Generally, corporations have to pay their taxes in instalments. An instalment payment is a partial payment of the total tax payable for the year. The Income Tax Act requires corporations to make instalment payments so that they are treated the same as taxpayers who have tax deducted from their income at source. 

Corporations generally make monthly or quarterly instalment payments toward their tax liability under the following parts of the Income Tax Act:

  • Parts I, VI, VI.1, and XIII.1:

    • Part I – Tax on income

    • Part VI – Tax on capital of financial institutions

    • Part VI.1 – Tax on corporations paying dividends on taxable preferred shares

    • Part XIII.1 – Additional tax on authorized foreign banks

  • Part XII.1 – Tax on carved-out income

  • Part XII.3 – Tax on investment income of life insurers


New Corporations



Instalment payments are not required for a new corporation until they have started its second year of operation. However, for their first year of operation, they must pay any tax they owe on or prior to their balance-due day for that tax year. Note that Part XII.1 tax, Tax on carved-out income, is an exception to this.



Tax Payable of $3,000 or Less



Corporations don't have to make instalment payments on their federal taxes if the total of their taxes payable under Parts I, VI, VI.1, and XIII.1, determined before taking into consideration specified future tax consequences, and prior to the deduction of current-year refundable tax credits, is $3,000 or less for either the current or previous year.

If the Part XII.3 tax is $3,000 or less in the current or previous year, they don't have to make instalments on this tax.



Instalment Due Dates



Instalment payments are due on the last day of every complete month of the corporation’s tax year or every complete quarter if they are an eligible small CCPC. For example, if the first day of the tax year is October 10, 2022, the end of the tax year will be October 9, 2023. The first payment is due one month or one quarter less a day from the starting day of the tax year. The rest of the payments are due on the same day of each month or the following quarter.

Instalment due dates can be estimated using the "Calculate and pay instalment payments" service at Represent a Client or My Business Account.



Payment Methods



Corporations have to make instalment payments and other payments on or before the due date by using one of the several payment methods:

  • Their Canadian financial institution's services

  • The CRA's My Payment service

  • Pre-authorized debit (PAD) agreement using My Business Account

  • Credit card, e-transfer or PayPal through a third-party service provider

  • In person, with cash or by debit, at any Canada Post outlet across Canada for a fee (with a remittance voucher with a QR code or a self-generated QR code

  • In person at a financial institution in Canada with a CRA remittance voucher

  • Wire transfer (for non-residents who do not have a Canadian bank account)

  • Cheque


For more information, visit the CRA’s Corporation Instalment Guide 2023.


Do you have any questions about corporation taxes? Drop them in the comments section to get help from our members. 


Sources:

Did you find this article useful?