---
name: filing-canadian-business-taxes
description: Guides Canadian business tax filings — T2125 for sole proprietors, T2 corporate returns, GST/HST registration and filing, payroll remittances, and T4/T5 slips, with deadlines and penalty rules. Use when the user asks how to file business taxes in Canada, about a T2 return, T2125 self-employment income, the small business deduction, registering for or filing GST/HST or QST, CPP/EI payroll remittances, T4 or T5 slips, or corporate instalments. Do not use for personal T1-only returns (preparing-canadian-personal-tax-returns), US filings (filing-us-business-taxes), or tax planning strategy (optimizing-business-taxes).
---

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Author: Simon-Pierre Boucher
Contact: contact@spboucher.ai
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# Filing Canadian Business Taxes

## When to use / when NOT to use
- **Use for:** which CRA filings a Canadian business owes (T2125 vs T2), GST/HST/QST registration and returns, payroll withholding and slips, deadlines, instalments, penalties.
- **Do NOT use for:** personal T1 returns without a business (→ `preparing-canadian-personal-tax-returns`), US entities (→ `filing-us-business-taxes`), or salary-vs-dividend strategy (→ `optimizing-business-taxes`).

## Important limits
- Educational help, not professional tax advice — multi-province, cross-border, or high-stakes filings go to a CPA.
- Figures and deadlines are tax-year-stamped and MUST be verified against canada.ca before use.
- Never assist with evasion, unreported income, or falsified records; refuse and explain.

## Core rules

1. **Structure determines the filing:**
   | Structure | Return | Filing due | Payment due |
   |---|---|---|---|
   | Sole prop / partnership (individuals) | T2125 inside the T1 | June 15 | **April 30** |
   | Corporation | T2 | 6 months after fiscal year-end | **2 months after year-end** (3 for many CCPCs) |
   Payment deadlines land BEFORE filing deadlines — money first, paperwork later.
2. **CCPCs get the small business deduction:** the first $500,000 of active business income is taxed at the low combined rate (~9% federal + province). Passive investment income above $50,000/year grinds the limit down.
3. **GST/HST registration is mandatory once revenues exceed $30,000** over four consecutive quarters (or one quarter alone). Register voluntarily below that to claim input tax credits (ITCs).
   - ✅ Registering at $28k because big equipment purchases are coming (recover ITCs)
   - ❌ Hitting $45k over two quarters and still charging no tax — liability accrues anyway
4. **Charge the rate of the customer's province** for most goods/services: HST provinces (ON 13%, NS/NB/NL/PE 15%), GST-only (AB/territories 5%), GST+PST (BC/SK/MB), GST+QST (QC — file with Revenu Québec).
5. **Payroll means CRA remittances:** withhold income tax + CPP + EI from each pay; remit with the employer share (CPP match, EI ×1.4) by the 15th of the following month (new small employers). T4 slips + summary due the last day of February.
6. **Dividends paid require T5 slips** (also end of February). Salary needs payroll accounts; dividends need directors' resolutions — don't blur them.
7. **Instalments:** corporations pay monthly/quarterly instalments after their first year owing >$3,000; self-employed individuals pay quarterly T1 instalments once tax owing exceeds $3,000 in consecutive years.
8. **Keep records 6 years** from the end of the tax year (CRA rule).

## Workflow

1. Confirm structure (sole prop vs corporation), province(s), fiscal year-end, and registrations (BN, GST/HST, payroll, corporate tax accounts).
2. Close and reconcile the books for the fiscal period.
3. File the return from rule 1; for corporations include the GIFI (financial-statement codes) mapping.
4. File the GST/HST return for the period: tax collected − ITCs = net remittance (or refund).
5. Verify slips: T4s match payroll ledger; T5s match dividends declared.
6. **Validate:** deadline calendar cross-checked against canada.ca; payment dates (which precede filing dates) scheduled; GST/HST collected account cleared by the remittance.

## Current figures (tax year 2026 — verify before use)

| Item | Figure | Source |
|---|---|---|
| Small business deduction limit | $500,000 active income (CCPC) | canada.ca |
| Passive-income grind threshold | $50,000/year | canada.ca |
| GST/HST registration threshold | $30,000 / 4 consecutive quarters | canada.ca/gst-hst |
| GST rate / HST examples | 5% GST; ON 13%; Atlantic 15% | canada.ca/gst-hst-rates |
| Instalment threshold | >$3,000 owing (fed) | canada.ca |

## Edge cases & failure modes
- **Quebec** files separately with Revenu Québec (QST, provincial return, payroll) — flag it explicitly.
- **First corporate year** → no instalments required, but the full balance is due 2–3 months after year-end; cash-plan for it.
- **Late T4/T5 slips** → per-slip penalties; file late rather than never.
- **Zero-rated vs exempt sales:** zero-rated (exports, basic groceries) still allow ITCs; exempt (residential rent, most financial services) do not — misclassification changes refunds.

## References
Deadline/rate tables, GST/HST worked example, and gotchas: see [references/reference.md](references/reference.md).