T2 deadline: two dates, and what missing either one costs

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Most owners hear “the T2 is due six months after year end” and plan around that. The tax you owe is due earlier, and interest starts running from that date. The late-filing penalty is measured on whatever is still unpaid at the filing deadline, so paying on time shrinks it.

The two deadlines

A corporation with a 31 December year end therefore files by 30 June of the next year and pays by the end of February, or the end of March if it qualifies for three months. When a deadline falls on a weekend or holiday, it moves to the next business day. A year end of 30 June or 30 September moves every date with it: the deadlines follow your fiscal year, not the calendar.

The CRA lists the conditions for the three-month payment date, and they turn on your previous year’s income and whether you claimed the small business deduction. If you are not sure you meet them, plan on two months. Paying early costs nothing, and paying late costs interest.

What a late return costs

• Late-filing penalty: 5% of the tax unpaid at the filing deadline, plus 1% of that unpaid tax for each full month the return is late, up to 12 months.
• Repeat late-filing penalty: 10% of the unpaid tax, plus 2% for each full month, up to 20 months. It applies where the CRA has assessed a late-filing penalty in any of the previous three years and had issued a demand to file.
• Interest: charged on unpaid tax and on penalties from the day after the payment deadline, at the CRA’s prescribed rate, compounded daily. It is not deductible.

The penalty is a percentage of tax that was still unpaid at the deadline. That is why paying early matters even if the return is late: every dollar paid before the filing deadline is a dollar the penalty is not measured on, and every dollar paid by the payment date avoids interest.

A fictional example. A corporation owes CAD 10,000 that was still unpaid at the filing deadline, and files three full months late. The first-time penalty is 5% plus 3 × 1%, which is 8%, or CAD 800. If the repeat penalty applied, it would be 10% plus 3 × 2%, which is 16%, or CAD 1,600. Interest runs on top of either. The figures are invented and are not a client result.

If you owe nothing, or did nothing

The late-filing penalty is a percentage of unpaid tax, so a return showing no tax owing draws no such penalty. That does not remove the obligation. A corporation generally files a T2 every year, including a year with no income and a year when it was inactive, and the CRA can issue a demand to file for a return it has not received.

There is no routine extension to the filing deadline. The CRA can cancel or waive penalties and interest under its taxpayer relief provisions in some circumstances, such as a serious illness or a disaster. That is a request made after the fact, and it is decided on its own facts.

What to have ready before the return is prepared

• Bank and credit card accounts reconciled to the last day of the fiscal year
• Accounts receivable and accounts payable listings at year end
• The payroll totals for the year, agreeing with the T4 summary
• GST/HST and PST filed through the year end, with the balances agreeing to the books
• The shareholder loan account, with every movement explained
• A list of assets bought or sold in the year, with dates and costs
• Last year’s notice of assessment and any CRA letters received since

The return is prepared from the books, so the books have to be finished first. When the books are behind, the deadline does not move. The catch-up work has to fit inside it.

Where the BC part of the tax goes

There is no separate BC corporate return. BC corporate income tax is worked out on the same T2, on a BC schedule, and paid to the CRA. For 2026 the small-business rate is 9% federally and 2% in BC, and the general rates are 15% and 12%. The lower rates apply to active business income of a Canadian-controlled private corporation up to the $500,000 business limit, and that limit is shared among associated corporations.

The year-end bookkeeping checklist for corporations →

Behind on returns: how the Voluntary Disclosures Program works →

A CRA letter has arrived: what to do first →

Books behind? Start with the catch-up checklist →

Have the books finished before the date arrives

Orbis Accounting Ltd. keeps the books that a T2 is prepared from, for small businesses across Metro Vancouver, in English and Mandarin. Tell us your year end and where the books stand, and we say in a written quote what would have to happen by when.

Ask for a written quote →