Corporate Tax Instalments in Canada: A Guide for Business Owners

Corporate income tax instalments are advance payments toward a corporation's tax for its fiscal year. Many corporations pay monthly. Eligible small Canadian-controlled private corporations may pay quarterly, and only while every condition is met. The amount and the dates follow the company's tax history and fiscal year. They do not follow the day the T2 return is filed.

A corporation can owe instalment interest even after the year's tax is eventually paid in full. Start with the fiscal year, the current and prior tax figures, and the CRA account. The CRA's instalment guidance sets out the rules and the exceptions. The CRA does not send corporate instalment reminders. The corporation calculates and remits the payments.

Who has to pay corporate tax instalments?

Corporations generally pay the applicable taxes by instalments, with important exceptions.

For most common corporate taxes, a new corporation does not make instalments during its first tax year after incorporation. Any tax for that year is still due on the balance-due day. Part XII.1 tax on carved-out income is an exception and can require instalments earlier. In the second year, instalments can start before the first T2 is filed and before the first year's balance is paid. If the year-end has not been established with the CRA, the Corporation Instalment Guide says the system will allocate the first payment to a 31 December year-end. A non-calendar year should be set up before that first payment.

For Parts I, VI, VI.1, and XIII.1, instalments are not required when the total of those taxes, before specified future tax consequences and before current-year refundable tax credits, is $3,000 or less for either the current or the previous tax year. A similar $3,000 test applies to Part XII.3 and, separately, to provincial or territorial tax. A single line on a financial statement does not answer the test. Carved-out income and some other taxes use their own calculation.

Monthly or quarterly payments?

Monthly instalments are the general rule. Quarterly instalments are available only while the corporation qualifies at the time the payment is due. T7B-Corp 2025, the Corporation Instalment Guide, requires all of the following:

• the corporation is a small Canadian-controlled private corporation;
• it has a perfect compliance history;
• it claimed the small business deduction for the current or previous tax year; and
• together with associated corporations, for the current or previous tax year, taxable income is $500,000 or less and taxable capital employed in Canada is $10 million or less.

The CRA's shorter due-date page lists CCPC status, perfect compliance, and the same $500,000 and $10 million tests. It does not restate the small business deduction condition. Do not read that shorter page as dropping the deduction test. Confirm eligibility in My Business Account or Represent a Client before paying quarterly.

Perfect compliance looks at the 12 months ending at the last instalment due date. During that period the corporation needs to have remitted on time the GST/HST, source deductions under subsection 153(1), CPP contributions, and EI premiums it was required to remit, and to have filed on time the income-tax and GST/HST returns required of it. Incorporating in BC, or simply being a small company, is not the quarterly test.

If eligibility stops during the year, the CRA allows the next instalment due at the end of the current quarter to remain on the quarterly schedule. Monthly payments begin after that quarter.

How are the due dates determined?

Due dates follow the start of the tax year. The first monthly payment is generally due one month minus a day after the year begins. For a qualifying quarterly payer, the first payment is due one quarter minus a day after the year begins. Later payments follow the same monthly or quarterly pattern.

A calendar-year corporation's monthly dates fall on the last day of each month. A qualifying quarterly payer's scheduled dates are 31 March, 30 June, 30 September, and 31 December. If a due date is a Saturday, Sunday, or public holiday recognized by the CRA, payment is on time when it is received or processed on or before the next business day. A non-calendar year produces different dates. The CRA's calculator in My Business Account or Represent a Client is the practical way to confirm them.

A tax year shorter than one month does not require an instalment. An eligible small CCPC with a tax year shorter than one quarter is likewise outside the instalment requirement for that short year. Any remaining tax is still due on the balance-due day.

How do you calculate instalments?

The calculation page and the Corporation Instalment Guide offer three approaches. You may use the one that produces the least amount payable by instalments:

Under the first two methods, a monthly payer remits one-twelfth and a quarterly payer remits one-quarter. Under the combination method, the first two monthly payments are each one-twelfth of the tax from the year before the previous year, and each of the remaining ten is one-tenth of the difference between the previous year's tax and those first two payments. A quarterly payer's first combination payment is one-quarter of that older year, and each of the remaining three is one-third of the difference between the previous year's tax and the first payment. The 2025 guide illustrates its worksheets with 2023, 2024, and 2025. The CRA's current worksheet instructions use 2024, 2025, and 2026. Use the current worksheet and the corporation's own fiscal years before paying.

If the current-year estimate is lower than both the actual tax and the tax produced by the prior-year methods, the CRA can charge instalment interest even though the estimated payments were made on the scheduled dates. If a previous-year option is used and the correct amounts are paid on time, the CRA says it will not charge instalment interest merely because a balance remains at year-end. Dividing last year's expense by twelve, without identifying which tax the guide includes, is not one of the three options.

For a BC corporation, federal and BC corporate income tax are generally paid together through the CRA. Quebec and Alberta collect their corporate tax differently, so a worksheet prepared for those provinces is the wrong model for a BC company. The guide says not to include Quebec or Alberta provincial tax in the federal instalment calculation.

A simple planning example

Assume a corporation has a full calendar fiscal year, must pay monthly, and has confirmed with its accountant that an instalment base of $24,000 is the appropriate annual amount under one of the permitted methods. For planning, $24,000 ÷ 12 is $2,000 per month. The scheduled dates run from 31 January through 31 December, subject to the weekend and holiday rule. The example excludes a short year, other tax parts, credits, and a change of method during the year.

If the year's actual tax is later calculated at $26,000 and all $24,000 was properly paid, the simplified remaining balance is $2,000. That illustration does not say whether interest applies. Interest depends on the required method, the amounts, and the dates. Review both before relying on the illustration.

Instalments, the balance due, and the T2 return are different dates

• Instalments are the advance payments during the fiscal year.
• The balance-due day is when the remaining tax is due. For most corporate taxes it is two months after year-end. For Parts I, VI, VI.1, and XIII.1, it can be three months after year-end when the corporation was a CCPC throughout the year, claimed the small business deduction for the current or previous year, and meets the business-limit test for its own previous-year taxable income or, if it is associated, for the associated group. That three-month test is not the same test as quarterly instalment eligibility.
• T2 filing is a separate duty. A corporation generally files within six months after the tax year ends. The filing date is not the payment date.

The corporate tax deadlines guide collects related dates. Check its year, and the current CRA guide, before using an example from it.

What happens if an instalment is late or too small?

The CRA can charge instalment interest when required payments are late or insufficient. Interest is generally compounded daily, and the prescribed rate is set every three months. Paying the final balance does not erase interest that already accrued. An instalment penalty can apply in addition to interest, but the CRA applies that penalty only when the instalment interest is more than $1,000.

If a shortfall appears, compare the three calculation options and the cash forecast promptly. Keep the confirmation number, the account, and the tax year with each payment so a remittance is not applied to the wrong period.

Make instalments part of cash-flow planning

Put the monthly or quarterly dates into the cash-flow forecast when the fiscal year starts. A monthly reserve is still useful for a corporation that pays quarterly, because eligibility can change. Compare the payments with expected receipts using the distinction in cash flow versus profit, and include the schedule in the year-end checklist.

Frequently asked questions

Sources

• Instalment requirements, Canada Revenue Agency.
• Instalment due dates, Canada Revenue Agency.
• Calculating instalments, Canada Revenue Agency.
• T7B-Corp, Corporation Instalment Guide 2025, including the three calculation options, the quarterly conditions, and the balance-due-day tests. Confirm the current edition before paying.
• T4012, T2 Corporation Income Tax Guide, for the six-month filing deadline.

Reviewed against the CRA instalment pages and T7B-Corp 2025 on 2 November 2026. Confirm the current rules, dates, and the corporation's circumstances before making payments.