Corporate Tax Instalments

Corporate tax instalments are generally required to be paid monthly, however, your business may be able to pay instalments quarterly if you meet all of the following criteria:

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• You are a Canadian-controlled private corporation (CCPC)

• You have a perfect compliance history

• Together with any associated corporations, for the current or previous tax year you have both:

  • Taxable income of $500,000 or less

  • Taxable capital employed in Canada for the tax year of $10 million or less

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Instalment Due Dates

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The first instalment payment is due:

• Monthly instalments: one month less a day from the starting day of your tax year

• Quarterly instalments (if eligible): one quarter less a day from the starting day of your tax year

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The rest of your instalment payments are due on the same day of each month or each quarter that follows.

You can view your instalment due dates by using the "Calculate and pay instalment payments" service in:

• Represent a Client, if you are an authorized representative or employee

• My Business Account, if you are the business owner

 

Calculating Corporate Tax Instalments

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You need to estimate your total federal and provincial taxes and credits for the current year.  You can use the online CRA Worksheet: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/paying-instalments/instalment-requirements/calculating-instalments-parts-1-xiii-1-tax-provincial-territorial-tax.html

 

You will calculate and choose one of three options for instalment calculations.

• Option 1: estimate of taxes for current year

• Option 2: taxes for previous year

• Option 3: combination of tax for previous 2 years

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The instalment payments you calculate are estimates and any remaining unpaid tax is payable on or before the balance–due day. If you choose to pay your instalments based on an estimate of the taxes you will owe for the current year (option 1), interest or penalties may apply in some circumstances.

 

You can calculate your instalments online in My Business Account, or by using downloadable worksheets.

 

Interest and Penalties

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CRA charges instalment interest on late or insufficient instalment payments.  They also pay refund interest on certain overpayments.   Interest is compounded daily, see prescribed interest rates: https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html

 

Instalment Penalties are applied if your instalment interest charges are greater than $1,000. To calculate the penalty,

CRA determines which of the following amounts is higher.

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• If a flat rate of $1,000 is higher: You are charged: $1,000

• If 25% of the interest is higher: You are charged: 25% of the instalment interest you would have paid if you had not made instalment payments for 2024

 

CRA subtracts the higher amount from your actual instalment interest charges for 2024. CRA then divides the difference by 2, and the result is your penalty.

 

Reduce your instalment interest and penalty charges

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You can reduce or eliminate interest and penalties if you do one of the following:

• Overpay your next instalment payment

• Pay your next instalment early

This will allow you to earn instalment credit interest. This credit interest is not refundable and can only be used against any interest charges on insufficient or late payments for the same tax year.