Who has to pay in instalments

Corporations are generally required to pay their income taxes in instalments, but not in some situations, such as in the first year of operation.

On this page

• What must be paid by instalments
• When you don't have to pay in instalments

What must be paid by instalments

Generally, all corporations are required to pay their income taxes in monthly or quarterly instalments. An instalment is a partial payment of the total amount of tax payable for the year.

You may need to calculate and pay instalments for several types of tax, if they apply to your corporation:

• Taxes included in standard instalment calculations:
  • Tax on corporate income (Part I)
  • Tax on capital of financial institutions (Part VI)
  • Tax on corporations paying dividends on taxable preferred shares (Part VI.1)
  • Additional tax on authorized foreign banks (Part XIII.1)
  • Provincial or territorial corporate income taxes (other than Alberta and Quebec)
• Tax on carved-out income (Part XII.1)
• Tax on investment income of life insurers (Part XII.3)

If you have carved-out income or investment income of life insurers, you must calculate these instalments separately from other corporate income taxes.

When you don't have to pay by instalments

In some situations, your corporation may not be required to pay by instalments.

Corporation's first year

You do not have to make instalment payments for most corporate income taxes (Parts I, VI, VI.1, XIII.1), tax on investment income of life insurers (Part XII.3) or provincial or territorial tax for the first year after the date of incorporation.

For your first year, you have to pay any tax you owe on or before your balance-due day for that tax year.

You may need to start making instalment payments for your second tax year even before you pay your balance due for your first tax year or file your first return. Establish your tax year-end before you make the first payment to avoid misallocated payments.

Exceptions

• Tax on carved-out income (Part XII.1) must be paid by instalments even in a corporation's first year. Refer to: Calculate tax on carved-out income
• If you started your corporate tax year after your incorporation date, you may need to pay instalments for part of the first tax year

Tax payable of $3,000 or less

You do not have to make instalment payments for any of the following, if your tax payable is $3,000 or less for either the current or previous year:

• Your taxes payable under Parts I, VI, VI.1, and XIII.1, determined before both of the following:
  • considering specified future tax consequences
  • deducting current-year refundable tax credits
• Your Part XII.3 tax
• Your provincial or territorial taxes

You still have to pay any tax you owe on or before your balance-due day for that tax year.

Exception: Tax on carved-out income (Part XII.1) must be paid by instalments even if it is $3,000 or less.

Short tax years

You do not have to make an instalment payment for a tax year that is shorter than one month, or in the case of an eligible small Canadian-controlled private corporateion (CCPC), shorter than one quarter.