If your corporation owes income tax, CRA usually expects you to pay it throughout the year by instalments, then top up any balaCorporate Tax Instalments in Canada: Who Must Pay, Due Dates, and How to Avoid Interest
If your corporation owes income tax, CRA usually expects you to pay it throughout the year by instalments, then top up any balance after year-end. Missing instalments can trigger instalment interest, penalties, and arrears interest.
This guide explains: who has to pay, monthly vs quarterly rules (including small CCPC eligibility), how to calculate, and what happens if you underpay.
In this post:
- Who has to pay corporate tax instalments (and common exceptions)
- Monthly vs quarterly instalments (small CCPC rules)
- Instalment due dates (how to find your exact schedule)
- How to calculate instalment amounts (options and practical approach)
- Interest, penalties, and other consequences
- FAQ
- Summary table
1) Who has to pay corporate tax instalments?
CRA’s starting point is simple: corporations are generally required to pay their corporate taxes by instalments (monthly or quarterly). Instalments are partial payments toward the tax payable for the year.
Corporate taxes that commonly fall into the standard instalment calculation include:
- Part I – Tax on corporate 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
- Most provincial/territorial corporate income taxes (Quebec and Alberta are paid directly to those provinces)
Common situations where instalments are not required
a) First tax year after incorporation (most corporate taxes)
For most corporate taxes, a corporation does not have to make instalment payments in its first tax year after incorporation. Instead, any tax owing is generally paid by the balance-due day for that first year.
b) Tax payable is $3,000 or less
If certain corporate taxes payable are $3,000 or less for either the current or previous tax year, instalments may not be required for those taxes. You still have to pay any remaining tax by the balance-due day.
c) Short tax years
A tax year shorter than one month generally does not require an instalment. For an eligible small CCPC paying quarterly, a tax year shorter than one quarter generally does not require an instalment.
2) CCPC vs non-CCPC: why it matters for instalments
A Canadian-controlled private corporation (CCPC) is a specific corporate type for tax purposes. CCPC status matters because only some CCPCs can pay corporate income tax instalments quarterly; most corporations pay monthly.
At a high level, CRA considers a corporation a CCPC if (at the end of the tax year) it is:
- a private corporation resident in Canada (or incorporated in Canada, with certain historical residency rules), and
- not controlled (directly or indirectly) by non-residents or public corporations, and
- not listed on a designated stock exchange
Small CCPC quarterly instalments (eligibility)
CRA allows some CCPCs to pay quarterly instalments instead of monthly. To qualify, CRA’s criteria include:
- The corporation is a CCPC
- It has a perfect compliance history
- Together with any associated corporations, it has taxable income of $500,000 or less (current or previous tax year)
- Together with any associated corporations, it has taxable capital employed in Canada of $10 million or less (current or previous tax year)
What CRA means by “perfect compliance history”
CRA generally considers you to have a perfect compliance history if, during the previous 12 months ending when your last instalment was due, you remitted on time required amounts (GST/HST, payroll withholdings, CPP, EI) and filed required returns on time (income tax and GST/HST).
If you become ineligible mid-year
If a corporation stops being eligible for quarterly instalments during the year, CRA indicates it can still pay the next instalment due at the end of the current quarter, and then must switch to monthly instalments after that.
3) Corporate instalment due dates (monthly vs quarterly)
The instalments are due on the last day of each quarter of CCPC’s taxation year or last day of each month for monthly instalments.
Example (calendar tax year)
If your corporation’s tax year is January 1 to December 31, monthly instalments are generally due by the last day of each month (Jan 31 through Dec 31). If eligible for quarterly instalments, the quarterly due dates are generally March 31, June 30, September 30, and December 31.
Pro tip: find your exact schedule in CRA online accounts
You can view instalment due dates and calculate instalment amounts using CRA’s “Calculate and pay instalment payments” service in My Business Account or Represent a Client.
4) How to calculate instalment amounts (the practical approach)
CRA’s instalment system gives you multiple calculation options. In practice, you pick a method and pay on schedule. At year-end, you file your T2 and pay any balance (or get a refund).
CRA’s main calculation options (monthly or quarterly)
- Option 1: based on an estimate of your taxes for the current year
- Option 2: based on your taxes for the previous year
- Option 3: based on a combination of the previous two years (more common for quarterly calculations in CRA examples)
- The quarterly and monthly instalment calculations under each option for eligible CCPC and other corporations is as follows.
| Option | Eligible CCPC | Othe Corporations |
| 1.Current year base | ¼ of estimated tax payable for the current taxation year | 1/12 estimated tax payable for the current taxation year |
| 2.Last year base | ¼ of the tax payable for the lest tax year | 1/12 of the tax payable for the lest tax year |
| 3.Combined base | First instalment:1/4 of tax payable for the second prior year; last three instalments:1/3 of tax payable for the last year minus first instalment | First two instalment:1/12 of tax payable for the second prior year; last ten instalments:1/10 of tax payable for the last year minus first two instalments |
- Corporations normally choose the option with the greatest deferral of cash outflow.
Best practice (what we typically recommend)
- Stable profits year-to-year: use prior-year (Option 2) and true-up at year-end.
- Rapid growth year: consider a higher estimate (Option 1) to avoid instalment interest.
- Declining year: you can reduce instalments, but you need a reasonable estimate and documentation (board notes, YTD financials, forecasts).
Important notes
- Corporations are responsible for calculating and remitting their own instalments. CRA generally does not send instalment reminder notices for corporations.
- Quebec and Alberta corporate income taxes are generally paid directly to those provinces (not through the federal instalment calculation for those provinces).
5) Interest, penalties, and consequences of underpaying
CRA can charge interest if instalments are late or insufficient. CRA describes two main buckets: instalment interest (during the year) and arrears interest (on unpaid balances after the balance-due day).
CRA’s corporation instalment guide also notes that the Income Tax Act authorizes CRA to charge instalment interest and penalty, and arrears interest, when required payments are not received on time.
Other consequences to be aware of
- Cash-flow shock at year-end: if you underpay all year, the balance due can be large and due quickly (often 2 months after year-end; some CCPCs may qualify for 3 months).
- Interest rates change quarterly: CRA uses prescribed interest rates compounded daily (the rate can change every calendar quarter).
Need help setting up instalments (or fixing them)?
If you’re unsure whether your corporation should be paying monthly or quarterly, or you want to avoid instalment interest surprises, we can help you set up a simple instalment plan based on your financials and cash flow.
Book a call: finsightcpa.ca/contact
Related services:
Related reading (internal links)
When are business tax filing and payment deadlines due in Canada?
Who should pay tax instalments in Canada? (Individuals)
FAQ
Do new corporations have to pay instalments right away?
Usually, no. For most corporate taxes, CRA generally does not require instalments in the first tax year after incorporation. Any balance is paid by the balance-due day. (Part XII.1 carved-out income is an exception.)
What’s the instalment threshold for corporations?
CRA describes a $3,000 threshold for many corporate taxes: if tax payable is $3,000 or less for either the current or previous year, instalments may not be required for those taxes (with specific exceptions such as Part XII.1).
Can my corporation pay quarterly instead of monthly?
Only some CCPCs qualify. CRA’s criteria include CCPC status, a perfect compliance history, and meeting taxable income ($500,000 or less) and taxable capital ($10 million or less) tests (with associated corporations, for the current or previous year).
What counts as “perfect compliance history”?
CRA generally looks back 12 months and checks whether you remitted GST/HST and payroll amounts on time and filed required income tax and GST/HST returns on time.
How do I figure out my exact due dates?
CRA provides general rules (one month less a day / one quarter less a day), and you can view your specific due dates using CRA’s “Calculate and pay instalment payments” service in My Business Account or Represent a Client.
What happens if I underpay instalments?
CRA can charge instalment interest, and potentially instalment penalties, and arrears interest on unpaid balances after the balance-due day. Interest is compounded daily at prescribed rates that can change every calendar quarter.
What if my year is going to be much lower than last year?
You can reduce instalments, but you need a reasonable, supportable estimate (and you may still owe interest if the estimate is too low). Keep documentation like interim financials and forecasts.
My corporation pays tax in Alberta or Quebec – does that change instalments?
CRA notes that corporations earning taxable income in Alberta or Quebec generally pay provincial tax directly to those provinces. Your federal instalment calculation still applies to federal tax and other included amounts.
Summary table
| Topic | Monthly (most corporations) | Quarterly (eligible small CCPC) | Key exceptions | CRA reference |
| Who pays? | Generally required | Only some CCPCs | First tax year for most taxes; $3,000 threshold; short tax years | CRA: Who has to pay in instalments |
| Due date rule | 1 month less a day from start date; then same day monthly | 1 quarter less a day from start date; then same day quarterly | — | CRA: Due dates for payments |
| Eligibility factors | N/A | CCPC + perfect compliance + income/capital tests | If becomes ineligible mid-year, switch to monthly | CRA: Due dates for payments (eligibility) |
| How to calculate | Options based on current year estimate / prior year / prior 2 years | Same idea, divided into 4 payments | Special calculations for Part XII.1 / XII.3 | CRA: Calculating corporate tax instalments; T7B-CORP |
| Consequences | Interest and possible penalties if late/short | Same | Late filing penalties are separate | CRA: T7B-CORP; CRA interest and penalties pages |
Sources (CRA)
Corporation instalment guide (detailed page)nce after year-end. Missing instalments can trigger instalment interest, penalties, and arrears interest. This guide explains: who has to pay, monthly vs quarterly rules (including small CCPC eligibility), how to calculate, and what happens if you underpay.
Who has to pay in instalments (corporate)
Due dates for payments + quarterly eligibility / perfect compliance