Corporate Tax Instalment Payments
Corporations must make monthly or quarterly instalment payments of corporate income tax during the year if the prior year or current year estimated federal tax owing exceeds CAD 3,000. Quarterly instalments are available for eligible CCPCs. Instalments prevent a large lump-sum payment at year-end and avoid instalment interest.
Who this applies to
- All Canadian corporations with prior-year or current-year estimated federal tax owing above CAD 3,000
- CCPCs with prior-year taxable income under CAD 500,000 (may use quarterly schedule)
- New corporations in their first year (base instalments on current-year estimate)
- Corporations whose tax exceeds CAD 3,000 in either the current or immediately preceding year
What to file
No separate instalment return; corporations remit via CRA My Business Account (choose 'Corporate income tax instalment'), financial institution, or cheque with the T2-INST remittance voucher (if using paper). Instalments are credited against the final T2 balance.
How to file
CRA My Business Account online payment is the fastest and provides immediate confirmation. Financial institution online banking using BN + RC program account. Paper cheque with remittance voucher (T2-INST) mailed to CRA. Electronic payment is strongly encouraged.
Payment due
Per the instalment schedule above. CRA calculates no-calculation-option instalments based on the prior year's tax liability for the first two instalments, then adjusted amounts for subsequent instalments.
Penalties for missing this deadline
Instalment interest (not a penalty) is charged at the CRA prescribed rate + 2% (currently approximately 11%) on deficient instalments. The charge applies where actual instalments paid are less than any of three options: (1) prior-year tax basis, (2) current-year estimate, or (3) instalment formula. Corporations can offset instalment interest by earning instalment credit on early/excess payments.
Filing checklist
- Determine whether instalments are required (prior-year federal tax over CAD 3,000)
- Choose instalment method: prior-year basis, current-year estimate, or instalment formula
- Set up recurring monthly or quarterly payments via CRA My Business Account or online banking
- Monitor actual income vs. estimate mid-year and adjust instalments if current income differs significantly
- Reconcile total instalments paid against the T2 final balance at year-end
Common mistakes to avoid
- Ignoring instalments because the balance is paid with the T2 filing - late or deficient instalments attract interest even if the final balance is paid on time
- Using only the prior-year basis when current-year income is significantly higher, resulting in instalment interest on underpayments
- New corporations with large first-year income not setting up instalments because there is no prior-year tax history
- Confusing the instalment due dates (based on fiscal year start) with the T2 filing and payment deadlines
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