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How to Prepare Corporation Income Tax Return for Business in Canada

If you would like to prepare your corporation income tax return by yourself, then you must read this article. Step-by-step instructions are provided, making the corporate tax return preparation process pain-free. If you are self employed and looking for a guide on how to complete your personal income tax return, check out How to Complete Form T2125 for a Sole Proprietor.

This article is a summary of the video I produced entitled “How to Prepare Corporation Income Tax Return for Business in Canada,” the link for which is shown at the bottom of this article.

Who Has to File a Return?

In Canada if you own a resident corporation in Canada then you are required to prepare a corporate income tax return(T2). When you fill out your first corporate return you must declare a year end for your corporation. A benefit to incorporating is you can choose any date in the year to be your company’s year end. In Canada a corporation can file their return up to 6 months after its year end. However taxes must be paid within 3 months of the year end so many corporations elect to file at the same time.

Get Organized

Getting yourself organized is the first step in preparing a corporate tax return in Canada. Filling out your T2 corporate income tax form will require many supporting documentation. Before beginning you should make sure the following is done:

1.) Find and organize your expense receipts by month.
2.) Print and sort all bank and credit card statements by month.
3.) Attach receipts to corresponding monthly bank or credit card statement.

By completing these three steps you will ensure all documentation you expect to claim on your return is accounted. In case of a review by CRA you will also know where to find the supporting documentation as they will request proof for the claim in question.

Some other information you will need to know are:

- Business number of your corporation
- The address of your corporation’s head office
- Address where your corporation’s books and records are kept
- The fiscal year end of your company

Whether filing on your own or with an accountant, proper documentation and information before hand can save you time and money with your corporate tax return.

Financial Statements – How to Prepare Corporation Income Tax Return for Business in Canada

Before starting the preparation of your Canadian corporation income tax return, you will require the Income Statement and Balance Sheet of your company.

Let’s use Tech Consulting Company Inc. (TCCI), a fictitious company, for demonstration purposes.

Income statement for 2013 

- Sales: $200,000,
- Expenses: $84,000 (including $2,000 for meals and entertainment)
- Profit: $116,000.

TCCI is a profitable company!

Balance Sheet as of December 31, 2013 (year-end) 

- Assets: $149,100 (cash and accounts receivable)
- Liabilities: $13,000 (accounts payable and GST payable)
- Equity: $136,100 (net assets retained in the corporation)

Important to note when filling out your financial statements in schedule 100 and 125 you will be required to provide the General Index of Financial information (GIFI) numbers. This is how the CRA keeps track of different accounts. These numbers will be listed at the bottom of your schedule and will have corresponding accounts listed next to them.

Where do I find corporate tax forms and schedules? – How to Prepare Corporation Income Tax Return for Business in Canada

Where do you get the schedules and forms for the preparation of a corporate tax return? They can be obtained from the Canada Revenue Agency’s (CRA’s) website.

On the homepage of the CRA’s website, enter ‘T2 returns and schedules’ in the search field and then click on ‘search.’

By clicking on T2 Returns and schedules, you will see a listing of all of the corporate tax forms and schedules that you could ever possibly need for the preparation of your company’s income tax return. You should only select the forms and schedules that are applicable.

Prepare corporate income tax

When preparing your own corporate tax return you will need to fill out accompanying schedules. This infographic illustrate the most common ones you can expect to encounter this upcoming tax season.

Know the basic corporation tax forms and schedules

The most commonly used schedules for the preparation of a corporation income tax return for a business in Canada are:

- Schedule 100: Balance Sheet Summary
- Schedule 125: Income Statement Summary
- Schedule 50: Shareholder Information
- Schedule 8: Capital Cost Allowance
- Schedule 1: Net Income for Tax Purposes
- Schedule 3: Dividend Received, Taxable Dividend Paid, and Part IV Tax Calculation
- Schedule 11: Transactions with Shareholders, Officers or Employees
- Schedule 24: First time Filer after Incorporation, Amalgamation or Wind-up of Subsidiary into a Parent
- Schedule 200: T2 Corporation Income Tax Return

Schedule 100 – Balance Statement Summary

Schedule 100 is a summary of the company’s balance sheet. Enter the total assets, total liabilities, and equity on this schedule. Make sure that you are recording the proper GIFI number with its matching account. If you have cash on hand account its GIFI number would be 1001.

Schedule 125 – Income Sheet Summary

Schedule 125 is a summary of the company’s income statement. Enter the total sales, operating expenses and net income on this schedule. This is where having a copy of your company’s income statement will come in handy. Similar to the balance sheet you will also have to provide the GIFI number. They will be listed at the bottom of the schedule with its corresponding account.

Wave Accounting is free software designed for small business owners who want to maintain their own financial statements. By connecting your bank account to Wave, transactions will be automatically created for your business. All that is required is for you to categorize each transaction.

Schedule 50 – Shareholder Information

Input the name of each shareholder, their social insurance number, type of shares owned (common or preferred), and % of shares owned.

Schedule 8 – Capital Cost Allowance

Capital Cost Allowance (CCA), which is a tax deduction, represents the wear and tear of the company’s physical assets.

During the year, TCCI purchased furniture for $15,000 and computers for $1,000. These amounts should be entered in column 3 of schedule 8.

In column 12, capital cost allowance is calculated based on the depreciation rates shown in column 9 – 20% for furniture and 55% for computers.

Computers have a special capital cost allowance rate of 100% if they were purchased before February 2011. All other assets are subject to the ‘half year rule’, meaning that only half of the capital cost allowance that would otherwise be allowed, can be claimed in the year of acquisition.

Prepare Corporation Income tax return

As the chart above illustrates, the capital cost allowance rate for furniture is 10% in the year of acquisition instead of 20% (i.e. $1,500 of capital cost allowance on $15,000 of furniture purchases). The computer, since it was purchased during 2013 would also qualify for the half year rule.  It would be amortized at a CCA rate of 27.5% (i.e. $275 of the capital cost allowance on the $1,000 computer purchase)

Schedule 1 – Net Income for Tax Purposes

On Schedule 1 you will calculate net income for tax purposes:

In the example used above, TCCI has net income for accounting purposes of $116,000, as per its income statement. This amount should be entered on line A (amount calculated on line 9999 from Schedule 125) of Schedule 1.

TCCI incurred $2,000 of meals and entertainment expenses during the year. Therefore, $1,000 of meals and entertainment expenses (half of which are non-deductible) are added back on line 121 of Schedule 1.

The capital cost allowance of $1,775 [calculated on Schedule 8] should be deducted on line 403 of Schedule 1.

After all of the add backs and deductions, the net income for tax purposes of TCCI is $115,225.

Other examples of non-deductible expenses that should be added back on Schedule 1 are:

- Golf dues
- Life insurance premiums
- Personal expenses, such as business clothing, or personal meals
- Sports clubs memberships

Schedule 3 – Dividends Paid to Shareholders & Dividends Received

Dividends paid by a corporation to a shareholder must be reported on box 500 of Schedule 3. Dividends are a common way of paying owner-managers, as opposed to salary. For more on whether to pay your self dividend or salaries read more from our article.

Dividends received by Canadian corporations and foreign corporations are also entered on this schedule through parts 1 and 2.

Note that dividends received from Canadian corporations are generally tax-free, meaning that the recipient corporation does not have to pay corporate income tax on those dividends. This is also true for foreign corporations owned by a Canadian corporation.

However, if your corporation owns less than 10% of the stock of a corporation from which it receives a dividend, then a special tax, known as Part 4 tax, will apply. Part 4 tax is equal to 33.33% of the dividend received.

For example, assume that your corporation owns 1000 Apple Shares and 3000 Google shares. Further assume that your corporation received a dividend of $20,000 in respect of its Google and Apple shareholdings.

Since your corporation’s ownership interest in the capital stock of Apple and Google is less than 10%, then Part 4 tax of $6,666.67 will apply.

Tip: Part 4 tax is refundable to your corporation. The refund is triggered when your corporation pays you a dividend. The refund rate is $1 of Part 4 tax for every $3 of dividends paid to you. Therefore, consider paying yourself a dividend in order for your corporation to receive a tax refund.

Schedule 11 – Transactions with Shareholders, Officers or Employees

This schedule is used to report transactions between the owner and his/her company. Examples of common transactions reported on Schedule 11 are:

1. Shareholder loans made to the corporation
2. Shareholder loans received from the corporation
3. Assets transferred by the shareholder to the corporation
4. A ‘Section 85 Rollover’ – complex transaction relating to asset transfers

Things you can expect to fill out on Schedule 11 are the relationship of the transaction, amount of the transaction, reimbursement, and whether section 85 applies to the asset transfer. For more information on Section 85 visit our article on Converting a Sole Proprietorship to a Corporation.

Schedule 24: First Year Filing Income Tax

If this is your first year filing your corporate income tax return you are required to complete Schedule 24, First Time Filer after Incorporation. Schedule 24 is to be completed after an incorporation, amalgamation or wind-up of a subsidiary into a parent.

Part 1: New Corporation
If you have incorporated your business in the 2013 tax year then you are required to complete part one of this schedule.

Part 1 requires the following information:

- Name of new corporation
- Business Number
- Fiscal year-end
- And type of operation (crown corporation, credit union, Insurance company, etc)

Part 2: Amalgamations

This section is only if you have amalgamated two or more corporations during the current tax year. If this section applies to you then you must name all previous corporations and their business numbers. This must be filed in the first year after the amalgamation.

Part 3: Winding Up a Corporation

If this is your first time filing after winding up a subsidiary corporation you must fill out part three. A wind up is when a business sells all of its assets with intention to pay off all creditors so it can dissolve its business. In this section you must name all subsidiary corporations that were wound up as well as their business number, start date of wind-up and end date of wind-up.

Schedule 200 – T2 Corporation Income Tax Return – How to Prepare Corporation Income Tax Return for a Business in Canada

Schedule 200, the T2 corporation income tax return, is an eight page form. The following information should be entered on this schedule:

    1. On the first page of Schedule 200, the corporation’s legal name and business number are reported.prepare corporate income tax retrun
    2. On boxes 11 to18 of page 1, the address of corporation’s head office is reported.prepare corporate income tax return
    3. You do not need to enter the mailing address or the location of the books and records if they are the same as the head office’s address.


    1. The taxation year (e.g. January 1, 2013 to December 31, 2013) should be entered on boxes 60 and 61 of page 1.How to prepare corporate income tax return
    2. On box 80, yes should be checked if your corporation is a resident of Canada.prepare corporation income tax return
    3. On box 40, check one of the boxes for the type of corporation. Most small businesses in Canada should check box 1 for Canadian Controlled Private Corporation.How to prepare corporate income tax
    4. On page two of Schedule 200, check the schedules that apply (see basic forms and tax schedules above)


    1. On page three ‘Additional Information’, you should check ‘no’ to IFRS, check ‘no’ to inactive.prepare for corporate tax return
    2. On box 284 of page 3, the description of the services or goods sold by the corporation must be entered.prepare corporate income tax return
    3. The rest of schedule 200 [pages 4 to 8] is used to calculate tax. TCCI (which is a Canadian controlled private corporation) is entitled to the small business deduction for $19,465 (i.e. net income for tax purposes multiplied by 17%)


    1. The base amount of Part I tax for TCCI is $43,510 and this amount is entered on box 550. The base amount of Part I tax is calculated by multiplying net income for tax purposes by 38%.preparing your own T2 corporate income tax return
    2. After the reduction for the small business deduction and the federal tax abatement from the base amount of Part I tax, TCCI has Part I tax payable of $12,595 (box 700)prapare corporation income tax return
    3. On the last page of Schedule 200 (page 8), the provincial tax from Schedule 5 is entered on box 760. TCCI has provincial and territorial tax payable of $5,721.Filing your corporate tax return
    4. TCCI has a total balance owing (federal Part 1 tax payable for $12,595 plus provincial and territorial tax payable for $5,721) of $18,316.


  1. On the very bottom of page 8 the corporation’s name, address, and telephone number, are reported. You must sign and date the corporation income tax return in the same area.
    prepare corporation income tax return

Additionally, if your corporation has engaged in any work related to research & development, you may be eligible for the lucrative SR&ED tax credit.  To find out more, please consult our article on tax credits for technology companies in Waterloo

About the Author – Allan Madan

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation . Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

If you like this article, kindly +1 and follow Allan Madan on by clicking on these
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How to Prepare Corporation Income Tax Return for Business in Canada was last modified: November 18th, 2014 by superAmin
This entry was posted in Corporate and business tax and tagged , , , , , , . Bookmark the permalink.

About the author

is a Chartered Accountant, CPA and Tax Expert and enjoys working with business owners, individuals and entrepreneurs.


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

74 Responses to How to Prepare Corporation Income Tax Return for Business in Canada

  1. I like this post, enjoyed this one thanks for putting up.

  2. jimmy says:

    Hi, my corporation hold some trust income investment that had foreign income and also foreign tax paid. I read that I can’t take income minus tax paid and the T2209 form was confusing cause it refer to S1 line 405 but that same line is refer to S10.

    Is it worth to reclaim back the $22 foreign tax paid?

  3. Wilson says:

    I was just wondering how come I can’t just send CRA a copy of my balance sheet and Income statement instead of filling out their version?

    • superAmin says:

      Hi Wilson,

      Unfortunately CRA requires your to complete their format of your financial statements. The reason is they have different calculations for tax purposes than IFRS or ASPE allows. Calculating items such as depreciation are done differently for accounting and tax purposes which is why you must complete it CRA’s way

  4. Rob says:

    My corporation paid charitable donations this year. I was wondering where I would report this?

    • superAmin says:

      Hi Rob,

      Schedule 2 will be where you calculate your corporations deduction for your charitable return. You can find the schedule here “”

  5. Marty says:

    I was wondering I have a small incorporated business. I am having trouble making my monthly tax installments from last year. Is it possible to request to make quarterly installments instead of monthly?

  6. jogan says:

    I have a small business employing one person with salary, where can I report this (on which schedule).

    • superAmin says:

      If you are a sole proprietor, then you will report salaries expense on Form T2125, Statement of Business Activities. If you are incorporated, then you will report salaries expense on the GIFI Schedule 125 – Income Statement.


      Allan Madan, CPA, CA & Team

  7. Logan says:

    Where can I find a template for how to complete a sole proprietor return?

  8. Cole says:

    I recently incorporated my business and I have made no money this year. I have a substantial amount of business expenses that i would like to claim but I have no income to offset them. Can I still claim business expenses this year even though don’t have enough income to offset them?

    • superAmin says:

      Hi Cole,

      You can still claim business-related expenses even though you earned no income this year. By doing so you will create a non-capital loss which can be applied to offset taxes paid in the past or future tax when you do earn income(up to three years back).



  9. Howard says:

    Hi Allan,

    My corporation suffered a capital loss this year when I sold some equipment. I was wondering if I could carry back this loss to my previous tax returns and if so how would I go about doing this?


    • superAmin says:

      Hello Howard,

      Yes you can carry back your capital loss to previous years but you need to complete a T1A form. In order to carry back a loss you suffered this year, you should make sure your tax returns for the previous 3 years include capital gains which the loss can be applied against. Also determine which year it would be most beneficial to carry the loss back. Last, go to the T1A form, and indicate which year you choose to carry the loss back to and then submit the T1A form with your tax return to apply the loss.



      • Scott Bradfor says:

        Hello Allan,

        Regarding requesting a carry back via the T1A form, the Company hasn’t files since 2008 , in order to claim a carry back from 2010 to 2009, they first need to file 2009 then request carry back once 2010 completed correct?

        • superAmin says:

          Hi Scott,

          Yes, first complete the 2009 return and wait to receive the Notice of Assessment. Then file the 2010 corporate tax return and request a loss carry back on Schedule 4 of the return.


          Allan Madan, CPA, CA
          Tel: 905-268-0150

  10. Brock says:

    Hi there Allan,

    It is my first year incorporated in my electrical business. I usually do my own tax returns and this guide is very helpful. I was just wondering if there are any additional forms I am required to submit to the CRA in my first year of incorporation.



  11. Mike says:

    Can you post or email the Example forms used in the video for Tech Consulting Company Inc. (TCCI)?

    I would like to open them up side by side with mine and make sure I did not miss anything and expect other people would as well.

    Thank you for helping small business owners save money and learn new skills!

  12. Ibrahim says:

    Hi Allan,
    my business is in Quebec, what are the forms I am required to submit to the Quebec revenue agency.

    • superAmin says:

      Hi Ibrahim,

      Corporations with a permanent establishment in Quebec must file a Quebec Corporate Tax Return (Form C0-17). This is in addition to the Federal Corporate Tax Return.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  13. Di says:

    I’m so glad I found this site. Thank you. My siblings and I started a corporation if and when we receive mineral rights income. To be able to psy expenses & mineral taxes, my mother put in funds each year to keep money in account. She did not loan it nor want payment back. I don’t know what to call this or where to put these deposits on T2.
    I guess she gifted it to us in the corp.
    How to I record this for balance sheet
    Thank you

    • superAmin says:

      Hi Di,

      Gifts are not taxable and are not considered business income. For tax purposes, you could categorize the donated capital as “Contributed Surplus.”


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  14. Scott says:

    Hi Allan, just wondering if my first year filing had zero income ( was a partial year and not active ) I don’t think I need to include income statement or balance sheet because they are zero. But I think I have to file an opening balance sheet as well as shareholders sch and schedule 24? Correct?

    • superAmin says:

      Hi Scott,

      You should complete the following schedules:

      - GIFI schedule 101 (opening balance sheet, showing share capital and and any opening balances)
      - GIFI schedule 100 (closing balance sheet)
      - Schedule 50 for shareholder information
      - Schedule 24 for first time filers
      - T2 Return


      Allan Madan, CPA, CA
      Tel: 905-268-0150

    • Russell Jones says:

      You would have had expenses, such as your incorporation costs, in your first year.

  15. M Ali says:

    Hi. We incorporated our company in 2013 and only two activity we had were incorporation cost & a courier cost for sending sample (even bank a/c was opened in 2014). So, should we just put these two transactions in our return? Thanks.. Ali

    • superAmin says:

      Hi Ali,

      You should report these transactions on the GIFI, General Index of Financial Information. Note: Incorporation costs are classified as an eligible capital expenditure (i.e. an intangible asset) and should be reported on Schedule 10 of the corporate tax return and on the GIFI. Only 3/4 of the incorporation costs qualify for depreciation per Schedule 10, and the depreciation rate is 7% per year.

      Finally, you should also complete the T2 Return, Schedule 1 for calculating Net Income for Tax Purposes, and Schedule 50 to report shareholders’ information.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  16. Vijay Patel says:

    Hi Allan,

    Great work first of all.
    question about T2:
    This is my 10th year of T2 filing. First time doing myself.
    Question: Coporation had couple of common stocks and sold them. So realized Capital Gain of $100,000. When I fill up Schedule 1 in Deduct section line 401 (Gain on disposal of assests per financial statement) should I put $100,000 OR $50,000? Since Capital Gain is taxable @1/2. Last year an accountant has put @1/2. But this year when I used ready made software (for trial – webtax4b) it deducts full amount. So confused about the correct way.
    Thanks for your help and time,

    • superAmin says:

      Hi Vijay,

      Thanks for your question. If you included the full gain ($100,000) in the company’s financial statements that you prepared, then you should subtract the full gain ($100,000) on line 401 of Schedule 1. On line 113, add back the taxable portion of the gain (i.e. $50,000).

      Thank You,

      Allan Madan, CPA, CA
      Tel: 905-268-0150

  17. Max Aleris says:

    I have recently incorporated my company, and as such have invested a significant amount of money into my business. How do I best protect my investment?

    • amadan says:

      Hello. To best protect yourself, you should aim to become what’s known as a “secured creditor” of your business.
      First, you should classify a minimal amount of your investment as your purchase of shares of the corporation. Let’s say your first $100 goes to purchase 100 common shares of your corporation. Then, you would treat the rest of the money you’ve invested as a loan to your company. This should be documented properly, with a promissory note between you and the corporation. There is no requirement for you to charge interest on this loan.
      Once you have had your lawyer register the note under your province’s personal security act, you will have made yourself a secured creditor of the corporation. If something should happen to your business, it is usually the secured creditors who get paid first.

  18. JohnQ says:

    Are all Canadian corporations eligible for the federal tax abatement. Line 608 on T2 form

    With thanks,

  19. Markus Greenbriar says:

    Hello Allan.

    Thank s for posting your video about corporate tax filing! It was very helpful and informative.
    Occasionally, I work as a contractor if I cannot find a permanent position. My question is regarding the filing of corporate tax with no activities. I wish to carry over the losses from the previous year. Can I file my tax return using the T2 short form, or do I need to go with the T2 regular form? Are there any other tax forms I need to submit?


  20. Fox says:

    Hi Allan,
    Thanks for this great post which helps me a lot.
    i paid about 400 CAD from my personal fund when registering my corp, it seems to me this should go into the balance sheet as “incorporation costs”, Does this count as “eligible capital property”? If it does, I’d have to fill in schedule 10 (which doesn’t look quite straightforward to me), right?

    • amadan says:

      Hi Fox,

      Thanks for your question. The $400 you paid for incorporation costs on behalf of your corporation should be treated as eligible capital property on Schedule 10 of the T2 Corporate Tax Return. Only 3/4 of the $400 of incorporation costs can be amortized at a rate of 7% each year.


      Allan Madan, CPA, CA
      Tel: 905-268-0150 x 2

  21. Tim says:

    Hi Allan, I am the president of a small corporation. I am thinking of making a loan to an employee who is also a shareholder. I am giving her the loan in order for her to buy a car to be used for business. How can I do this in a way that avoids the loan being included in the employee’s income?

    • amadan says:


      When the recipient of the loan is also an employee, there are a few situations that can exclude them from income inclusion. Luckily, buying a car for business is one of these. The other two are as follows.

        The loan was made to an employee to purchase shares of the company from the corporation itself and not another shareholder
        The recipient of the loan cannot own more than 10% of the company.

      Additionally, there are three conditions must be met. First, the loan must have been available as a result of the employee working at the company, not because they are a shareholder. The second is that there must be clear repayment terms, which you have done.

      Allan Madan and Team

  22. Sebastian Morales says:

    Hi Allan.

    I own a small incorporated business, which I have opened in the last six months. So far, I have not made any money from it. I live off of my spouse’s income for now. When I file my income tax, the software asks if I am self-employed. What do I answer? Do I need to report income from the corporation on my personal income tax? There has been little activity on the corporation, so I would rather do this myself than hire an accountant.
    When I start to make money, should I take salary or dividends? I am planning to have my spouse as a shareholder. Are there any other matters I should consider?

    • superAmin says:


      A corporation is a separate legal entity. Therefore, you do not need to report your corporate income with your personal income tax return. If you are paid salary or dividends from your corporation, the income needs to be reported. When your business starts to make money, it may be beneficial to take a combination of both salary and dividends. Dividends may sound attractive, but they don’t provide RRSP contribution room. This is because they do not count as earned income.

      It may also be wise to evaluate whether a corporation is necessary. You may not experience many benefits from incorporation until your income reaches over $100k. There are also the obligations of annual meetings and filing obligations with the CRA. With such a small business, the limited liability you experience may also be thinner than you think.

      One clear advantage of a corporation is dividend sprinkling. Here, each spouse can split the dividends and be taxed according to their own class. With that, you can distribute dividends to whichever class works out best tax wise. Corporations can be tough to understand, especially when starting out. Feel free to contact me if you have any questions.

      Allan Madan and Team

  23. glenn lawryk says:

    I just got back my company reassessed notice back. The gov’t changed my tax amount with no detail. I phoned and all they said was my Federal Tax Abatement was incorrect. How does one calculate line 608 on the corp tax return. Cannot find any information for an explanation. The company is based in Alberta.

    Thank you for your response.

    • superAmin says:

      Hi Glenn,

      The Federal Tax Abatement is calculated as 10% of the taxable income reported on line 360 of the T2 Return.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  24. Sadhbh Honora Orman says:

    Hello, Allan.

    I have recently started a new corporation with two equal shareholders. I was wondering if there is any way of reducing my taxable income for the current year. I was working this year, and i am in the highest tax bracket. Would a lump sum loan work? The loan would be used as a start-up capital for the business, and be from myself to the corporation.

    • superAmin says:


      I would have to know more about your situation before making recommendations. I can say that interest from a loan you provided to the company would result in extra tax for yourself personally. However, you are not required to charge interest on that loan.

      If you have a significant amount of personal employment income and less corporate income, there is most likely no way of using the corporation to reduce your personal tax bill. If you have some extra money available, you can always contribute to your rrsp to reduce your personal tax bill. There are also recommendations to help save on corporate tax. If you have not filed your corporate tax return already, one thing you should do is purchase capital assets that are eligible for CCA.

      There are also things that you can do to reduce your personal income, such as donating to charity and paying investment management fees. Please contact me so that we can come up with a strategy that works best for your unique situation.

      Allan Madan and team

  25. Jordan Falcone says:


    In Schedule 3, there is a section called “publicly traded shares”. Does the first column, numbers, mean the quantity of stocks? The third column is “the year of acquisition”. If I bought stock in years 2012 and 2013, and sold them all in 2014, how do I declare the year of acquisition?

    • superAmin says:


      The first column means the number of shares sold. For the third, you should put the latest date of purchase for the whole thing. That way, the CRA can tell if there is no superficial loss. You should also consider keeping track of your transactions, and the ongoing adjust cost base on a spreadsheet, so that you have a summary if the CRA ever questions.

      Allan Madan and Team

  26. Jennifer H. says:

    I am a sole proprietor and am trying to fill out my T2 form. I have put a lot of personal funds into the business and so has my spouse. Where do I put this amount on the form?

  27. andrea says:

    This is my second year filing a T2 return. Where on the balance sheet, do I record the corporate income tax that I paid in May 2013 for the tax year 2012?

    • superAmin says:

      Hi Andrea,

      In your 2012 tax year, you should’ve accrued the income tax expense and payable. When you paid this amount in May 2013, you will simply DR income tax payable and CR bank to remove the payable.

      In other words, the payable would’ve been record on the balance sheet in 2012, and when you finally pay the amount, you simply remove the payable from the balance sheet.

  28. Jason says:

    I have a question regarding the loss carry-forward transfer from a subsidiary to parent. In my case, both the subsidiary and the parent have a June 30 year end. The subsidiary started dissolution on May 15, 2014 and was dissolved on June 11, 2014. The loss carry-forward of the subsidiary should be transferred to the parent and increase its age by one year. My question is how this is reflected on the T2 Schedule 4. Should the transfer of loss show up on the Schedule 4 of June 2014 T2 on the row of Year 2013-06-30 (increase age by one year), or should it show up on the June 2015 T2 on the row of Year 2014-06-30?

    Thank you for your response!

    • amadan says:

      Dear Jason,

      My name is Francis and I am a senior at Madan CA.

      To answer your question, first of all, you cannot transfer the losses from
      your subsidiary to the parent if the subsidiary was simply dissolved.
      Perhaps you mean the subsidiary was wound up (wind-up) or amalgamated with
      the parent and the subsidiary was 100% owned by the parent.

      If that is the case, first of all, you will report the total available loss
      carryforward available by the subsidiary on box 105 of schedule 4.

      Then, on the Non-Capital Loss Continuity Workchart, you would record the
      losses incurred by the subsidiary under the ‘Adjustments and tranfers’
      column. With respect to what to put for ‘Year of origin’ column, you will
      need to review the subsidiary’s prior year tax returns to segregate the
      losses incurred in different tax year. Then, you will need to report each of
      these losses in appropriate year of origin under the ‘adjustments and
      tranfers’ column.

      If you have questions on this, let me know.


      Francis Do

  29. imran says:

    First, this is great site thanks for your efforts.
    I was working as a full time employee and recently opened an incorporation. My question are
    1. I have earned over 60k while I worked as full time 2014. I am planning to start giving salary to myself and my other director (who is my spouse) starting from January to keep my tax bracket low. Is it a good Strategy ? FYI, my corp tax filling month is aug/sep 2015.
    2. I am expecting to make over 100K by my corporation, and looking to minimize the tax what would be the best strategy (in terms of salary % and dividend like how much salary I should give to myself and my spouse and how much should be given via dividend to keep the overall tax low).

    My spouse has no income other than what ever she will get from the corporation. Same goes to me my only income would be through the corporation.
    Hope to hear back from you soon.
    Thank you.

    • superAmin says:

      Hi Imran,

      Salary should be reasonable and reflective of the amount of work done by the employee. Paying a salary from your corporation may reduce your corporate taxes, however it is important to consider the impact on your personal taxes. The salary paid from your corporation may put you into a higher personal tax bracket. We can offer services in analyzing the overall tax impact.

      Dividends are taxed at a lower rate than salary however, there are disadvantages such as, not paying CPP premiums and RRSP room is not created with dividends.

      For further details on advantages and disadvantages of salary and dividends, please refer to our article link:

      Allan Madan

  30. HvK says:

    Your explanations (text and video) are excellent and I am now encouraged to start filing my own T2. I am confused about one detail. The Income Statement (Schedule 125) is required to complete Schedule 1 with then flows into the main T2 return that calculates the tax owed. However, the Income Statement includes “current income tax” (line 9990) which according to my previous accountant-prepared returns in the exactly the value calculated in the main T2 return. How can I include the current income tax in the Income Statement when it has not yet been calculated in the main T2 return? There is probably a simple explanation but I can’t see it.
    Thanks for your response!

    • superAmin says:


      After you input your income statement on to Schedule 125, ensure there is no value under “Current

      Income Tax”. On line 770 of your T2 Corporation Income Tax Return, your taxes payable will be

      displayed. Insert this amount on to Line 9990. I hope this answers your question.

  31. Brandon says:

    I am US citizen now working in CANADA. The TEKsystems Canada pay my US corporation for the service I provide, however, it withholds 15% of the payment as tax submitted to CRA. I was told I can get the 15% Tax back. I don’t know how to do it.

    • superAmin says:

      Hi Brandon, In order to recover the taxes withheld, a T2 Corporation Tax Return must be filed. Along with this return, schedules claiming an exemption from income tax will be submitted. So long as your company did not maintain a fixed place of business in Canada, and the contract was for less than 6 months, your company can claim an exemption from Canadian income taxes on the profits earned pursuant to the Canada-US tax treaty.

  32. Michael says:

    Hi Allan,
    This is a great example. Thank-you very much for taking the time to set this up.

    I was wondering if you could also email me the completed T2 forms for your Tech Consulting Company Inc. (TCCI) example. I would like to take a look in order to reference my corporations T2 return.

    I also wanted to ask a question regarding Schedule 3: DIVIDENDS RECEIVED, TAXABLE DIVIDENDS PAID, AND
    PART IV TAX CALCULATION (2004 and later tax years). I am a 100% shareholder of my corporation and am looking to distribute dividends to myself with the after tax income of my corporation (I compensate myself through a combination of salary and dividends and throughout the year I set up a payroll account in order to cover my cash flow needs. I paid 3/4 of the company income through payroll and with the remaining company income I wanted to pay through dividends).

    Am I still required to fill out schedule 3 if I proceed to pay myself the reaming income through dividends? What is the difference between Schedule 3 and a T5 form?

    Thanks again for your insight and I wish you happy holidays!

    • superAmin says:

      Hi Mike,

      Thanks for contacting me. Dividends paid to shareholders should be reported on Schedule 3 of the T2 Return. If you own more than 10% of the shares of the company, then Part 4 tax will not apply on the payment of the dividends to you.

      A T5 slip must also be prepared by February of the year following the year in which the dividends were paid to you. This is a separate filing from Schedule 3 of the T2 Return.

      I do not have the soft copy available of the T2 Return used in this example anymore.

      Hope this helps.

      Allan Madan, CPA, CA

  33. Chris says:

    The accountant who did our books passed away during the last business year. I am trying to imitate his work in order to complete the T2. I know that line 9999 should equal line 3680. Alas, there’s quite a big gap between the two. Please can you suggest where I should look for the error? I’m confident in the calculations for income and expenses, and I have the accountant’s assets and liabilities numbers from 2013. My best guess is that I’ve done something wrong with 2014′s assets and liabilities. The business is incorporated with a sole proprietor and one full-time employee and one part-time employee. Thank you in advance for considering my question.

    • superAmin says:

      The only way to troubleshoot the accounting error(s) is to use a bookkeeping software, like wave accounting or QuickBooks. Otherwise, it will be very difficult and time consuming.

      Allan Madan, CPA, CA

  34. Devon says:

    Hi Allan! I am in dire need of professional advice regarding my sole proprietorship, partnership, and corporation (yes I own different businesses in each category). I also work fulltime for a different company on a salary of $55K a year,

    Here’s the situation: The only business so far making money for me is the partnership business, and in the year we made good money (2012), I had to pay a heavy tax on my personal income as it was added to my salary. I didn’t want that to happen again so our accountant advised me to register a corporation to which I can put the partnership income under, but he never explained how to do that, I assumed he would take care of all that come tax season I registered the corporation anyway. Now, fast forward to 2014 tax season, and we made even more money than we did in 2012 (we reported a loss in 2013) and my accountant just told me he CAN’T issue this income under my corporation since it’s under my partnership income. We have now come full circle to where I was in 2012, where I may owe heavy taxes. It really comes down to this, is there any possible way I can declare that partnership income (my portion of it anyway) as my corporate income? I do not want it added to my personal inc! ome whatsoever. Please help!!!

    Thank you,

    • superAmin says:

      ​Hi Devon,

      Thanks for contacting me. A corporation can be a partner in a partnership. To do this, there must be a partnership agreement that specifies your corporation is in fact a partner and ‘units’ in the partnership should have been purchased by your corporation.

      If the above steps were taken, you can include the partnership’s profits in the taxable income of your corporation.

      Please let me know if you have any questions.

      Allan Madan, CPA, CA

  35. Demetry says:

    I’ve just set up a corporation for my son who is 16 and wanted to start a business.
    I was enjoying your video

    I had a question, when I search the schedules such as 100, I end up with a very different looking form.
    What am i doing wrong ?


  36. Crissy Schneider says:

    How do you carry forward a non-capital loss on your corporate T2 or T2 short return, to reduce the taxable income?

  37. Anthony says:

    Hi Madan,
    Thanks for all you post on the Youtube, they are very educative and more grease to your elbow.
    Please, I have a question for you. I have client who terminated her contract with an accounting firm and asked us to prepare the books of her company and file the taxes.
    When filing for say 2008, does CRA allow us to enter the T2s of the company as our prior year even if we were not the firm that did their books?

    The fixed assets balances of 2007 at cost were carried forward and entered on schedule 8, which calculated amortization as if the assets were purchased in 2008. Having entered the cost and accumulated amortization on Schedule 100, these differed from what was on schedule 8.
    The carried forward numbers increased the amortization, which were already calculated using the declining balance method over the years. How, can I resolve this discrepancy? Doesn’t it matter if the summary on schedule 8 does not tally with the amounts already entered on schedule 100 for amortization and cost?
    Please, advise.


    • superAmin says:

      Hi Anthony,

      Yes, you can and must enter the opening balances on Schedule 8 of the 2008 T2 Return, evening if your firm did not prepare the 2007 T2 Return. If you are using the same depreciation rates for tax and accounting purposes, then the cost and accumulated amortization amounts as per the GIFI should match with Schedule 8 of the T2 Return.

      To reconcile changes in the net assets as per Schedule 8 to the changes in the net assets as per the GIFI / Financial Statements, please complete Schedule 8 – REC.

      The half year rule for CCA only applies in the year of acquisition of the asset.

      Allan Madan, CPA, CA

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