Corporate tax instalments: when and how much

Instalments catch a lot of newly profitable corporations off guard — you file a strong first or second year, and suddenly the CRA expects you to start prepaying next year's tax throughout the year rather than in one lump sum. Here's how the system actually works.

What instalments are, and who must pay

A tax instalment is a periodic prepayment toward your corporation's tax bill for the current year, rather than paying it all at once when you file. You're generally required to pay instalments if your net federal tax owing exceeds $3,000 in the current taxation year or in either of the two immediately preceding years. If your tax owing has stayed at or below that amount, you can simply pay your balance in full by the due date instead.

Monthly vs. quarterly instalments

By default, corporations that owe instalments pay monthly. Some smaller corporations can instead pay quarterly, which frees up cash flow. To qualify as an eligible small CCPC for quarterly instalments, a corporation generally needs, together with any associated corporations:

• Taxable income at or below the small business limit ($500,000) in the current or prior tax year
• Taxable capital employed in Canada at or below $10 million
• A perfect compliance history — all GST/HST, payroll source deduction, CPP and EI remittances made on time, and all required returns filed on time, over the preceding 12 months

Slip on any of these conditions during the year and the CRA can move you back to monthly instalments going forward.

Three ways to calculate your instalments

The CRA gives you a choice of calculation method, and you can pick whichever produces the lowest instalments for your situation (subject to interest if your estimate turns out too low):

• Current-year method: base each instalment on your best estimate of the current year's tax payable, divided across the year's instalments.
• Prior-year method: base each instalment on your prior year's tax payable, divided evenly across the year.
• Combined (no-calculation) method: the CRA's default — early instalments are based on your second-preceding year's tax, and the remaining instalments are adjusted to bring the total in line with your prior year's tax payable.

Growing businesses often prefer the prior-year or combined method, since it's predictable and avoids guessing at current-year income. A business expecting a much weaker year may prefer the current-year method to avoid overpaying.

Due dates

Monthly instalments are due on the last day of each month of your tax year. Quarterly instalments, for eligible small CCPCs, are due on the last day of each quarter. Instalments are separate from your balance-due date and your T2 filing deadline — see our T2 deadlines and penalties guide for how those interact.

What happens if you underpay

If your instalments fall short of what you should have paid, the CRA charges instalment interest, compounded daily, at its prescribed rate for overdue amounts — currently 7% as of the third quarter of 2026 (this rate is reviewed and can change quarterly). If the resulting instalment interest for the year works out to more than $1,000, the CRA can also assess an instalment penalty on top of the interest. Both are avoidable by remitting on time and choosing a calculation method that matches your actual results.

Instalments are hardest on businesses whose revenue is uneven, because the payments are sized by a prior year rather than the current month. The guide to cash flow in a seasonal business covers how to reserve for them.

The bottom line

If your corporation is consistently profitable, instalments aren't optional — but they're predictable once you know the $3,000 trigger, your monthly-vs-quarterly status, and which calculation method fits your cash flow. We calculate and track instalments for our corporate tax clients year-round so nothing is a surprise at year-end. Check current deadlines any time on our CRA tax deadlines page.

Missing an instalment is not the emergency owners assume — what to do when you cannot pay a corporate tax balance covers arrears interest and how a payment arrangement is negotiated.

This article is general information, not tax advice for your specific situation. Prescribed interest rates change quarterly — confirm the current rate and your instalment obligations with the CRA or with us.

Working through this in your own business? We advise owners on it remotely across Canada — including as a online accountant in Calgary, a accountant in Edmonton, a Toronto small business accountant.

Instalment obligations are federal and do not change with your postal code. We plan them for owners across Canada, including as an Vancouver, accountant in Ottawa and Winnipeg business owners.

Instalments are only part of the calendar — see the full set of corporate dates.

Instalment reminders now arrive through your CRA account rather than the post, so the notification settings matter as much as the calculation — see CRA direct deposit and online mail for business.