Do I file Form T2 even if no tax is owed?
Annual return obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. Canadian resident corporations, including Canadian subsidiaries of foreign groups and Canadian companies with foreign operations.
What happens if I have missed Form T2 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form T2 the same as the other reports I already file?
No. The Canadian corporation return, with the schedules that report foreign income, foreign affiliates and payments to non-residents. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
Does my corporation file a T2 if it earned nothing?
Yes. Every Canadian resident corporation files, profit or not, and a year with no activity is still a year that has to be reported. The dormant year is also where cross-border groups most often fall behind, because nothing commercial happens to prompt anyone. If the corporation holds foreign affiliates or made payments to non-residents, the schedules that travel with the return can still be required in a year the corporation itself earned nothing. It is far cheaper to file a nil year on time than to reconstruct several of them afterwards from records nobody kept.
Which schedules go with a T2 when there is foreign income?
That depends on what the corporation actually did, which is why we start with the group structure rather than the trial balance. Foreign income, holdings in foreign affiliates and payments to non-residents each bring their own reporting, and a treaty position taken at any point in the group has to be reflected consistently. The point worth understanding is that the CRA reads the schedules together with the return and with each other. A schedule saying the corporation holds a foreign affiliate, sitting beside financial statements showing no such investment, is the inconsistency that starts the correspondence.
My company is owned by a foreign parent. What changes?
The return itself looks familiar; what grows is the reporting around it. Amounts flowing to the parent, such as management charges, interest, royalties and dividends, are payments to a non-resident with their own reporting and withholding consequences, and the pricing of intercompany dealings has to be supportable rather than merely recorded. Where a treaty rate is being relied on, the basis for it belongs on file before the return goes in, not after a question arrives. In practice the Canadian return is the visible part of a file that must agree with what the group reports elsewhere.
Do payments to our overseas parent go on the return?
They have to be reported, and they are read against the return rather than in isolation. A management fee appearing as an expense in the Canadian accounts is also a payment to a non-resident, so the two records should describe the same amount, for the same thing, in the same year. Where they do not, the difference is visible without anyone auditing anything. The practical discipline is to fix the intercompany arrangements and their documentation during the year, so the corporate return and the non-resident reporting are two views of one set of facts.
Our foreign subsidiary files nothing in Canada. Is that right?
The subsidiary itself may well have no Canadian filing obligation. That is a separate question from what the Canadian parent must report about it, which is where groups get caught. Holding a foreign affiliate brings reporting obligations onto the Canadian corporation's own return and the package accompanying it, and those obligations exist whether or not the affiliate ever sends money to Canada. So the honest answer is usually yes for the subsidiary and no for you. Check what the Canadian company is reporting about its holdings, not what the foreign company is filing.
Can we file the return now and the schedules later?
It is not a sequence we would recommend, because the schedules are not appendices. They are how the return is read. A return filed without the reporting that belongs with it presents an incomplete picture, and the later arrival of the missing pieces draws attention to the gap rather than quietly closing it. Where information from overseas is genuinely unavailable in time, the better course is to establish what can be supported, file on that basis, and deal with the shortfall deliberately and in writing rather than by silence.
Do I pay tax twice on a foreign dividend?
Not at full rates if the relief is claimed. The paying country usually withholds at source, capped by treaty where one applies and the paperwork is in place; your residence country then taxes the dividend and credits the foreign withholding against its own charge. Where the withholding exceeded the treaty rate because no declaration was filed, the excess is recovered from the paying country, not credited at home. See the dividends article.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
