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New Corporations · First T2, Deadlines & Instalments · 2026

First-Year Corporate Taxes in Canada: What New Business Owners Need to Know

Your first fiscal period runs up to 53 weeks, not 53 months. The balance is due two months after year-end, and the shareholder loan clock is one year, not two.
By Sharad Gondaliya, CPA | Corporate Tax Filing

First year corporate taxes Canada require accurate filing of the T2 return, understanding corporate tax deadlines, and managing instalments to avoid penalties from the CRA. Gondaliya CPA helps new corporations with GST/HST registration, payroll accounts, record keeping, and first year tax obligations to ensure smooth corporate tax filing.

Quick Summary

Four things decide a new corporation’s first year:

  • 53 weeks is the maximum first fiscal period, under section 249.1.
  • Two dates, not one: the T2 is due six months after year-end, the balance two months after it.
  • No instalments in year one, because there is no prior year to base them on.
  • Shareholder loans: one year after the corporation’s year-end, not two.
SG
Author: Sharad Gondaliya, CPA (Canada & USA) — Founder & Managing Director, Gondaliya CPA Professional Corporation, Toronto, Ontario.
Reviewed and fact-checked by Sharad Gondaliya, CPA (Canada & USA)

Sharad Gondaliya, CPA (Canada & USA), brings 15+ years of experience setting up and filing for new Canadian corporations, covering first fiscal period selection under section 249.1, the T2 and its schedules, balance and instalment due dates, business number and program account registration, GST/HST small supplier timing, payroll accounts with source deduction schedules and director liability, pre-incorporation costs and shareholder loans under 15(2) with imputed interest, capital cost allowance prorated for a short year, salary against dividend planning with TOSI, non-capital loss carryovers, SR&ED for first-year claimants, mandatory electronic filing, and CRA review representation. Verify our firm on the CPA Ontario public firm directory.

CPA Ontario | CPA USA (Washington & Montana) | Registered Ontario CPA Firm | 1300+ 5-star Google reviews

Reading time: 31 minutes.

The Numbers That Matter

53 weeks
Maximum first fiscal period
6 & 2
Months to file; months to pay the balance
12.2%
Ontario combined small business rate
6 years
Record retention from the end of the tax year
Scope & Assumptions

This article covers newly incorporated Canadian-controlled private corporations filing a first T2, with Ontario and Toronto context, and reflects rules current to 26 September 2026. Corporate law formalities, minute books and share structure design are legal matters outside its scope. Non-resident corporations and public companies follow different rules. This is educational information only and not tax or legal advice.

Understanding First Year Corporate Taxes in Canada

1

First-Year Obligations and Deadlines

Obligations

Overview of First Year Corporate Tax Obligations
  • File a T2 for the first fiscal period, even with no revenue, under paragraph 150(1)(a).
  • Register for GST/HST once taxable supplies exceed $30,000 over four consecutive quarters or in a single quarter.
  • Open a payroll account before the first payday if anyone is paid, including the owner on salary.
  • Repay any shareholder loan inside the 15(2) window.
Importance of Accurate First Corporate Tax Return Filing

The first return sets the corporation’s fiscal period, its opening balances and its capital cost allowance pools. Errors here follow the company for years, because every later return builds on the closing figures of this one.

Key Tax Deadlines for New Corporations
Risk Warning

Risk Warning: the balance is due before the return is. The T2 is filed six months after fiscal year-end, but the tax itself is due two months after year-end, or three months for a CCPC claiming the small business deduction with taxable income under the business limit.

The balance date is not two months after filing. Interest under section 161 runs from that earlier date at the prescribed rate plus four points, compounded daily, even when the return itself arrives on time.

ObligationDeadlineAuthority
File the T2Six months after fiscal year-endITA 150(1)(a)
Pay the balanceTwo months after year-end; three for an eligible CCPCITA 157(1)(b)
Maximum first fiscal period53 weeks from incorporationITA 249.1(1)
InstalmentsNone in the first tax yearITA 157(1)(a)
Late filing penalty5% plus 1% per complete month, to 12 monthsITA 162(1)
Record retentionSix years from the end of the taxation yearITA 230(4)
Understanding the T2 Corporate Tax Return

The T2 reports the corporation’s income for the fiscal period, with the financial statements attached in GIFI form on Schedules 100, 125 and 141, the accounting-to-tax reconciliation on Schedule 1, capital cost allowance on Schedule 8, and shareholder detail on Schedule 50.

Setting Up Your Corporation for Tax Compliance

2

Setting Up for Tax Compliance

Setup

Incorporation and Business Registration Essentials

Incorporation creates a separate taxpayer. The corporation files its own return whether or not it earned anything, and its money is not yours to spend directly, which is the point most first-year problems trace back to.

Obtaining a Business Number and CRA Program Accounts
AccountSuffixNeeded when
Corporate income taxRCAlways, from incorporation
GST/HSTRTOn crossing the threshold, or voluntarily
PayrollRPBefore the first payment to an employee
Import and exportRMBefore goods cross the border
Information returnsRZFor T5 and similar slips
GST/HST Registration Requirements for New Corporations
  • Register once taxable supplies exceed $30,000 over four consecutive calendar quarters, or in a single quarter.
  • Exceeding in one quarter ends small supplier status immediately, with 29 days to register.
  • Exceeding across four quarters leaves you a small supplier until the end of the following month.
  • The threshold is in section 148 and the requirement to register in 240(1).
  • Voluntary registration lets a pre-revenue corporation recover GST/HST on start-up purchases.
Payroll Accounts and Source Deductions Overview
Risk Warning

Risk Warning: remittances are not due “within one month of the first payroll”. A regular remitter sends income tax, CPP and EI by the 15th day of the month following the month in which the amounts were deducted. Pay on 3 March, remit by 15 April.

Late remittance costs 3% to 10% under subsection 227(9), depending on how late, and unremitted source deductions follow the directors personally under section 227.1, not 227(4). For 2026, CPP is 5.95% each side between $3,500 and $74,600, CPP2 is 4% to $85,000, and EI is 1.63% with the employer at 1.4 times.

Choosing Your Fiscal Year-End and Its Impact on Filing
Risk Warning

Risk Warning: the first fiscal period is 53 weeks, not 53 months. Subsection 249.1(1) caps a corporation’s fiscal period at 53 weeks. A first period running “about four years and five months” is not available under any provision, and Regulation 1100(3) concerns short-year capital cost allowance, not fiscal period length.

You choose the first year-end simply by filing the first return with that date. Changing it afterwards needs CRA approval under 249.1(7), and approval is refused where the only reason is tax deferral.

  • A year-end after your busy season puts a full cycle in one period.
  • A year-end early in the calendar year can defer personal tax on a bonus into the following year.
  • December is simplest where the owner takes salary and wants payroll and personal years aligned.

Managing First Year Corporate Income and Expenses

3

Income, Expenses and Shareholder Loans

Income

Reporting Revenue and Handling No-Revenue Scenarios

A nil return is still a return. A Toronto startup incorporated on 15 March with a 31 December year-end has a 9.5-month first period and files by 30 June the following year, with or without revenue.

Where no tax is owing, the percentage penalty in 162(1) computes to nil, but the $1,000 penalty under 162(7.2) for failing to file electronically still applies, and an unfiled year stays open to assessment indefinitely.

Deductible Start-Up Costs and Capital Cost Allowance (CCA)
Key Stat

Key Stat: a short first year prorates the CCA claim by days in the period, not by how long you owned the asset. Regulation 1100(3) multiplies the claim by the number of days in the fiscal period over 365.

A 9.5-month first period therefore allows roughly 78% of a full year’s claim on every class, whether the asset arrived in month one or month nine. Separately, the half-year rule is suspended for eligible property acquired after 31 December 2024, so the two adjustments no longer stack.

ItemTreatmentSupport needed
Legal and accounting fees of incorporatingDeductible; eligible capital rules ended in 2017Invoice and shareholder loan entry
Pre-incorporation supplies and marketingDeductible when the corporation adopts and reimbursesReceipts in the owner’s name plus a board resolution
Equipment bought personally, transferred inCapital, at fair market value on transferInvoice plus transfer documentation
ComputersClass 50 at 55%, 100% first yearInvoice with available-for-use date
Office furniture and general equipmentClass 8 at 20%, prorated for a short yearInvoice
Handling Shareholder Loans and Owner Spending
Risk Warning

Risk Warning: the repayment window is one year, not two, and the result is income, not a dividend. Under subsections 15(2) and 15(2.6), an amount owed by a shareholder is included in income unless repaid within one year after the end of the corporation’s taxation year in which the loan was made.

A series of repayments and re-borrowings does not count. Section 80.4 also imputes a taxable interest benefit at the prescribed rate while the balance is outstanding, and paragraph 20(1)(j) gives a deduction when an amount previously included is repaid. Money flowing the other way, from owner to company, is a credit balance and carries none of this.

Our Actual Experience

An owner spent about $10,000 personally on materials before incorporating and recorded nothing until the year-end. The amounts were real business costs, but with no documentation the balance looked like drawings.

We recorded them as a credit due to the shareholder, supported by receipts and a directors’ resolution adopting the pre-incorporation expenses. The owner could then be repaid tax-free instead of taking salary or dividends for the same cash. Figures changed for privacy.

Salary Versus Dividends: Tax Implications for Owners
FeatureSalaryDividends
Corporate deductionYesNo, paid from after-tax profit
RRSP room18% of earned incomeNone
CPPBoth halves, 11.9% combinedNone
AdministrationPayroll account, remittances, T4T5 only
Family membersReasonable for work done, section 67Tested under TOSI, section 120.4
Accrued bonusPayable within 179 days, ITA 78(4)Not applicable
Record Keeping Best Practices for New Corporations
  • A separate bank account from day one, with no personal spending through it.
  • Receipts and invoices supporting every revenue and expense line.
  • A shareholder loan account reconciled monthly.
  • Minute book resolutions for salary, dividends and pre-incorporation expenses.
  • Records kept six years from the end of the taxation year under subsection 230(4).

Navigating Corporate Tax Rates and Instalment Payments

4

Rates, Instalments and Provincial Tax

Rates

Overview of Corporate Tax Rates for Canadian Corporations in 2026
IncomeFederalOntarioCombined
Active business, first $500,000 (CCPC)9%3.2%12.2%
Active business above the limit15%11.5%26.5%
Manufacturing and processing15%10%25%
Investment income (CCPC)38.67%11.5%50.17%, partly refundable

The balance due date sits in paragraph 157(1)(b). Section 159 concerns legal representatives and clearance certificates, and has nothing to do with when a corporation pays.

Small Business Deduction and Eligibility Criteria
  • A CCPC throughout the year, on active business income, to a business limit of $500,000 shared across associated corporations.
  • The limit is ground down by passive investment income over $50,000, reaching nil at $150,000.
  • It is also reduced on taxable capital between $10 million and $50 million.
  • A short first year prorates the business limit by days in the period.
Instalment Payment Rules and Avoiding Penalties
Key Stat

Key Stat: a new corporation pays no instalments in its first tax year. Instalments are calculated from the current year’s tax, the prior year’s, or the two prior years’, and a first-year corporation has no prior year, so nothing is payable until the balance due date.

Two points follow. Instalments for most corporations are monthly, not quarterly; quarterly is available only to an eligible CCPC with taxable income under the business limit and a clean compliance record. And no instalments are required in any year where total taxes payable are $3,000 or less, which keeps many small corporations out of the system entirely.

Understanding Provincial and Federal Tax Obligations

Ontario, and most provinces, administer corporate tax through the same T2, so one return covers both. Alberta and Quebec require a separate provincial return. Ontario’s Employer Health Tax is separate again, with a $1 million exemption and a top rate of 1.95%.

Impact of Global Minimum Tax on Canadian Corporations
Risk Warning

Risk Warning: the global minimum tax does not reach new small corporations. Canada’s Global Minimum Tax Act applies to groups with consolidated revenue of €750 million or more in at least two of the four preceding years.

A first-year corporation is not in scope and will not attract CRA attention on that basis. What can matter for a small company with cross-border transactions is transfer pricing under section 247, which is a different regime with its own documentation deadline at the T2 filing date.

Filing Your First Corporate Tax Return with Confidence

5

Filing the First T2

Filing

Step-by-Step Guide to Completing the T2 Return
  1. Set the fiscal period, up to 53 weeks from incorporation.
  2. Gather the records: statements, receipts, incorporation documents, shareholder loan detail and any assets rolled in from a sole proprietorship.
  3. Prepare the financial statements and map them to GIFI codes.
  4. Complete the T2 with Schedule 1, Schedule 8 prorated for the short year, Schedule 50 and the GIFI schedules.
  5. File electronically before the six-month deadline.
  6. Pay the balance two months after year-end, or three for an eligible CCPC.
Our Actual Experience

A startup incorporated 15 March with a 31 December year-end filed its first T2 on 30 June, correctly, and assumed it was done. Tax of about $9,000 had been due on 31 March, three months after year-end as an eligible CCPC.

The return was on time, so no late filing penalty applied, but interest had run for three months. The two dates are independent, and the earlier one is the expensive one to miss. Figures changed for privacy.

Common Filing Mistakes and How to Avoid Them
Risk Warning

Risk Warning: the late filing penalty is not “$200 plus $100 per month”, nor “$250 plus daily fines”. Under subsection 162(1) it is 5% of the unpaid tax plus 1% for each complete month the return is late, to a maximum of 12 months.

A repeat failure within three years, after a demand to file, doubles it to 10% plus 2% per month to 20 months. Where no tax is owing the percentage is nil, which is exactly why a dormant corporation can go years without filing and think nothing is wrong.

  • Personal expenses run through the corporation without support.
  • Shareholder loan balances left unreconciled or unexplained.
  • Full-year CCA claimed in a short first period.
  • Missing GIFI detail, which stalls processing.
  • Paying the balance on the filing date rather than the balance date.
Electronic Filing Options and CRA Compliance Requirements

Electronic filing is mandatory for substantially all corporations for tax years beginning after 2023. The old exemption for corporations under $1 million of gross revenue is gone, and the penalty for filing on paper without an exemption is $1,000 under 162(7.2). Certified software is listed by CRA; paper is limited to narrow cases such as non-resident corporations and those in bankruptcy.

Handling Losses and Non-Capital Loss Carryforwards
  • Non-capital losses carry back three years and forward twenty, under subsections 111(1) and 111(8).
  • A first-year loss has nothing to carry back to, so it waits for future profit.
  • Net capital losses carry back three years and forward indefinitely, against capital gains only.
  • An acquisition of control restricts the use of prior losses, which matters if investors come in later.
  • Claiming less CCA in a loss year preserves the pool rather than deepening a loss you cannot use.
Preparing for CRA Reviews and Maintaining Good Standing
  • No return filed while the corporation is clearly active.
  • A large or growing shareholder loan balance.
  • Source deductions remitted late or not at all.
  • Personal expenses claimed as business costs.
  • GST/HST registration missed after the threshold was crossed.

Where filings are behind or materially wrong, the Voluntary Disclosures Program, revised effective 1 October 2025, gives better relief while the disclosure is still unprompted.

Additional Considerations and Support for New Corporations

6

Credits, Payroll and 2026 Changes

Extras

Tax Credits and Incentives Relevant to First Year Corporations (e.g., SR&ED)
  • SR&ED: 35% refundable for a CCPC on expenditures up to the enhanced limit, doubled by Bill C-15 to $6 million, with capital expenditures eligible again for property acquired after 15 December 2024.
  • Claimed on Form T661 with Schedule 31, due 18 months after year-end. The deadline is statutory and CRA cannot extend it.
  • Ontario adds an 8% refundable Innovation Tax Credit and a 3.5% non-refundable R&D credit.
  • The Apprenticeship Job Creation Tax Credit is 10% of eligible apprentice wages to $2,000 each.
  • The relevant CRA guide is T4088, not RC4070, which is the general small business guide.

A first-year corporation with no tax payable still benefits, because the CCPC portion of SR&ED is refundable: it pays out in cash rather than waiting for profit.

Employer Payroll Contributions: CPP, EI, and Other Obligations
Item2026 figure
CPP, each side5.95% between $3,500 and $74,600
CPP2, each side4% between $74,600 and $85,000
EI, employee1.63% to $68,900
EI, employer1.4 times the employee premium
Remittance, regular remitter15th of the month following the deduction
T4 slipsLast day of February

An owner-manager who controls more than 40% of the voting shares is generally not insurable for EI, so no EI premiums are withheld on their own salary, though CPP still applies.

Important Updates and Changes in Corporate Tax Rules for 2026
  • Bill C-15, Royal Assent 26 March 2026, suspends the half-year rule for eligible property acquired after 2024 and reinstates 100% first-year expensing for manufacturing machinery and clean energy equipment.
  • The SR&ED enhanced limit doubled to $6 million with the phase-out widened to $15 million to $75 million.
  • Electronic filing has been mandatory for substantially all corporations since tax years beginning after 2023.
  • The Voluntary Disclosures Program was revised effective 1 October 2025.

What did not change: the late filing penalty in 162(1) has no separate escalation at 30 days, and there is no rule making instalments depend on expecting more than $3,000 of taxable income next year. The $3,000 figure is a threshold for total taxes payable, below which no instalments are required at all.

Resources and Support from Gondaliya CPA for First Year Tax Filing

We set up the corporation’s opening balance sheet, register the program accounts that are actually needed, put bookkeeping in place that will still make sense at year-end, and prepare the first T2 with its schedules. Fees are flat and stated before the work begins, including HST.

Legal Important Notes and Disclaimer on Corporate Tax Advice

Shareholder loan treatment sits in 15(2) with the repayment rule in 15(2.6), the imputed benefit in 80.4 and the repayment deduction in 20(1)(j). Money an owner puts into the company is a credit balance and repayable tax-free; money taken out without documentation is not. This article is educational and does not replace advice on your own facts.

FAQs on First Year Corporate Taxes Canada

7

Frequently Asked Questions

FAQ

What is the maximum length of the first fiscal period for a new corporation?+

53 weeks from the date of incorporation, under subsection 249.1(1). You set it by filing the first return with that year-end; changing it later needs CRA approval under 249.1(7), which is refused where the only purpose is deferral.

When is the T2 corporate tax return due date?+

Six months after the fiscal year-end. A 31 December year-end means 30 June. Filing late costs 5% of unpaid tax plus 1% per complete month under 162(1), doubling on a repeat within three years.

What is the balance due date for payment of corporate taxes?+

Two months after the fiscal year-end, or three months for a CCPC claiming the small business deduction with taxable income under the business limit. It is not two months after filing, and interest runs from that date whether or not the return is late.

What is the small supplier threshold for GST/HST registration?+

$30,000 of taxable supplies over four consecutive calendar quarters, or in a single quarter, under section 148. Exceeding it in one quarter ends small supplier status immediately with 29 days to register; exceeding it across four quarters leaves you a small supplier until the end of the following month.

Are new corporations exempt from instalment payments in their first year?+

Effectively yes. Instalments are computed from a prior year’s tax, and a first-year corporation has none, so the whole amount is simply due at the balance due date. Instalments are also not required in any year where total taxes payable are $3,000 or less.

What penalties apply for late corporate tax filing?+

5% of the unpaid tax plus 1% for each complete month the return is late, to 12 months, under 162(1). A repeat failure after a demand doubles it to 10% plus 2% per month to 20 months. Filing on paper without an exemption adds $1,000 under 162(7.2).

How long must corporations keep records for CRA compliance?+

Six years from the end of the taxation year to which they relate, under subsection 230(4). Some records, including the minute book and share register, are kept permanently, and CRA can require longer retention in writing.

What happens if shareholder loans are not repaid timely?+

The amount is included in the shareholder’s income under 15(2) unless repaid within one year after the end of the corporation’s taxation year in which it was made. It is not treated as a dividend, and section 80.4 imputes an interest benefit while the balance is outstanding. A later repayment gives a deduction under 20(1)(j).

When should payroll source deductions be remitted?+

By the 15th of the month following the month in which the amounts were deducted, for a regular remitter. Accelerated schedules apply above $25,000 of average monthly withholding, and eligible small employers can remit quarterly.

What risks do directors face if payroll deductions are not remitted?+

Personal liability for the unremitted amounts plus interest and penalties, under section 227.1. A due diligence defence exists, and liability generally ends two years after a person ceases to be a director, but the debt follows the individual, not the company.

Do I have to file if the corporation had no activity at all?+

Yes. Paragraph 150(1)(a) requires a return from every corporation resident in Canada for every tax year, whether or not tax is payable. A nil return is cheap; an unfiled year stays open to assessment indefinitely.

How is capital cost allowance calculated in a short first year?+

Prorated by the number of days in the fiscal period over 365, under Regulation 1100(3). A 9.5-month period allows roughly 78% of the full-year claim. The half-year rule that used to apply on top is suspended for eligible property acquired after 31 December 2024.

Quick Answers: Key Numbers & Concepts at a Glance

At a Glance

Item2026 position
First fiscal periodUp to 53 weeks, ITA 249.1(1)
T2 filingSix months after year-end
Balance dueTwo months; three for an eligible CCPC
Instalments, year oneNone
Instalment exemptionTotal taxes payable of $3,000 or less
Ontario small business rate12.2% combined on the first $500,000
Ontario general rate26.5% combined
GST/HST threshold$30,000, four quarters or one quarter
Payroll remittance15th of the following month
Shareholder loan windowOne year after the corporation’s year-end
Short-year CCAProrated by days over 365
Record retentionSix years from the end of the taxation year

Who This Is For / Not For

Fit Check

  • For: Owners of newly incorporated Canadian-controlled private corporations preparing a first T2, including pre-revenue companies and those converting from a sole proprietorship.
  • Not For: Corporate law questions on share structure and minute books, which belong with a lawyer, and non-resident or public corporations.

People Also Ask

Quick Answers

How long can my first corporate year be?+

Up to 53 weeks. Anything longer is not a valid fiscal period, and the “53 months” figure that circulates is simply wrong.

Do I pay instalments in my first year?+

No. There is no prior year to base them on, so the full amount is due at the balance due date, two or three months after year-end.

Can I take money out of my corporation before it makes a profit?+

Repaying what you put in is tax-free, because that is a credit balance. Drawing beyond that creates a shareholder loan, which becomes income under 15(2) if it is not repaid within a year of the corporation’s year-end.

What if my corporation lost money in year one?+

The non-capital loss carries forward twenty years. There is nothing to carry it back to in a first year, so consider claiming less capital cost allowance to preserve the pool rather than deepening a loss you cannot use yet.

Do I need a GST/HST number the day I incorporate?+

Not unless you are carrying on a taxi or ride-sharing business, which must register from the first fare. Otherwise you register on crossing $30,000, and registering voluntarily earlier lets you recover tax on start-up purchases.

Key Points on Corporate Tax Filing and Compliance with Gondaliya CPA

Checklist

  • First fiscal period: up to 53 weeks, chosen by filing the first return.
  • T2 due date: six months after year-end, electronically.
  • Balance due date: two months after year-end, three for an eligible CCPC.
  • Small supplier threshold: $30,000, on both the four-quarter and single-quarter tests.
  • First-year instalments: none, with the whole amount due at the balance date.
  • Late filing: 5% plus 1% per month under 162(1), not a flat dollar penalty.
  • Record retention: six years from the end of the taxation year, ITA 230(4).
  • Shareholder loans: repay within one year of the corporation’s year-end, or the amount is income.
  • Payroll: account opened before the first payday, remittances by the 15th of the following month.
  • Director liability: personal, under section 227.1, for unremitted source deductions.
  • Electronic filing: mandatory for substantially all corporations, $1,000 penalty otherwise.
  • GIFI codes: financial statements mapped on Schedules 100, 125 and 141.
  • Short-year CCA: prorated by days over 365 under Regulation 1100(3).

This quick self-check shows where your new corporation’s setup most likely needs attention. Please answer the five questions below.

First-Year Setup Check

Five quick questions on your business. No fee shown.

1. Have you chosen your first fiscal year-end?
2. Have you paid business costs personally?
3. Have taxable sales passed $30,000?
4. Are you paying yourself or anyone else?
5. Is your first T2 deadline within three months?

Please answer all five questions to continue.
Your escape room year-end profile

Points to raise with us:

Book a free consultation

This is a general prompt, not tax or legal advice or a quote. Your position depends on your full facts. For a real review, please book a free consultation.

Verdict

A first corporate year turns on three dates and one account. The first date is the year-end, which you choose once by filing, and which can sit anywhere up to 53 weeks from incorporation, not 53 months. The second is the filing deadline, six months after that year-end. The third is the one that costs money: the balance is due two months after year-end, or three for a CCPC claiming the small business deduction, and interest runs from that earlier date even when the return itself is filed perfectly on time. Instalments are the one genuine break a new corporation gets, because they are calculated from a prior year that does not exist, so the whole amount simply lands at the balance date. The account is the shareholder loan. Money you put into the company is a credit balance you can draw back tax-free, but money taken beyond that is a loan that becomes taxable income under 15(2) unless it is repaid within one year of the corporation’s year-end, with an imputed interest benefit under 80.4 running the whole time. Set those four things up properly in month one and the first return is a formality; get them wrong and every subsequent year inherits the problem.

2026 Update

What is current as at 26 September 2026: Bill C-15, Royal Assent 26 March 2026, suspends the half-year rule for eligible property acquired after 31 December 2024 and available for use before 2034, and reinstates 100% first-year expensing for manufacturing machinery in Classes 53 and 43 and clean energy equipment in Class 43.1. It also doubled the SR&ED enhanced expenditure limit to $6 million, widened the taxable capital phase-out to $15 million to $75 million and restored capital expenditure eligibility. Electronic filing is mandatory for substantially all corporations for tax years beginning after 2023, with a $1,000 penalty under 162(7.2). 2026 payroll: CPP at 5.95% each side between $3,500 and $74,600, CPP2 at 4% to $85,000, EI at 1.63% to $68,900 with the employer at 1.4 times. Ontario’s combined rates are 12.2% on the first $500,000 of active business income and 26.5% above it, with the Employer Health Tax exemption at $1 million. The Voluntary Disclosures Program was revised effective 1 October 2025. Unchanged for 2026: the 53-week fiscal period in 249.1(1); the six-month filing deadline and the two or three month balance date in 157(1)(b); the 162(1) penalty; the $30,000 small supplier threshold in section 148; the shareholder loan rules in 15(2), 15(2.6), 80.4 and 20(1)(j); short-year CCA proration under Regulation 1100(3); non-capital losses back three and forward twenty; and six-year retention under 230(4).

First-Year Corporate Taxes: How Gondaliya CPA Supports You

Just incorporated, or facing a first year-end you have not planned for?

For a flat fee stated before the work starts, we set the first fiscal period deliberately rather than by accident, open only the program accounts you actually need, record pre-incorporation costs as a shareholder credit so you can be repaid tax-free, keep the loan account inside the 15(2) window, prorate the capital cost allowance claim properly for a short year, plan the salary and dividend mix before the year closes rather than after, and file the first T2 with its schedules on time with the balance paid on the earlier date it is actually due.

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Next Steps

Book a free consultation with Gondaliya CPA. Bring your articles of incorporation, a list of what you have spent personally on the business, and your bank statements since incorporation. Those three settle the fiscal year-end, the shareholder loan opening balance and the registration position in one sitting. You’ll get a flat fee before any work begins. We serve Toronto, Mississauga, Brampton, Vaughan, Scarborough and the rest of Ontario, and work remotely across Canada.

SG
Sharad Gondaliya, CPA (Canada & USA) — Founder & Managing Director, Gondaliya CPA Professional Corporation
Reviewed and fact-checked by Sharad Gondaliya, CPA (Canada & USA)

Sharad Gondaliya, CPA (Canada & USA), has over 15 years of experience setting up and filing for newly incorporated Canadian businesses, including first fiscal period selection under subsection 249.1(1) and year-end changes under 249.1(7), T2 preparation with GIFI schedules and Schedule 1 reconciliation, balance and instalment due dates under section 157, business number and program account registration, GST/HST small supplier thresholds and registration timing under sections 148 and 240, payroll account setup with remitter classification and director liability under 227.1, pre-incorporation expenses and shareholder loans under 15(2), 15(2.6), 80.4 and 20(1)(j), capital cost allowance prorated for short years under Regulation 1100(3), salary against dividend planning with TOSI, non-capital and net capital loss carryovers, SR&ED claims for first-year claimants, mandatory electronic filing, voluntary disclosures, and CRA review representation. He is a CPA in Canada and the United States, licensed in Washington and Montana. Gondaliya CPA is a Registered Ontario CPA firm; registration is verifiable at cpaontario.ca. Verify our firm on the CPA Ontario public firm directory.

CPA Ontario | CPA USA (Washington & Montana) | Registered Ontario CPA Firm | 1300+ 5-star Google reviews

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Editorial policy: Deadlines, thresholds, rates and statutory references are verified against the Income Tax Act, the Excise Tax Act, their Regulations and CRA publications before publication, and updated when the rules change.

Disclaimer: This article is educational information only and is not tax, legal, or financial advice. First-year outcomes depend on your incorporation date, year-end and how money has moved between you and the company. Please speak with a CPA before acting.


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