Compliance, administration and a capstone

This final lesson does two things. First, it sets out the compliance calendar of an owner-managed corporation: when the T2 return is due, when tax must be paid, how instalments work, the information slips and payroll obligations that come with paying salaries and dividends, the reassessment and objection rules for corporations, and the personal liability of directors. Second, it assembles Brandt Aerial Inc.'s 2027 corporate tax and Leah's 2027 personal tax from the pieces computed in lessons 2 to 9, reviews the year and identifies planning points for 2028. As throughout, the figures are invented and illustrative, and they apply 2026 rates on the assumption that they continue to 2027.

Filing the T2 return

Every corporation resident in Canada, and every non-resident corporation that carried on business in Canada or disposed of taxable Canadian property, must file a T2 return for each taxation year, even if it owes no tax. The return is due six months after the end of the taxation year, so Brandt Aerial Inc.'s 2027 return is due on 30 June 2028. For taxation years beginning after 2023, almost all corporations must file electronically. The return includes the GIFI financial statements and schedules such as Schedule 1 (net income reconciliation), Schedule 8 (CCA), Schedule 7 (aggregate investment income and the small business deduction), Schedule 50 (shareholder information), Schedule 53 (GRIP) and Schedule 23 if the corporation is associated with others. A corporation with permanent establishments in more than one province also files the provincial allocation schedule, and those with permanent establishments in Quebec or Alberta file separate provincial returns. The late-filing penalty is 5 per cent of unpaid tax plus 1 per cent per month up to 12 months, doubled for repeat failures after a demand.

Paying the tax and instalments

A corporation's balance of tax for a year is due two months after its year-end, or three months for a CCPC that claimed the small business deduction in the current or preceding year and whose taxable income for the preceding year, together with that of associated corporations, did not exceed its business limit. Brandt Aerial Inc. qualifies for the three-month date, so its 2027 balance is due on 31 March 2028, three months before the return. Corporations must pay instalments if their tax payable under Parts I, VI, VI.1 and XIII.1 for the current or the preceding year exceeds $3,000. Most corporations pay monthly instalments, each one-twelfth of the estimated current-year tax, the previous year's tax, or a combination based on the second preceding year. A small CCPC, one with taxable income and taxable capital (with associated corporations) of no more than $500,000 and $10 million, that claimed the small business deduction and has a perfect compliance history for 12 months, may pay quarterly instalments instead. Interest on late or deficient instalments is charged at the prescribed rate plus 4 percentage points, and an additional penalty applies when instalment interest exceeds $1,000.

Payroll and information slips

Paying Leah a salary makes Brandt Aerial Inc. an employer. It must deduct income tax and CPP from her pay (but not EI, as a controlling shareholder) and remit the deductions with its own CPP contributions to the CRA by the 15th of the following month, or less often for small remitters, and file a T4 slip and summary by the last day of February: 28 February 2028. Failing to remit source deductions brings penalties of up to 10 per cent, and 20 per cent for repeated failures. Dividends paid in 2027 must be reported on T5 slips by the same date, showing the eligible and non-eligible dividends and their grossed-up amounts; capital dividends are not reported on T5 slips but must have been elected on form T2054. Payments to contractors in some industries must be reported on T5018 slips. The corporation must also file its GST/HST returns on its elected schedule and keep records for six years after the end of the year to which they relate. Directors are jointly and severally liable for unremitted source deductions under section 227.1 and unremitted GST/HST under section 323 of the Excise Tax Act, unless they exercised the care, diligence and skill of a reasonably prudent person, and the CRA must assess them within two years after they cease to be directors.

Assessments, objections and appeals for corporations

The CRA has three years from the date of the original assessment to reassess a CCPC for a taxation year, and four years for other corporations; the periods are extended by three years for reassessments arising from loss carrybacks, transactions with non-arm's length non-residents and certain other items, and there is no limit where the taxpayer made a misrepresentation through carelessness or wilful default, or filed a waiver. A corporation that disagrees with an assessment must file a notice of objection within 90 days after the date of the assessment; unlike individuals, corporations do not get the alternative one-year deadline. A large corporation, one with taxable capital over $10 million, must describe each issue, the relief sought and the facts and reasons relied on, and can be required to pay half of the disputed amount while it objects. Appeals then go to the Tax Court of Canada, the Federal Court of Appeal and, with leave, the Supreme Court of Canada.

Capstone: Brandt Aerial Inc. and Leah in 2027

The program brings the year together. The corporation's Part I tax of $11,552.17 comes from lesson 3, its Part IV tax of $2,300 and its dividend refund of $4,446.67 from lesson 4. Leah's income consists of her $70,000 salary, her $23,000 share of SkyGrid Data's income from lesson 7, and the dividends paid in lesson 4: $6,000 eligible, $20,000 non-eligible and a $3,000 capital dividend. Because her partnership income is self-employment income and her salary is below the CPP maximum, she also pays both halves of CPP on the part of her partnership income needed to reach the maximum. Her personal tax is computed with the 2026 federal and Manitoba brackets, the basic personal amounts, CPP credits and deductions, the Canada employment amount and the federal and Manitoba dividend tax credits.

# Capstone: Brandt Aerial Inc.'s 2027 T2 and Leah's 2027 personal tax (2026 rates, illustrative)
FED = [(58_523, 0.14), (117_045, 0.205), (181_440, 0.26), (258_482, 0.29), (float('inf'), 0.33)]
MB = [(47_000, 0.108), (100_000, 0.1275), (float('inf'), 0.174)]
def bracket(x, br):
    tax, lo = 0.0, 0.0
    for hi, r in br:
        if x > lo:
            tax += (min(x, hi) - lo) * r
        lo = hi
    return tax

# Corporation (lessons 2 to 4)
part_i, part_iv = 11_552.17, 2_300.00
refund = 2_300.00 + 2_146.67                     # eligible and non-eligible RDTOH used
corp_net = part_i + part_iv - refund
print(f"{'T2: Part I tax (federal and Manitoba)':<52}{part_i:>11,.2f}")
print(f"{'T2: Part IV tax on portfolio dividends':<52}{part_iv:>11,.2f}")
print(f"{'T2: dividend refund':<52}{-refund:>11,.2f}")
print(f"{'Net corporate tax for 2027':<52}{corp_net:>11,.2f}")
print()
# Leah (lessons 5, 7 and 8 of this course; personal rules from ACCT-351)
salary, elig, nonelig, cap_div, partnership = 70_000, 6_000, 20_000, 3_000, 23_000
g_e, g_n = 1.38 * elig, 1.15 * nonelig
cpp1_emp = 0.0595 * (min(salary, 74_600) - 3_500)
se_room1 = max(0.0, 74_600 - max(salary, 3_500))           # CPP1 room left for self-employment
se_cpp1 = 0.119 * min(partnership, se_room1)
se_cpp2 = 0.08 * max(0.0, min(salary + partnership, 85_000) - 74_600)
# deductible: enhanced part of employee CPP, the employer half of self-employed CPP,
# the enhanced part of the other half, and all CPP2
enhanced_deduction = cpp1_emp / 5.95 + se_cpp1 / 2 + (se_cpp1 / 2) / 5.95 + se_cpp2
base_credit = cpp1_emp * 4.95 / 5.95 + (se_cpp1 / 2) * 4.95 / 5.95
net_income = salary + partnership + g_e + g_n - enhanced_deduction
fed = (bracket(net_income, FED) - 0.14 * (16_452 + base_credit + 1_501)
       - 0.150198 * g_e - 0.090301 * g_n)
mb = (bracket(net_income, MB) - 0.108 * (15_780 + base_credit)
      - 0.08 * g_e - 0.007835 * g_n)
personal = fed + mb
print(f"{'Salary (T4)':<52}{salary:>11,.2f}")
print(f"{'Share of SkyGrid Data partnership income (T5013)':<52}{partnership:>11,.2f}")
print(f"{'Eligible dividends grossed up 38%':<52}{g_e:>11,.2f}")
print(f"{'Non-eligible dividends grossed up 15%':<52}{g_n:>11,.2f}")
print(f"{'Capital dividend (not taxable)':<52}{0:>11,.2f}")
print(f"{'Less deductible CPP (enhanced and self-employed)':<52}{-enhanced_deduction:>11,.2f}")
print(f"{'Net income = taxable income':<52}{net_income:>11,.2f}")
print(f"{'Federal tax after credits and DTC':<52}{fed:>11,.2f}")
print(f"{'Manitoba tax after credits and DTC':<52}{mb:>11,.2f}")
print(f"{'Total personal income tax':<52}{personal:>11,.2f}")
print(f"{'CPP on self-employed partnership income':<52}{se_cpp1 + se_cpp2:>11,.2f}")
print(f"{'Total income tax, corporate and personal':<52}{corp_net + personal:>11,.2f}")

T2: Part I tax (federal and Manitoba)                 11,552.17
T2: Part IV tax on portfolio dividends                 2,300.00
T2: dividend refund                                   -4,446.67
Net corporate tax for 2027                             9,405.50

Salary (T4)                                           70,000.00
Share of SkyGrid Data partnership income (T5013)      23,000.00
Eligible dividends grossed up 38%                      8,280.00
Non-eligible dividends grossed up 15%                 23,000.00
Capital dividend (not taxable)                             0.00
Less deductible CPP (enhanced and self-employed)      -1,816.70
Net income = taxable income                          122,463.30
Federal tax after credits and DTC                     15,272.28
Manitoba tax after credits and DTC                    12,815.17
Total personal income tax                             28,087.45
CPP on self-employed partnership income                1,379.40
Total income tax, corporate and personal              37,492.95

Brandt Aerial Inc.'s net corporate tax for 2027 is $9,405.50 after the dividend refund. Leah's net income is $122,463.30, putting her in the 26 per cent federal bracket and the 17.4 per cent Manitoba bracket, and her personal income tax is $28,087.45, plus $1,379.40 of CPP on her partnership income. Total income tax on the family's business income, corporate and personal, is $37,492.95. The corporation retains about $80,000 of its accounting income after tax and dividends, taxed so far only at the corporate level, to fund equipment for the second year of the utility contract; that deferral is the main tax benefit of incorporation. Leah received the $3,000 capital dividend tax-free and recovered all of the corporation's refundable tax. Her 2027 balance owing will depend on the tax withheld from her salary, and because her partnership income was not subject to withholding, she should expect to pay personal instalments for 2028 if her net tax owing exceeds $3,000 in 2028 and in 2027 or 2026.

Reviewing the year and planning for 2028

A review of the year suggests several points for 2028. Leah's salary of $70,000 is below the CPP maximum pensionable earnings; raising it toward $85,000 would increase her RRSP room and CPP pension and, together with a year-end bonus, keep the corporation's active income within the business limit as revenue grows. The corporation's portfolio is small, but if retained earnings are invested in interest-bearing securities, the passive income grind and Manitoba's high rate on investment income make growth investments, debt repayment or an individual pension plan more attractive. The estate freeze and the Brandt Family Trust should be implemented early in 2028, with an independent valuation and a price adjustment clause, before the value of the business grows further, but the family should not expect dividends to Tomás or Nora to escape TOSI. SkyGrid Data must register for GST/HST by early 2028. The corporation must pay quarterly instalments for 2028 and file the trust's T3 and Schedule 15 once the trust exists. Finally, Leah should keep the corporation's minute book, shareholder loan account and capital dividend account up to date, because the reorganizations and dividends that make the structure work depend on them.