Who Must File a Corporate Income Tax Return in Canada?

Unsure whether your corporation needs to file a corporate income tax return this year? You're not alone. Canada has strict rules, and filing obligations vary depending on your corporate structure, tax residency, provincial presence, and level of activity. Whether your corporation is new, inactive, foreign, resident in Canada or a nonprofit, it's essential to understand exactly what applies to your situation.

As corporate tax accountants, we hear this question every day. It's not always easy to know who must file a corporate income tax return — and who may be exempt, especially when rules differ between the Canada Revenue Agency (CRA) and Revenu Québec. This guide will help you confirm your obligations and avoid costly mistakes.

Understanding the General Rule: Who Is Required to File?

In Canada, every incorporated business must file a corporate income tax return, unless it falls within a very small group of entities specifically exempted by law. At the federal level, this means filing the T2 Corporate Income Tax Return. In some provinces, you must also file a separate return, such as the CO-17 in Québec or the AT1 in Alberta.

Once a corporation legally exists, it has its own tax identity. This creates an annual filing requirement — even if your corporation:

• earned no income or had no expenses;
• is newly incorporated;
• is inactive or dormant;
• is being dissolved or liquidated.

In practice, most Canadian corporations must file a return every year, regardless of size, profit, sector, or whether they own capital property.

Corporations That Must File a Corporate Income Tax Return

Your filing obligations depend on the type of corporation and its connection to Canada. However, several categories are always required to file.

Canadian Resident Corporations

A corporation is considered resident in Canada if it is incorporated here or if its "central management and control" occur in Canada. Resident corporations must file a return every year, even when there is no tax payable. At the federal level, you must complete Form T2, and in Quebec, Form CO-17 in addition to Form T2.

Resident corporations include:

• Active or newly incorporated corporations — Filing is required from the very first fiscal year, even when the year is short. The simple act of being incorporated triggers the obligation.
• Inactive corporations — Even without revenue, sales, or transactions, an incorporated company remains legally "alive." It must still file a zero-activity corporate tax return until it is officially dissolved.
• Holding companies (Holdcos) — Holding companies often own shares, investments, or other corporations. Even without active operations, they must file annually.
• Nonprofit organizations (NPOs) — NPOs that are incorporated must generally file, unless they qualify as registered charities, which fall under a separate regime.
• Tax-exempt corporations — A corporation may be exempt from paying tax but still required to file (e.g., certain Crown corporations).

Non-Resident Corporations With Canadian Activity

A foreign corporation must file a Canadian corporate income tax return if, during the year, it:

• carried on business in Canada;
• realized a taxable capital gain;
• disposed of taxable Canadian property.

Even when a tax treaty provides an exemption from Canadian tax, the filing requirement often remains under CRA rules. If the non-resident has a permanent establishment in Québec, it must also file the CO-17 return, even if it is not incorporated in Canada.

Non-resident corporations must also file if they elect to be taxed on:

• net rental income from real property (subsection 216)
• net timber royalties
• net acting services income (subsection 216.1)

Foreign corporations may also file voluntarily to claim a refund or make elections, for example when handling non-resident corporation tax return obligations on Canadian-source income.

Corporations Exempt From Filing

Only a small number of entities are exempt from filing at the federal and provincial levels. The exemptions are nearly identical across jurisdictions, with small nuances.

• Registered charities — These organizations do not file a standard corporate return. Instead, they file the T3010 Registered Charity Information Return and other required compliance forms.
• Certain Crown corporations — Some government-owned entities are exempt from both tax and annual corporate filing based on enabling legislation.
• Hutterite colonies — These communities follow a unique tax regime and do not file a standard T2.
• Non-resident corporations with no taxable connection to Canada — If a foreign corporation does not carry on business in Canada, did not realize a taxable gain, and owns no taxable Canadian property, it may not be required to file.

Special Situations That May Affect Filing Requirements

These corporate events may affect your filing obligations:

• Corporate dissolution — A corporation must file a final return covering the period up to the official dissolution date registered with the authorities.
• Short fiscal year — Short years resulting from incorporation, a change in year-end, or a deemed year-end (e.g., after an acquisition of control) must still be reported.
• Changes in ownership or structure — Mergers, acquisitions, reorganizations, or converting to a trust structure can alter your filing obligations or require additional schedules or disclosures.

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Summary: Who Must File a Corporate Tax Return?

In practice, almost every incorporated business in Canada must file a corporate income tax return each year. This includes active companies, holding corporations, incorporated NPOs, inactive corporations, and tax-exempt entities.

Only a few exceptions exist — mainly registered charities, certain Crown corporations, and Hutterite colonies.

For non-resident corporations, the obligation depends on your economic connection to Canada, including business activity, rental income, taxable Canadian property, or gains. Because the rules can be complex, especially for cross-border or multi-provincial situations, it's always safer to confirm your specific obligations.

If you're unsure about your situation, T2inc.ca helps hundreds of corporations—resident and non-resident, active or inactive—determine their filing requirements and prepare their returns securely online.

The information in this article is general in nature and does not replace personalized tax advice. Every corporate situation is unique—consult a professional when needed.

FAQ — Common Questions From Business Owners

Do sole proprietors need to file a corporate income tax return?

No. Sole proprietors and unincorporated businesses report their income on the personal T1 return. Only incorporated entities file a corporate return.

Does a foreign corporation with no sales in Canada need to file?

Not always. A foreign corporation generally must file only if it carries on business in Canada, has a permanent establishment, or realizes a taxable gain on Canadian property.

Does a Canadian subsidiary of a foreign group have to file?

Yes. Every Canadian-incorporated corporation must file its own return, even if its operations are internal to a foreign parent company.

Do cooperatives and mutual companies have to file?

Yes, if they are incorporated. Their industry or organizational structure does not remove the filing obligation.