All strata corporations must file a corporate income tax return each year, even if there is no tax payable. Generally, strata corporations are considered non-profit organizations that are exempt from tax under paragraph 149 (1)(l) of the Income Tax Act (ITA). A strata corporation’s taxation status is based on the particulars of the strata corporation each fiscal year.
All strata corporations must file a
1. Corporation Income Tax Return (T2); and
2. If eligible file a T1044 Return
In order to file a T2, a strata corporation will need to apply for a business number through CRA. A business number is simply a common identifier used by CRA. It does not change your tax status. T2 returns are due 6 months after the fiscal year end. Penalties and interest are assessed on taxes payable on late returns.
T1044 is a Non-Profit Organization Information Return. A strata corporation is eligible and must file a T1044 if:
1. It received or is entitled to receive taxable dividends, interest, rentals or royalties totaling more than $10,000 in one fiscal year;
2. It owns assets valued at more than $200,000 at the end of the immediately preceding fiscal period (i.e. cash and cash equivalents, accounts receivable, prepaid expenses, investments, tangible capital assets);
3. It had to file a non-profit organization return for a previous fiscal year.
Even though form T1044 is informational only, subsection 162(7) provides a penalty of $25 per day, up to a maximum of $2,500, for each missed filing (that is, each year). Fortunately, there is relief. The CRA’s administrative policy is not to apply the penalty when form T1044 is late-filed for the first time (CRA document no. 2007-0243291C6). It is unclear whether this policy applies to multiple missed filings filed at one time.
If a strata corporation voluntarily comes forward to correct inaccurate or incomplete information or to disclose information that they have not reported (like filing a T1044 for the first time) there may be relief from penalties that may be assessed by the Canada Revenue Agency (CRA). Speak to one of the professionals at JKC Group who can attend to tax relief through the Voluntary Disclosure Program or other possible available avenues.