Mistakes, Penalties and Official Sources
Late-filing penalties for T2 and GST/HST returns: how they are calculated
How the CRA calculates late-filing penalties on corporate T2 and GST/HST returns, repeat penalties, e-filing and payment penalties, interest, and when relief may be available.
If a corporation files its T2 late, the CRA charges 5% of the tax unpaid at the filing deadline, plus 1% of that unpaid tax for each complete month the return is late, up to 12 months. A repeat late filer can face 10% plus 2% a month, up to 20 months. For GST/HST, the late-filing penalty is 1% of the amount owing plus 0.25% of it for each complete month late, up to 12 months. Interest on unpaid amounts is charged on top, compounded daily. Separate fixed penalties apply for not filing electronically and for paying large amounts by cheque. Filing on time, even when you cannot pay, avoids the percentage penalties.
This guide is part of the corporate accounting mistakes guide. The figures were checked against CRA and federal legislation pages in October 2026.
T2 late-filing penalty
According to the CRA:
- Standard penalty: 5% of the unpaid tax due on the filing deadline, plus 1% of that unpaid tax for each complete month the return is late, to a maximum of 12 months. The maximum is therefore 17%.
- Repeat penalty: if the CRA issued a demand to file and assessed a failure-to-file penalty in any of the three previous tax years, the penalty is 10% of the unpaid tax when the return was due, plus 2% for each complete month late, to a maximum of 20 months. The maximum is therefore 50%.
The penalty is based on unpaid tax at the deadline. If instalments or payments covered all the tax, the percentage penalty works out to nil, though interest and other penalties may still apply.
Illustrative example
A corporation owes $8,000 at its T2 deadline and files 4 months and 10 days late. Only complete months count, so 4 months.
Penalty = $8,000 x (5% + 4 x 1%) = $8,000 x 9% = $720, plus interest.
If the corporation is a repeat late filer: $8,000 x (10% + 4 x 2%) = $8,000 x 18% = $1,440.
GST/HST late-filing penalty
Under section 280.1 of the Excise Tax Act, the penalty is 1% of the amounts that were required to be remitted for the period and were not, plus one quarter of that 1% amount for each complete month the return is late, up to 12 months. The total is at most 4%.
Illustrative example
A quarterly return showing $6,000 of net tax is filed 3 complete months late and nothing was paid.
Penalty = $6,000 x (1% + 3 x 0.25%) = $6,000 x 1.75% = $105, plus interest on the $6,000 from the due date.
A smaller percentage than the T2 penalty, but GST/HST is filed more often and interest accumulates on the full amount.
Other penalties to know
| Penalty | Rule | Amount |
|---|---|---|
| Failing to file the T2 electronically when required | CRA e-filing requirement for tax years starting after 2023 | $1,000 (as stated by the CRA) |
| Paying more than $10,000 other than electronically | Income Tax Act s. 160.5(2); penalty in s. 162(7.4) | $100 for each failure, unless the payer cannot reasonably pay electronically |
| Instalment penalty | When instalment interest exceeds $1,000 | Half of the instalment interest above the greater of $1,000 and 25% of the interest that would have applied with no instalments |
| Information returns filed late or in the wrong format | Income Tax Act s. 162 | Depends on the number of slips and days late |
Interest
Interest on unpaid tax, unpaid instalments and penalties is charged at the CRA's prescribed rate, which is set each quarter and compounded daily. The rate charged on amounts you owe is higher than the rate the CRA pays a corporation on overpayments. Because the rate changes, check the current figure on the CRA site rather than relying on an old one. Interest is generally not deductible.
Relief: when penalties and interest may be cancelled
The CRA's taxpayer relief provisions allow it to cancel or waive penalties and interest in situations such as natural disasters, serious illness or accident, serious emotional or mental distress, CRA errors or delays, and, for interest, inability to pay or financial hardship. Requests must be made within ten calendar years after the end of the year in which the tax year or reporting period ended. Relief is discretionary and you need to explain and document what happened. Use the CRA's relief form or a written request; your accountant can prepare it, usually as an extra fee.
How to avoid the penalties
- File on time even if you cannot pay. The percentage penalties are for late filing; interest alone applies to late payment.
- Know your balance-due day. See the 2026 filing calendar.
- Set money aside monthly for GST/HST and corporate tax with the tax set-aside calculator.
- Send records early so your accountant can meet the deadline.
- Pay electronically for amounts over $10,000.
- Respond to demands to file immediately, because they set up the repeat penalty.
Penalties often follow from the issues in shareholder loans and personal expenses and automation errors and ITCs, and the CRA's own guidance on penalties is listed in the directory of official sources.
Frequently asked questions
Is there a penalty if no tax is owing?
The percentage late-filing penalty is based on unpaid tax, so it can be nil. A late return can still matter: it can affect eligibility for quarterly instalments and future relief requests, and other penalties can apply.
Do penalties apply to Quebec's CO-17 and QST?
Revenu Québec has its own penalty rules for Quebec returns. Check Revenu Québec for the current rules.
Can the accountant be charged the penalty?
No. The CRA assesses the corporation. Whether the firm compensates you depends on your agreement and the circumstances.
Sources
- Canada Revenue Agency — corporate penalties, GST/HST penalties, prescribed interest rates and taxpayer relief
- Justice Laws Website — Income Tax Act sections 160.5, 162 and 220(3.1); Excise Tax Act section 280.1
- Revenu Québec — Quebec penalties and interest
