balances from the balance-due day.
The small business deduction reduces the federal corporate tax rate from 15% to 9% on the first $500,000 of active business income for Canadian-controlled private corporations (CCPCs). Combined with Ontario's 3.2% small business rate, CCPCs pay 12.2% on qualifying income—versus 26.5% at general rates.
Electronically filed T2 returns are typically assessed within 2–4 weeks. Paper returns (where permitted) take 8–16 weeks. We provide electronic confirmation of filing within 24 hours of submission.
File with accuracy and confidence.
Spend less time on bookkeeping and more time growing your business. Let Acctaxco financial experts handle the details, ensuring accuracy, compliance, and experience seamless financial operations.
