As 2025 comes to a close, it’s the ideal time for incorporated professionals in Canada to review their tax strategy, organize their financials, and take advantage of every opportunity to optimize their year-end reporting. Whether you’re a physician, lawyer, dentist, or consultant operating through a professional corporation, this checklist will help ensure that you stay compliant with the Canada Revenue Agency (CRA) and make informed financial decisions.
At Raman Nat Inc., we specialize in supporting small businesses and incorporated professionals across British Columbia and Canada. This guide covers what Medical Professional Corporation (MPC), Legal Professional Corporation, or other professional corporations should do before year-end.
1. Reconcile Your Financial Records
Before filing your T2 Corporate Tax Return, ensure your bookkeeping is up to date. Reconcile all corporate bank accounts, credit cards, and loan balances. Confirm that all income, expenses, and asset purchases are accurately recorded. For professional corporations that operate with inventory or supplies, make sure to do a year-end count.
✔ Tip: Record all asset purchases with the “available for use” date to claim Capital Cost Allowance (CCA) or immediate expensing where applicable.
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2. Prepare Key Documents and Corporate Records
Keep your minute book updated. If you declared dividends, paid bonuses, or made changes to shareholders or directors, ensure these are properly documented with shareholder or director resolutions.
Gather and organize:
- Invoices and receipts
- Payroll records for T4s
- Dividends paid for T5s
- Shareholder loan details
- Investment account summaries
3. Salary or Dividend? Revisit Your Compensation Strategy
Many professionals wonder whether they should pay themselves salary, dividends, or a combination. The right answer depends on your income goals, retirement plans, and tax position.
- Salary creates RRSP room and contributes to CPP
- Dividends may be taxed more favorably and reduce payroll costs
- Combination strategies often provide flexibility and optimize outcomes
Speak with your accountant before year-end to determine the right mix for 2025.
4. Watch for Passive Investment Income Thresholds
If your professional corporation has investments (stocks, real estate, mutual funds), it is important to monitor passive income. Once passive investment income exceeds $50,000, your eligibility for the small business tax rate may begin to erode.
The small business limit is reduced by $5 for every $1 of passive investment income above $50,000, and is eliminated at $150,000.
5. Purchase Assets Before Year-End (if needed)
Corporations can claim capital cost allowance (CCA) on qualifying assets purchased and made available for use before the fiscal year-end. If you plan to invest in equipment, software, or office upgrades, doing so now may lower your 2025 tax bill.
Eligible corporations may also be able to take advantage of accelerated depreciation or immediate expensing. Confirm eligibility with your CPA.
6. Consider Declaring a Capital Dividend
If your Capital Dividend Account (CDA) has a positive balance, you may be able to issue a tax-free capital dividend to yourself before year-end. This is a valuable opportunity that many professionals overlook.
Your accountant can help confirm the CDA balance and file the necessary election (Form T2054) with the CRA.
7. File On Time: Know Your Deadlines
- T2 corporate tax return: Due 6 months after your corporation’s fiscal year-end
- Balance owing: Due 2 or 3 months after year-end, depending on your corporation type
- T4 slips for employees: Due February 28
- T5 slips for dividends: Due February 28
Late filings may incur penalties, so plan in advance.
8. Plan Ahead for Next Year
- Review your personal and corporate cash flow
- Adjust salary or dividend strategy for 2026
- Consider RRSP and TFSA contributions
- Plan charitable donations for personal or corporate deduction
- Confirm CRA installment obligations are up to date
A professional corporation is more than just a tax vehicle. It’s a powerful financial tool when used strategically. At Raman Nat Inc., we help you understand how to make your corporation work for you. Book a year-end review with our team and make sure you enter 2026 with a solid plan.
About Raman Nat Inc.
Raman Nat Inc. Chartered Professional Accountant is a trusted tax consulting firm located in Vancouver, BC, offering specialized financial services to professionals and small businesses. Our comprehensive suite of services includes corporate tax planning and preparation, bookkeeping, financial consulting, and business advisory, all designed to meet the unique needs of our diverse clientele. Contact: info@rncpa.ca
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