Corporate income tax (T2) — the basics

Lesson 2 of 4 in Canadian Tax Fundamentals for IEPs · 22 minutes

The T2 is the corporate tax return for Canadian corporations. This lesson covers the structure, key concepts (small business deduction, dividend types), and what makes Canadian corporate tax distinct.

What you'll learn

Understand the T2 structure
Apply the small business deduction (SBD)
Distinguish active business income from investment income
Recognize the integration principle (corporate vs personal tax)

From the lesson

The T2 is the federal corporate income tax return. Every corporation operating in Canada must file a T2 annually, even if it has no income. The T2 is more complex than the T1 — corporate tax uses different rates, different rules, and more sophisticated planning. This lesson covers the foundations.

1. The T2 — what it is

The T2 has many schedules: • Schedule 1: Net income for tax purposes (reconciles accounting income to taxable income). • Schedule 2: Charitable donations. • Schedule 3: Dividends received and paid. • Schedule 4: Loss continuity. • Schedule 5: Tax calculation supplementary. • Schedule 8: Capital cost allowance (depreciation for tax). • Schedule 23 / 49: Small Business Deduction…