Nil T2 Return Cost and Penalty Calculator
A corporation with no income still has to file. Work out how many returns are outstanding, what the real exposure is when no tax is owing, whether the T2 Short is available, and whether filing nil returns forever beats winding the company up.
to bring everything current
—
—
—
—
What Is Outstanding
| Obligation | Requirement | Position |
|---|
What It Actually Costs
| Item | Basis | Amount |
|---|
Keep Filing or Wind It Up
| Point of Comparison | Keep Filing Nil Returns | Dissolve the Corporation |
|---|
Points That Decide This
What to Do Next
—
Disclaimer: Under subsection 150(1) of the Income Tax Act every corporation resident in Canada must file a return of income for each taxation year, whether or not tax is payable, subject to limited exceptions. The return is due within six months of the end of the taxation year. The late-filing penalty under subsection 162(1) is 5% of the tax unpaid at the due date plus 1% of that unpaid tax for each complete month the return is late, to a maximum of twelve months; where no tax is owing the penalty computed under that provision is nil. Larger penalties apply under subsection 162(2) for repeated failures following a demand to file. Subsection 162(7) permits a penalty of $25 a day, to a maximum of $2,500, for failing to comply with a duty under the Act where no other penalty is specified, and the Minister may also issue a demand to file under subsection 150(2) and assess arbitrarily under subsection 152(7). The T2 Short return is a simplified two-page return available only to corporations meeting all of the Canada Revenue Agency’s stated conditions, which include being a Canadian-controlled private corporation with a nil or loss net income for income tax purposes and a permanent establishment in only one province or territory; the full conditions must be checked against the current CRA guidance before it is used. Since 2021 the Ontario Annual Return is filed through the Ontario Business Registry rather than with the T2, and a corporation that fails to file it may be dissolved by the registry. Government and professional fees used here are estimates and should be confirmed. This page is general information, not tax advice.
Yes, You Have to File
Subsection 150(1) requires every corporation resident in Canada to file a return for each taxation year, whether or not tax is payable. There is no dormancy exemption, no minimum revenue threshold and no provision that switches the obligation off because nothing happened.
The corporation exists, therefore it files. That remains true for a company incorporated three years ago that never opened a bank account, and for one that traded once in 2019 and has sat still since.
The obligation attaches to the corporation, not to the activity. The only reliable way to stop filing is to stop having a corporation, which means dissolving it properly rather than abandoning it.
The Late-Filing Penalty on a Nil Return Is Nil
This surprises people in both directions, so it is worth being precise. The penalty under subsection 162(1) is five per cent of the tax unpaid at the due date, plus one per cent of that unpaid tax for each complete month the return is late, up to twelve months.
Every part of it is a percentage of unpaid tax. Where no tax is owing, five per cent of nothing is nothing, and the twelve monthly increments are also nothing. A nil return filed eight years late attracts no penalty under that provision.
That is not the same as saying there is no consequence. The penalty calculation being nil is one narrow point. The real exposure sits in the discretionary penalty for failing to comply, the arbitrary assessment power, the loss of losses, the dissolution risk and the corporate paralysis that follows. Those are what actually cost people money.
What Actually Goes Wrong
| Consequence | Where It Comes From | Severity |
|---|---|---|
| Late-filing penalty on a true nil return | A percentage of nil tax | None |
| Failure to comply penalty | $25 a day to $2,500, at the Minister’s discretion | Real but capped |
| Demand to file, then arbitrary assessment | The Minister assesses on estimated figures | Tax assessed on income you never had |
| Non-capital losses never claimed | Losses must be reported to be carried forward | Permanent loss of a real asset |
| Dissolution by the registry | Failure to file annual returns | The corporation stops existing |
| No certificate of status | Not in good standing | Blocks financing, sale and contracts |
The arbitrary assessment is the one that turns a nil problem into a real one. If the CRA demands a return and none arrives, it can assess on whatever figures it considers reasonable, and the burden then falls on the corporation to displace that assessment by filing and proving the truth. A company with no records and no bookkeeping is badly placed to do that.
Losses Are the Quiet Cost
A pre-revenue corporation is usually not nil at all. It has incorporation costs, professional fees, software, a bit of equipment. Those are non-capital losses, and they can be carried forward twenty years against future profits.
They only carry forward if they are reported. A startup that skips three years of filing because there was no revenue has typically thrown away a five-figure loss pool it would have used in its first profitable year. That is a larger number than every penalty discussed on this page.
Expenses make a year non-nil, and that is good news rather than bad. A year with $4,000 of costs and no revenue is a loss year, not a nil year. It needs a proper return rather than a T2 Short showing zeros, and the return is what banks the loss.
The Ontario Annual Return Is a Separate Filing
Until 2021 the Ontario Annual Return travelled with the T2. It no longer does. It is filed through the Ontario Business Registry, separately, and a corporation can be fully current with the CRA while being in default with the province.
The consequence there is not a penalty but dissolution. A corporation that stops filing annual returns can be dissolved by the registry, which ends its existence, and reviving it afterwards is its own filing with its own fee and its own delay. Many owners discover this when they try to sell an asset the dissolved company still legally owns.
The T2 Short Return
The T2 Short is a two-page return for simple cases, and a genuinely dormant Canadian-controlled private corporation with nil income and a permanent establishment in one province is the case it was designed for. It reduces preparation time, which should reduce the fee.
The conditions are specific and cumulative, and they are not all about size. A corporation claiming certain credits, with a permanent establishment in more than one province, or not resident in Canada throughout the year, falls outside it. The conditions should be checked against current CRA guidance for each year rather than assumed to continue.
Filing Forever Against Winding Up
If the corporation has no future purpose, dissolution ends the obligation permanently. It costs more once and nothing thereafter, against a modest fee every year for as long as the company exists.
It is not purely arithmetic. A dissolved corporation cannot hold assets, and any property still registered in its name becomes a problem. Loss carryforwards die with it. The name is released. And if there is any chance of the business restarting, keeping a clean, current shell is usually cheaper than incorporating again and rebuilding the history.
| Situation | Usually Better |
|---|---|
| Genuinely finished, no assets, no plans | Dissolve |
| Holds property, investments or a bank balance | Deal with the assets first |
| Meaningful loss carryforwards | Keep it if profits are plausible |
| Business may restart within a few years | Keep filing, stay current |
| Name or trademark worth protecting | Keep filing |
Close the Accounts You Do Not Need
An open GST/HST account expects returns whether or not there is anything to report, and an open payroll account expects remittances. Both generate their own reminders, their own penalties and their own arrears letters for a company doing nothing at all.
Closing accounts that are no longer needed removes most of the ongoing noise, and it is usually the cheapest single step on a dormant file. It has to be done deliberately, since an account left open is not treated as closed just because nothing is happening in it.
What This Calculator Does Not Cover
- Whether the corporation was genuinely inactive, which decides whether these are nil returns or loss returns
- Assets still held by the corporation, which must be dealt with before any dissolution
- Taxpayer relief for penalties and interest, which is discretionary and fact-specific
- The Voluntary Disclosures Program, which may apply where there is unreported income rather than a nil position
- Director liability for unremitted source deductions or HST from the active period
- Revival of a corporation already dissolved by the registry
Bringing several years current at once is usually cheaper per year than the first year was. Our catch-up corporate tax filing service covers the outstanding returns, the annual returns, the account closures and the dissolution decision.
Frequently Asked Questions
Common questions on dormant and pre-revenue corporations.
Related Calculators and Guides
More tools for dormant and behind-schedule corporations.
Bring the Years Current, Then Decide Whether to Keep It
Send us the incorporation date, the last return filed and any bank statements for the dormant years. We will file the outstanding returns, bank any losses, bring the annual returns current, close the accounts you do not need and price the dissolution if that is the right answer.