Corporate tax instalments: monthly over $3,000; small CCPCs quarterly

Which corporations pay instalments, and how often?

A corporation doesn't have to pay instalments when its tax payable is $3,000 or less for either the current or the previous tax year. The test counts Part I, VI, VI.1 and XIII.1 tax plus provincial or territorial tax, measured before specified future tax consequences and before current year refundable credits canada.ca. Above that, instalments are monthly unless the corporation qualifies to pay quarterly canada.ca.

Perfect compliance means every GST/HST amount, payroll withholding, CPP contribution and EI premium was remitted on time, and every return under the Income Tax Act and the GST/HST part of the Excise Tax Act was filed on time canada.ca. The CRA's due dates page leaves out the small business deduction condition, but paragraph 157(1.2)(c) of the Act requires it laws-lois.justice.gc.ca. For the $500,000 limit itself, see the small business deduction, and for the status test, the CCPC definition.

Provincial tax is included for every province except Alberta and Quebec. A corporation with taxable income there pays that provincial tax directly to the province canada.ca.

How do the three instalment options compare with 2026 numbers?

Your client picks one of three bases: the estimated tax for 2026 (option 1), the 2025 tax (option 2), or a mix of 2024 and 2025 (option 3). Under option 3 monthly, the first two payments are 1/12 of the 2024 tax and the other ten split what's left of the 2025 tax. Quarterly, the first payment is 1/4 of the 2024 tax and the other three split the rest of the 2025 tax. Each base is reduced by estimated 2026 refundable credits canada.ca.

Worked example: Opco is an Ontario CCPC with a calendar tax year and no refundable credits. Its tax was $30,000 for 2024 and $48,000 for 2025, and it expects $60,000 for 2026.

Option 3 wins here. It totals the same $48,000 as option 2 but starts lower, which keeps cash in the corporation longer. The other $12,000 is due on the balance due day, March 31, 2027 if Opco still meets the three month test explained on the T2 filing deadline page.

Paying the option 3 schedule on time leaves no instalment interest even though the 2026 tax comes in at $60,000. Subsection 161(4.1) measures interest against whichever method gives the least total instalments for the year laws-lois.justice.gc.ca. Option 1 is the only base that carries risk: estimate too low and interest runs on each shortfall.

When is each 2026 instalment due?

The first instalment is due one month (or one quarter) less a day after the first day of the tax year, and the rest fall on the same day of each later month or quarter canada.ca. For a calendar year that's the last day of each month. A payment due on a Saturday, Sunday or CRA holiday is on time if the CRA receives it by the next business day.

September 30, 2026 is the National Day for Truth and Reconciliation, on the CRA's list of public holidays canada.ca. A tax year that doesn't start on the first of a month shifts every date: in the CRA's example, a year beginning October 10 has its first monthly instalment due November 9 canada.ca.

What changes partway through the year?

A corporation that stops qualifying for quarterly instalments still pays the instalment due at the end of the current quarter, then pays monthly from the month after canada.ca. Subsection 157(1.5) lets it spread the estimated tax for the year, less the quarterly instalments already paid, over the months left laws-lois.justice.gc.ca. If Opco paid $7,500 and $13,500 and lost its status on May 31, it would owe ($60,000 − $21,000) ÷ 6 = $6,500 a month from July to December.

Your client can also change amounts during the year without telling the CRA. Rework the worksheet, take the new base, subtract what's been paid and divide the remainder by the months or quarters left canada.ca. On options 2 and 3, a higher expected tax doesn't require a recalculation to avoid interest; paying more only shrinks the balance owing at filing.

Short years and reorganizations change the base. In a short current year, the corporation pays 1/12 or 1/10 of the base for each complete month, or 1/4 or 1/3 for each complete quarter, and no instalment is due for a year shorter than one month (one quarter for an eligible small CCPC). A short previous year is annualized at 365 ÷ the days in it under Regulation 5301(1). After an amalgamation, the new corporation's base is generally the total of its predecessors' bases canada.ca.

The second year is the one that catches new corporations. Your client may owe instalments for its second tax year before it has paid the first year's balance or filed its first return canada.ca.

What does a late or short instalment cost?

Instalment interest compounds daily at the prescribed rate on overdue taxes, which is 7% for July 1 to September 30, 2026 canada.ca and for October 1 to December 31, 2026 canada.ca. Paying a later instalment early or paying extra earns credit interest that offsets it, but that credit only works within the same tax year and is never refunded canada.ca.

If Opco skips its June 30 quarterly instalment of $13,500 and pays it on October 1, the 93 late days cost $13,500 × ((1 + 0.07 ÷ 365)^93 − 1) = $242.92, and that interest keeps compounding to the balance due day. Paying the December instalment early would offset most of it.

A penalty applies only when the year's instalment interest is over $1,000. It's half of the amount by which that interest exceeds the greater of $1,000 and 25% of the interest that would have been charged with no instalments at all canada.ca. The full mechanics are on CRA instalment interest, and the rate after the balance due day on the CRA rate on overdue taxes.