What is a T2? | Empire CPA (2024)

Home » News » Canadian Tax FAQs » What is a T2?

Tax Question:

What is a T2? What does it have to do with corporate taxes?

Facts:

In Canada, the “prescribed form” for filing federal corporate taxes is called a T2 return. It is the same form for all resident and non-resident corporations subject to Canadian tax. The attachments and the calculations change depending on the situation.

Incorporated businesses are separate legal entities and therefore a separate return called a T2 is required for each corporation. The T2 should be prepared by a professional for the chosen year-end date of the company. The deadline for filing with CRA is six months after the company’s year-end date and the deadline for topping up or finalizing paying the corporation’s income taxes is two months after the year-end (three months for Canadian Controlled Private Corporations).

Generally, corporate income taxes are due during the year as installments. However, the first year that a corporation owes taxes there is an exception and the full payment for the year can be made without penalty within the two-month window after the year-end. The T2 reflects the company’s total financial picture. Financial statements are typically prepared to aid in the preparation of the corporate tax return. In all T2s a special schedule called The General Index of Financial Information (GIFI) is required. This GIFI contains information that is almost identical to a traditional accounting income statement and balance sheet. The company’s assets, liabilities, income and expenses are all listed in detail in the return on this GIFI.

The T2 income tax return uses as its starting point the accounting financial statements of the company. There is a central (schedule 1) in the T2 return that reconciles income for tax purposes with income for accounting purposes. This means that accounting profit can have a direct link to the tax paid and any differences between accounting profit and taxable income are clearly reconciled.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.