Non-Resident Corporation T2 Late-Filing Penalty Calculator 2026
A foreign-owned corporation with no Canadian tax to pay still owes $2,500 for every unfiled year. Section 162(2.1) imposes a flat penalty that has nothing to do with how much tax is owing, and the Federal Court of Appeal confirmed it applies even at nil. Work out your exposure across every year and what the Voluntary Disclosures Program can remove.
total owing to the CRA
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Year by Year
| Year End | Filing Due | Days Late | Section 162(1) | Section 162(2.1) | Penalty Assessed | Interest |
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Voluntary Disclosures Program Outcome
| Item | Without a Disclosure | With an Accepted Disclosure |
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Other Filings This Situation Usually Exposes
What to Do Next
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Disclaimer: This calculator applies subsections 161(1), 162(1), 162(2) and 162(2.1) of the Income Tax Act, the CRA prescribed interest rates from 2018 onward, and the Voluntary Disclosures Program relief tiers in Information Circular IC00-1R7 effective 1 October 2025. Canadian tax is computed at the Ontario general rate of 26.5%, because a corporation controlled by non-residents is not a Canadian-controlled private corporation. Interest also accrues on assessed penalties from the date of assessment, which is not included here. Provincial filings outside Ontario, gross negligence penalties, and the separate penalties for T106, T1134, T1135 and NR4 are not included. VDP acceptance is at the CRA’s discretion and is not available where the corporation is under audit or investigation. This page is general information, not tax advice.
The $2,500 Penalty That Applies Even With No Tax
Most foreign-owned corporations that discover a Canadian filing obligation react the same way. There was no Canadian profit, no Canadian tax, often a treaty exemption, so surely a late return is a formality. It is not.
Subsection 162(2.1) of the Income Tax Act sets a separate rule for non-resident corporations. Where a non-resident corporation is liable to a penalty for failing to file a return, the penalty is the greater of the ordinary late-filing penalty and a flat amount of $25 per day the failure continues, with a minimum of $100 and a maximum of 100 days. That maximum is $2,500, and it is charged per year, per corporation.
The ordinary penalty is a percentage of unpaid tax, so at nil tax it is nil. The flat penalty is not. Where the ordinary calculation produces nothing, section 162(2.1) substitutes the flat amount instead. Four unfiled years with no Canadian tax at all is a $10,000 assessment.
Exida.com and Why Nil Tax Does Not Help
This was litigated. In Exida.com Communications Inc. v. The Queen, 2010 FCA 159, two non-resident corporations argued that because they owed no Canadian tax, they were not liable to any penalty under subsection 162(1), and therefore subsection 162(2.1) could not apply to them.
The Tax Court accepted that argument. The Federal Court of Appeal reversed it. The Court held that a corporation which fails to file is liable to a penalty under subsection 162(1) even where the amount computed is nil, and that subsection 162(2.1) then substitutes the greater flat amount. The $2,500 per year stood.
That decision is why every quote a non-resident corporation receives for catch-up filing should start with the number of unfiled years, not with the tax.
How the Penalty Is Actually Computed
| Provision | Calculation | Applies To |
|---|---|---|
| Subsection 162(1) | 5% of unpaid tax plus 1% per complete month, maximum 12 months | Every corporation |
| Subsection 162(2) | 10% of unpaid tax plus 2% per complete month, maximum 20 months | Repeat failure, demand plus a prior penalty in the last three years |
| Subsection 162(2.1) | Greater of $100 and $25 per day, maximum 100 days, so $2,500 | Non-resident corporations only |
| The amount assessed | The greater of the ordinary penalty and the flat penalty | Non-resident corporations |
| Subsection 161(1) | Arrears interest, compounded daily at the prescribed rate plus four points | Every corporation with unpaid tax |
When a Non-Resident Corporation Must File a T2
A non-resident corporation has to file a Canadian corporate return for a tax year if, at any time in that year, it carried on business in Canada, had a taxable capital gain, or disposed of taxable Canadian property. That obligation exists even where a treaty exempts the profits from Canadian tax entirely.
| Situation | T2 Required | Tax Payable |
|---|---|---|
| Carried on business in Canada with a permanent establishment | Yes | Yes, on the attributable profits |
| Carried on business in Canada, treaty exempt with no permanent establishment | Yes, with Schedule 91 | Nil under the treaty |
| Disposed of taxable Canadian property | Yes | Depends on the gain |
| Sales into Canada with no people, premises or agents | Generally no | Nil |
| Canadian subsidiary, parent has no other Canadian activity | No for the parent | The subsidiary files its own T2 |
Schedule 91 and Schedule 97
Two schedules do most of the work on a non-resident return, and both are frequently the reason a corporation discovers its obligation years late.
- Schedule 91, Information Concerning Claims for Treaty-Based Exemptions: filed where the corporation carried on business in Canada but claims a treaty exemption because it had no permanent establishment here. This is the schedule that makes a nil return a filing rather than a non-event.
- Schedule 97, Additional Information on Non-Resident Corporations in Canada: sets out the nature of the Canadian activity, the presence in Canada and the treaty position, and is required from non-resident corporations filing a T2.
Filing the T2 without these schedules does not preserve the treaty position. The claim has to be made, and it has to be made on time or through a disclosure.
The Voluntary Disclosures Program After 1 October 2025
The CRA overhauled the Voluntary Disclosures Program with Information Circular IC00-1R7, effective 1 October 2025. The old general and limited programs are gone. Relief now depends on whether the application is unprompted or prompted, and the change is materially better for a non-resident corporation in this position.
| Application Type | When It Applies | Penalty Relief | Interest Relief |
|---|---|---|---|
| Unprompted | No prior CRA communication about the issue | Up to 100% | Up to 75% |
| Prompted | The CRA has already raised the specific issue | Up to 100% | Up to 25% |
| Not available | Under audit or investigation, or egregious non-compliance | None | None |
The biggest change is that a demand letter no longer closes the door. Under the old rules, a taxpayer the CRA had already contacted was excluded from the programme entirely. Since 1 October 2025 that same taxpayer can apply as a prompted disclosure and still obtain up to full penalty relief. For a non-resident corporation whose exposure is almost entirely flat penalties rather than tax, that is close to the whole liability.
Other Filings This Situation Usually Exposes
| Filing | When It Applies | Its Own Penalty |
|---|---|---|
| T106 | Non-arm’s length transactions with non-residents above $1,000,000 | $500 per month to $12,000 |
| T1135 | Specified foreign property above $100,000 | $25 per day to $2,500 |
| NR4 slip and summary | Dividends, interest or royalties paid to non-residents | Penalty per slip, minimum $100 |
| Part XIII withholding | Amounts paid out of Canada without withholding | 10% of the amount not withheld, plus interest |
| GST/HST returns | Registered but not filing | Penalty and interest on net tax |
| Ontario annual return | Extra-provincially registered corporations | Corporation can be dissolved |
What the Calculator Does Not Include
- Interest on the penalties themselves: charged from the date the CRA assesses them
- Gross negligence penalties: assessed separately where the CRA considers the failure deliberate
- Provincial filings outside Ontario: Alberta and Quebec administer their own corporate tax
- The information return penalties above: each carries its own separate exposure
- Part XIV branch profits tax: where the Canadian activity is a branch rather than a subsidiary
- Professional fees: for the catch-up filings and the disclosure application itself
The order matters more than the speed. Filing the returns first and applying afterwards is not a voluntary disclosure. The application has to go in first, on Form RC199, with the returns following as part of it. Our non-resident tax return service prepares the disclosure and every unfiled year as one engagement.
Frequently Asked Questions
Common questions from foreign-owned corporations that have discovered a Canadian filing obligation.
Related Calculators and Guides
More tools for foreign-owned corporations with Canadian obligations.
Apply First, Then File. In That Order.
Send us the year ends you have missed and the corporate structure. We confirm whether a disclosure is available, prepare Form RC199, and file every outstanding year with Schedule 91 and Schedule 97 as part of the same application.