Choosing your corporation's year-end (you only get one free pick)

Summary

Your corporation has a tax year, and unlike your own tax year it doesn’t have to run from January to December. A corporation’s tax year is its fiscal period, meaning the stretch of time its books and its tax return cover. The last day of that period is your year-end, and every corporate deadline counts forward from it.

You pick the date once, by writing it on your corporation’s first T2, which is the corporate income tax return. Nobody hands it to you, it isn’t in your articles of incorporation (the document that created the corporation), and there’s no form to file and nothing to apply for. Your first tax year can’t run longer than 53 weeks from the day you incorporated, and any date inside that window is free.¹ Changing it afterwards normally needs written approval from the CRA.²

In our view, pick the last day of a month, because a year-end on the 9th lines up with no bank statement and no payroll period. Then pick the month when your business has the least to count and value on that date (e.g. stock on the shelves, invoices your customers haven’t paid). If you carry no stock and have no real season, which covers most consultants, contractors and agencies, take the month-end just short of 53 weeks out. No corporation pays instalments, meaning the prepayments of corporate tax made during the year, in its first tax year whatever that year’s length, so the further out that first year-end sits, the later every payment starts.³

Three things override that. A professional corporation, meaning one carrying on the practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, has to use December 31 if it carries on business in Canada and is a partner in a partnership.⁴ If you already own another corporation, give the new one the same year-end as the one you have rather than the best month for each on its own. And if you’d rather never think about the date again, pick December 31 on purpose. Whichever date you pick, our deadline calculator shows every CRA date that follows from it.

What the date controls

Once the year-end is set, a list of deadlines follows from it automatically:

• Your T2 corporate return is due six months after year-end, so June 30 for a December 31 year-end.⁵
• The tax itself is due earlier, at either two months or three. You get three months only if all three of the following are true. Your corporation was a Canadian-controlled private corporation all year (privately held, not listed on a stock exchange, controlled by people resident in Canada), it claimed the small business deduction that year or the year before, and its taxable income last year was at or below its business limit. Everyone else pays at two months, and if you can’t tell which you are, use the two-month date.⁶
• Miss your payment date, whichever of the two applies to you, and interest runs on the unpaid tax from that day forward rather than from the six-month filing deadline. The CRA resets the rate every quarter.
• Your GST/HST year copies your corporate fiscal period automatically (GST/HST being the goods and services tax and harmonized sales tax you charge customers). File that return once a year and it’s due, with the payment, three months after your year-end.⁷

What doesn’t move is everything personal and everything on a payroll calendar. Your own T1, which is your personal income tax return, still covers January to December. T4 slips, which report salary, and T5 slips, which report dividends (i.e. money paid to you as a shareholder out of the corporation’s after-tax profit), are still due the last day of February. Payroll deductions, meaning the tax withheld from a paycheque, still go in by the 15th of the following month if you’re a regular monthly remitter, which most new employers are. The CRA assigns some employers a quarterly or more frequent schedule instead.⁸ A non-calendar year-end leaves you tracking two year-ends rather than one.

Choosing the date

Assuming your corporation isn’t one of the professional corporations forced onto December 31, we’d weigh four things in this order.⁴

Start with when your business is quiet, because closing a year costs accountant time in proportion to how much there is to count and verify on that date: stock, unpaid invoices, jobs half finished. Picking the trough of your cycle makes that work cheaper, and gives you a reason the CRA accepts if you later want to move the date. What it costs is visibility, because a September 30 year-end appears on no calendar and in nobody’s reminder emails, so it’s easier to miss. Missing it is expensive: a late T2 costs 5% of whatever tax was unpaid at the filing deadline, plus another 1% of that same amount for every complete month the return is late, up to 12 months.⁹

Second, look at where the tax payment lands, because an October 31 year-end puts a corporate payment in January. For a landscaper or a marina, January is the worst possible month to find that cash, and the bill is exactly the same size it would have been in a better month.

Third, decide how long the first year runs, because its length is the only one of these four you can never revisit. To provide an example, incorporate on June 12, 2026 and your 53 weeks run out on June 18, 2027. The last month-end inside that window is May 31, 2027, so your first-year tax payment falls on August 31, 2027 if you’re on the three-month deadline (July 31 if you’re on the two-month one), about 14 and a half months after you started. What you accept is a date set by when you happened to incorporate, and one large bill rather than instalments. Your second tax year starts June 1, 2027, so instalments for it can fall due before you’ve paid the first year’s tax.³

Fourth, weigh what December 31 buys, which is one date covering your corporate year, your personal return, the calendar year your T4 and T5 slips report on, and your sales tax year. Everything you track closes on the same day, though the deadline for filing those slips never moves off February. What it costs is a year-end in the month when many businesses are busiest and every accounting firm is at capacity.

What we’d discount is the common claim that a year-end other than December 31 defers tax. The deferral they mean comes from a rule about bonuses rather than from the date. A bonus properly accrued at year-end stays deductible for that year if paid within 180 days afterwards, and that works from any year-end, December 31 included.¹⁰

Changing it later

Subsection 249.1(7) of the Income Tax Act says a fiscal period’s end date can’t be changed without the concurrence of the Minister, which in plain terms means the CRA has to agree.² The request is a letter to your tax services office, meaning the regional CRA office assigned to your file, giving your reasons and the date you want it effective. You can look yours up by postal code on the CRA’s website, or find it on a letter the CRA has sent you.¹¹ The reasons have to be operational rather than tax-driven (e.g. lining up with another corporation you control, or matching your payroll or GST/HST account), so a change made to defer tax is refused.¹² A few events end the tax year with no approval needed at all, among them an acquisition of control, a wind-up, an emigration, and a change in Canadian-controlled private corporation status.¹¹

Approval also has a price. A fiscal period can’t run past 53 weeks, so in almost every case the change has to be made by cutting the current year short rather than stretching it. A short year means an extra return, an extra bill from your accountant, and less of that year’s profit taxed at the low rate small corporations get, which is 9% federally in 2026 rather than the general 15%.¹³

How often this changes

We’d leave a year-end alone unless one of the following happens:

• Your professional corporation joins a partnership, which makes December 31 mandatory.⁴
• Someone acquires control of your corporation, which ends the tax year automatically and lets it choose a new fiscal period without CRA approval. A share sale that doesn’t change who controls the corporation leaves the year-end alone.¹⁴
• You add a second corporation or a holding company, meaning one that exists to own shares of another rather than to trade, at which point putting both on one year-end matters more than which month you picked.
• You start carrying stock, or your business becomes seasonal or stops being seasonal, which moves where the quiet month sits.
• A bank or an investor that needs your year-end financial statements imposes a schedule (e.g. statements every March as a condition of keeping a loan in place). Where a lender wants an accountant’s report on those statements, that’s separate work we don’t do.

Otherwise there’s no reason to revisit it, and we wouldn’t.

Closing thoughts

For most owner-managed corporations, the difference in actual tax between one year-end and another is small. The money lost by forgetting a date you never remember is not small: a late return, interest, and a penalty on tax you had the cash for all along. The gap between the two is most of why we treat the pick as an operations question rather than a tax question. Whatever you land on, put two dates into a calendar you actually read, on the day you decide. One is the payment date, two or three months after year-end, and the two-month version is the safe one to enter if you aren’t certain which applies to you. The other is the filing date, six months after year-end.

How we handle it

We set the year-end when we register a new corporation, and we check it on files we take over where the date was inherited rather than chosen. Where a change is worth making, we draft the letter to the tax services office, file the short-year T2, and reset the instalment and GST/HST schedules that move with it. Corporate and personal filings sit in one file, so both calendars come from the same place.