At the 2016 APFF Conference, CRA indicated that an inactive corporation must file an income tax return, but could file a letter explaining the non-filing, and that a penalty would not be automatically imposed. What is the CRA position as to: (a) the obligation to file a T2 return for each of the years in which there is no business activity and, thus, no tax payable; and (b) the application of late-filing penalties?
After noting that such filing was required by s. 150(1)(a)(i)(A), CRA stated:
… Exida.com … stated that the general penalty in subsection 162(7) was applicable … where a person fails to comply with an obligation imposed on the person … unless another provision of the Income Tax Act provides for a penalty for such default. …
However … the CRA [considers] that since this decision is based on a rather narrow interpretation of the relevant statutory provisions, the penalty under subsection 162(7) will generally not be imposed on resident corporations that failed to file their tax returns where they either had no taxable income or had incurred a loss for the year. The CRA does not intend to change its position in this regard.