Does an inactive corporation have to file a T2 return?
Yes. The CRA says every resident corporation has to file a T2 return for every tax year, even if there is no tax payable, and it names inactive corporations in that list. A company that earned nothing, sold nothing and paid nobody still files. The CRA's page on the corporation income tax return sets this out.
Owners often call this a "nil return". There is no special nil form for corporations. It is a normal T2 that reports zero income, along with the company's balance sheet, which still shows what it owns and owes: the bank account, any shareholder loan, share capital and losses from earlier years.
When is the T2 due if there was no income?
The same date as any other year: six months after the end of the tax year. A company with a 31 December year-end files by 30 June. One with a 31 March year-end files by 30 September. The CRA's when to file page has the rule and more examples. Our tax dates page lists the filing and payment dates by year-end month.
For tax years starting after 2023, almost every corporation has to file the T2 electronically. A paper return from a company that should have filed online can bring a ,000 penalty, so a quiet year is not a reason to print and mail it.
What happens if I skip it because nothing happened?
The late-filing penalty is 5% of the unpaid tax plus 1% for each full month late. With no tax owing, that works out to nothing, which is why some owners stop filing. That is a mistake for three reasons.
- The CRA can send a formal demand to file. After a demand, repeat late filing is penalized at a higher rate. The CRA explains these on its avoiding penalties page.
- Missing years pile up. When the company becomes active again, a bank, a landlord or a buyer will want filed returns, and catching up on three or four years costs more than filing each one on time.
- Losses go unrecorded. If the company spent money on start-up costs, a website or an accountant, that is a loss it may be able to use against future profit. Filing the return is how the loss is put on record.
My company only holds an investment or a rental. Is that "no income"?
No. Interest, dividends, rent and capital gains are all income, even if the company has no sales and no staff. A holding company or a company that owns a rental property files a full T2, and investment income inside a corporation is taxed differently from business income. If this is your situation, the return needs proper work rather than a quick zero.
What else does a quiet Ontario corporation still have to file?
- Ontario annual return. It is filed separately through the Ontario Business Registry, not with the T2. It is short, but years of missed annual returns can lead to the corporation being dissolved. A federal corporation files its annual return with Corporations Canada instead.
- GST/HST returns. If the company is registered for HST, it files a return for every reporting period, even when there were no sales. A zero return is still a return.
- Payroll account. If the company has a payroll account but paid nobody, tell the CRA there is nothing to remit, or close the account if payroll has stopped for good.
- Your own T1. Your personal return is separate. A quiet company does not change your own filing.
Should I keep the company or close it?
Keep it if you plan to use it again soon, if it holds something (cash, an investment, a property) or if it has losses worth carrying forward. Every year you keep it, the T2, the annual return and any HST returns still have to be filed.
Close it if it will never be used again. Closing properly means a final T2, closing the HST and payroll accounts with the CRA, dealing with any money left in the company or owed to it, and filing articles of dissolution. Simply walking away leaves the filing obligations running, and the gaps tend to show up years later.
A quick checklist for a company that had a quiet year
- Confirm the company's year-end date. It may not be 31 December.
- Gather the year-end bank statement and any bills the company paid or still owes.
- Check the shareholder loan balance: money you put in or took out still has to be reported.
- File the T2 electronically within six months of year-end.
- File the Ontario (or federal) annual return.
- File any HST returns due, even at zero.
- Decide whether to keep the company another year or close it properly.
If you have missed a year or two, it can usually be fixed. We file the missing returns in order and deal with any CRA letters that have arrived, from our office at 181 Queen St E in Brampton or by video call. Our corporate tax returns page explains how we handle the T2.
General education only; not individualized accounting, tax or legal advice.