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# CRA Late Filing Penalties for T2, T1 and GST/HST: The Formulas, With Worked Examples
- URL: https://learn.sansarsolutions.com/cra-late-filing-penalties-explained/
- Published: 2026-10-15T02:13:12.000Z
- Updated: 2026-10-15T02:41:31.000Z
- Description: How CRA calculates late filing penalties on T2, T1 and GST/HST returns, the repeat-offender rule, daily interest, and worked examples for small businesses.
- Author: Gurdeep Sangha
- Tags: CRA Problems

**For T2 and T1 returns, the CRA's late-filing penalty is 5% of the balance owing plus 1% for each full month late, up to 12 months. For GST/HST it's 1% of the amount owing plus 0.25% per full month, up to 12 months.** If you owe nothing, there is generally no percentage penalty, but you still have to file. Repeat late filers can face double penalties.

## The three formulas side by side

| Return                    | Basic penalty                                          | Repeat penalty                                                                                       | Source                                                                                                                                                                                                                           |
| ------------------------- | ------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| T2 corporate              | 5% of unpaid tax + 1%/full month (max 12)              | 10% + 2%/month (max 20) if a demand was issued and you were penalized in any of the previous 3 years | [canada.ca, corporations](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/avoiding-penalties.html?ref=learn.sansarsolutions.com)                                        |
| T1 personal (incl. T2125) | 5% of balance owing + 1%/full month (max 12)           | 10% + 2%/month (max 20) under the same conditions                                                    | [canada.ca, individuals](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/interest-penalties/late-filing-penalty.html?ref=learn.sansarsolutions.com)                                |
| GST/HST                   | 1% of amount owing + 0.25% × full months late (max 12) | $250 failure-to-file penalty if you ignore a demand                                                  | [canada.ca, GST/HST](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/file-gst-hst-return/reporting-requirements-deadlines/gst-hst-filing-penalties.html?ref=learn.sansarsolutions.com) |

On top of every penalty, **interest compounds daily** at the CRA's prescribed rate, which changes each quarter, on both the tax and the penalties.

## Worked example 1 (hypothetical): a T2 filed 7 months late

A corporation owes $20,000 for a year and files 7 full months after the due date. - 5% × $20,000 = $1,000 - 1% × $20,000 × 7 = $1,400 - **Penalty: $2,400**, plus daily interest on the tax from the balance-due date (not the filing date).

## Worked example 2 (hypothetical): the repeat-offender trap

Same corporation, but last year it was also penalized and the CRA sent a demand to file. Now it's 10% + 2% × 7 = 24%, which is **$4,800**. This is why businesses that are several years behind should file in the right order and think about the [Voluntary Disclosures Program](https://learn.sansarsolutions.com/cra-voluntary-disclosure-program-changes/) **before** the CRA writes to them.

## Worked example 3 (hypothetical): quarterly HST, 18 months late

$6,000 owing: 1% = $60, plus 0.25% × 12 (capped) = 3% = $180\. **Penalty: $240** plus interest. GST/HST penalties are smaller, but they hit every period, and quarterly filers who are three years behind have 12 of them.

## What if a refund or no tax is owing?

There's no percentage penalty when nothing is owing. But a corporation that never files can still get a demand to file, an [arbitrary assessment](https://learn.sansarsolutions.com/reverse-cra-arbitrary-assessment/), and lose refunds and input tax credits to time limits.

## Can the penalties be removed?

Sometimes. Before the CRA contacts you, a VDP application can bring relief. After penalties are charged, a taxpayer relief request can ask the CRA to cancel them for reasons like illness, disaster or CRA error. Our [VDP and penalty relief page](https://learn.sansarsolutions.com/voluntary-disclosure-penalty-relief/) explains both.

## The usual situation behind multi-year penalties

Most of the businesses we see weren't trying to avoid tax. The owner grew from a side business to a few million in revenue, the old accountant stopped answering, and the years piled up. The fix is the same either way: get the books done, file the oldest years first, and deal with relief at the same time. Sansar handles [late business tax filing](https://sansarsolutions.com/late-business-tax-filing/?ref=learn.sansarsolutions.com) and the bookkeeping behind it for one all-inclusive flat rate, backed by our 100% Happiness Guarantee. See also [our late tax filing page](https://learn.sansarsolutions.com/late-tax-filing/) and the main-site guide on [what happens when you file late](https://sansarsolutions.com/taxes/what-happens-when-you-file-business-taxes-late/?ref=learn.sansarsolutions.com).

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## FAQ

**Is there a penalty for filing a T2 late if I owe nothing?** Not the percentage-based penalty, because it's calculated on unpaid tax. But you still have to file, and the CRA can demand the return or assess you arbitrarily.

**Does the 1% per month keep going after 12 months?** No. For the basic T2 and T1 penalty the monthly part stops at 12 months (20 months for the repeat penalty). Interest keeps compounding until you pay.

**When does interest start on corporate tax?** From the balance-due date, generally 2 or 3 months after year-end depending on the corporation, not from the filing deadline.

**Are GST/HST late penalties per return?** Yes. Each late reporting period has its own penalty, which is why several years of quarterly returns add up.

**Can I get late filing penalties waived?** Possibly, through the Voluntary Disclosures Program before the CRA contacts you, or a taxpayer relief request afterwards when the circumstances qualify.

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*Written by *Gurdeep Sangha*, founder of* [*Sansar Solutions*](https://sansarsolutions.com/about/?ref=learn.sansarsolutions.com)*, a Vancouver-based bookkeeping and tax firm serving small businesses across Canada (mainly Ontario, Alberta and BC). Sansar is not a CPA firm; Notice to Reader and review engagements go through partner CPAs. This guide is general information, not tax or legal advice for your situation. Last reviewed: October 2026.*