The Complete Guide to Corporate Tax Arrears and Interest
What arrears are, what interest attaches to, why a nil year creates none, and how an unfiled year manufactures a balance that was never owed. Nil T2 filing is $300.00 plus HST per tax year.
Written and reviewed by Sharad Gondaliya, CPA (Ontario), CPA Ontario Membership 61040184.
Last reviewed: October 27, 2026 · All nil T2 filing guides
On this page
- What Corporate Tax Arrears Are
- How Interest Is Charged on an Unpaid Balance
- Why a Nil Year Produces No Arrears
- Arbitrary Assessments and Manufactured Arrears
- Instalment Interest
- The Order Payments Are Applied In
- Taxpayer Relief and What It Covers
- Collections and Director Liability
- Clearing Arrears Created by an Unfiled Year
- How Long Arrears Last
- Keeping a Dormant Corporation Out of Arrears
- What the Fee Covers
Gondaliya CPA Professional Corporation is a registered EFILE electronic filer. Returns are prepared and transmitted in Canada. Credentials are never shared and never used offshore.
What Corporate Tax Arrears Are
Arrears are an unpaid balance on a corporation’s tax account. The balance can come from an assessed return, from a reassessment, from an assessment the Agency raised on its own estimate, or from a charge added to the account.
Arrears are a balance, not a filing. A corporation can be years behind on filing and owe nothing, and it can be fully filed and owe a great deal.
Separating the two is the point of this page. The rest of it is about which one a dormant corporation actually has.
How Interest Is Charged on an Unpaid Balance
Interest runs on an unpaid balance and compounds daily. It starts from the day the balance was due and continues until the balance is paid.
It attaches to the balance, which means it needs a balance to attach to. Interest is not charged on a return that was filed late and showed nothing owing.
| Charge | Attaches to | Needs |
|---|---|---|
| Interest | An unpaid balance | A balance owing |
| Instalment interest | Instalments not paid when due | An instalment obligation |
| Percentage late-filing penalty | Tax owing on the return | Tax owing |
All three columns describe the same dependency from different sides. None of the three has anything to work on where the corporation owes $0.00.
Why a Nil Year Produces No Arrears
A true nil return carries no percentage late-filing penalty, because that penalty is a percentage of tax owing and the corporation owes $0.00. The unfiled year still stays open forever, invites a demand to file and an arbitrary assessment, blocks a clearance certificate and dissolution, and costs a non-resident-owned corporation $25.00 per day up to $2,500.00.
A year with no activity assesses at $0.00. There is no balance, so there is nothing for interest to compound on and nothing for the percentage charge to be a percentage of.
That is the end of the matter only while the year is filed. The next section is about what happens when it is not.
Arbitrary Assessments and Manufactured Arrears
Where a return is not filed and a demand to file goes unanswered, the Agency may assess the corporation on its own estimate of income. The amount is an estimate the corporation did not supply.
That assessment creates a real balance. Interest then runs on it, and the corporation is in arrears on a figure it never earned.
This is how a dormant corporation that genuinely owed nothing ends up with a collectible debt and interest compounding daily. The balance was not produced by activity. It was produced by the missing return.
An arbitrary assessment stands until a filed return displaces it, which makes filing the only way to remove it. See what happens if a demand to file goes unanswered.
Nil T2 Filing, $300.00 plus HST per tax year
One price for every year and every province. CPA reviewed and transmitted electronically.
Instalment Interest
A corporation with tax owing above the threshold pays by instalments through the year. Where an instalment is missed or paid short, interest is charged on the shortfall.
A corporation with no activity has no instalment obligation, so it cannot incur instalment interest. The obligation arises from the previous year’s tax, and a nil year sets that at $0.00.
| Year | Tax owing | Instalments the following year |
|---|---|---|
| A nil year | $0.00 | None required |
| A trading year below the threshold | Small | None required |
| A trading year above the threshold | Above the threshold | Monthly or quarterly |
A corporation emerging from dormancy into a profitable year is the case to watch, because its instalment position for the following year changes.
The Order Payments Are Applied In
A payment to a tax account is not applied to whichever year the payer had in mind. It is applied according to the Agency’s own ordering, and interest already accrued is generally taken before the balance it accrued on.
The practical consequence is that a partial payment reduces a balance more slowly than the payer expects, because part of it clears interest that then stops growing only from that date.
None of this reaches a corporation whose years are all nil. It matters to a corporation that traded, stopped, and left a balance behind.
Taxpayer Relief and What It Covers
The Agency may cancel or waive interest and penalties in defined circumstances. Relief is discretionary, it is requested in writing, and it is decided on the facts of the particular account.
| Relief can be requested for | Relief does not extend to |
|---|---|
| Interest charged on a balance | The underlying tax itself |
| A late-filing penalty | The obligation to file the return |
| Charges arising from circumstances beyond the corporation’s control | A decision not to file |
Relief is not a route around filing. The return still has to be filed, and a request made while years remain outstanding has little to work with.
Collections and Director Liability
An assessed balance is collectible. The Agency has statutory collection powers it can use without going to court, and it can act on a balance produced by an arbitrary assessment exactly as on one produced by a filed return.
Certain amounts a corporation was required to withhold and remit, including payroll source deductions and net GST/HST, can be assessed against directors personally. Corporate income tax on its own is not among them.
A dormant corporation with an unclosed payroll or GST/HST account is the case where this becomes personal. Closing those accounts is covered in the guide to winding up an inactive corporation.
Clearing Arrears Created by an Unfiled Year
Filing the actual return is what removes an arbitrary assessment. The filed figures displace the estimate, and a nil year reassesses to $0.00.
Interest that accrued on the estimated balance falls away with the balance it was charged on. Where charges remain after reassessment, that is when a relief request has something definite to address.
| Step | Effect |
|---|---|
| File the outstanding year | Displaces the estimate |
| The year reassesses at $0.00 | The balance goes |
| Interest charged on that balance | Falls away with it |
| Anything left standing | Can be put to a relief request |
Oldest year first, each on its own return. See how to catch up on years of unfiled returns.
How Long Arrears Last
A collectible balance does not expire on a fixed anniversary. Collection limitation periods can be restarted by Agency action and by acknowledgement of the debt, so a balance left alone is not a balance running down.
An unfiled year does not expire at all. There is no point at which it closes itself, which is why an arbitrary assessment raised years ago can still be sitting on an account today.
Keeping a Dormant Corporation Out of Arrears
A dormant corporation stays out of arrears by filing each year on time. That is the whole mechanism: with the year filed at $0.00 there is no estimate, no balance and nothing to compound.
A holding corporation with investment income, a rental corporation and a corporation that paid or received a dividend are not nil. Those are handled by Gondaliya CPA Professional Corporation at gondaliyacpa.ca at $350.00 plus HST per year.
Each outstanding year is a separate return at $300.00 plus HST per tax year. See the full nil T2 filing cost.
What the Fee Covers
The fee is $300.00 plus HST per tax year, covering one nil T2 return for one corporation for one tax year:
| Included | Detail |
|---|---|
| The T2 return | Including the T2 Short where the corporation qualifies |
| GIFI Schedules 100, 125 and 141 | Where they are required |
| Schedule 24 | On a first return |
| Schedule 50 | For every shareholder at 10% or more |
| Schedule 8 and loss continuity | Recorded |
| Form T183CORP package | With single-use secure e-signing |
| CPA review | Before transmission |
| Electronic transmission | By a registered EFILE electronic filer |
| One corrected transmission | If the Agency rejects the first one |
| CRA confirmation | Emailed within 3 business days |
See the full nil T2 filing cost.
Frequently Asked Questions
Does a Nil Year Create Arrears?
No. A year with no activity assesses at $0.00, so there is no balance for interest to compound on and nothing for a percentage charge to apply to.
How Can a Dormant Corporation Owe Money Then?
Through an arbitrary assessment. Where a return is unfiled and a demand goes unanswered, the Canada Revenue Agency may assess on its own estimate of income, and interest then runs on that estimated balance.
Does Filing the Return Remove an Arbitrary Assessment?
Yes. The filed figures displace the estimate, a nil year reassesses to $0.00, and interest charged on the estimated balance falls away with it.
Does Interest Run on a Return Filed Late With Nothing Owing?
No. Interest attaches to an unpaid balance, so it needs a balance to attach to.
Can Directors Be Held Personally Liable?
For amounts the corporation was required to withhold and remit, including payroll source deductions and net GST/HST, yes. Corporate income tax on its own is not among them.
Do Arrears Expire if Left Alone?
A collection limitation period can be restarted by Agency action and by acknowledgement of the debt, so a balance left alone is not a balance running down. An unfiled year does not expire at all.
Questions Answered in Full
- What Happens if I Don’t File My T2 for Five Years?
- What Happens if I Don’t Respond to a CRA Demand to File a T2?
- Can I File a Nil T2 Late Without a Penalty?
- Can I Catch Up on Unfiled T2 Returns Without an Audit?
- What Happens if I Don’t File a Nil T2?
- How Do I Catch Up on Years of Unfiled T2 Returns?
The Other Nil T2 Filing Guides
- The Complete Guide to Winding Up an Inactive Corporation
- The Complete Guide to Small Business Corporate Filing
- The Complete Guide to the Corporate Compliance Calendar
- The Complete Guide to Numbered Company Maintenance
- The Complete Guide to Mandatory T2 Electronic Filing
- The Complete Guide to Schedule 50 and Shareholder Reporting
- The Complete Guide to Non-Resident-Owned Corporation Nil Filing
- The Complete Guide to the Nil T2 Return
- The Complete Guide to Dormant and Inactive Corporations
- The Complete Guide to Catching Up on Unfiled Corporate Tax Returns
- The Complete Guide to the Final T2 and Dissolution
- The Complete Guide to T2 Short Eligibility
Nil T2 Filing, $300.00 plus HST per tax year
Type your corporation name, pick your unfiled years, pay, and sign Form T183CORP on a secure screen. Your CRA confirmation is emailed within 3 business days.