--- title: "Corporate Tax Instalments: $3,000 Rule, Monthly or Quarterly" url: https://www.everstonecpa.com/blog/corporate-tax-installments-canada description: "When must a corporation pay tax instalments, how much, and what if you underpay? The $3,000 threshold and due dates explained. Check if yours are due." type: guide updated: 2026-10-08 summary: "A corporation generally must pay tax instalments if its net federal tax owing exceeds $3,000 in the current year or either of the two preceding years. Most corporations pay monthly; an eligible small CCPC with a clean compliance history may qualify for quarterly instalments instead. New corporations are exempt in their first taxation year." faq_count: 7 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) Corporate Tax Instalments: When and How Much Tax # Corporate tax instalments: *when and how much* By EverStone CPA · Updated July 2026 · 9 min read Quick answer **Quick answer:** A corporation generally must pay tax instalments if its net federal tax owing exceeds $3,000 in the current year or either of the two preceding years. Most corporations pay monthly; an eligible small [CCPC](https://www.everstonecpa.com/glossary#ccpc) with a clean compliance history may qualify for quarterly instalments instead. New corporations are exempt in their first taxation year. Underpaying triggers instalment interest at the CRA’s prescribed rate — 7% as of the third quarter of 2026, and a penalty if that interest exceeds $1,000 for the year. Which schedule applies to your corporation. **Rather have a CPA handle this?** A CPA at EverStone replies with a straight answer and a fixed fee for your situation. [Get My Fixed Quote →](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form) ## Key takeaways - Instalments are required once net tax owing exceeds $3,000 in the current or a prior year. - New corporations are exempt from instalments in their first taxation year. - Most corporations pay monthly; small eligible CCPCs can qualify for quarterly. - You can calculate instalments using the current-year, prior-year, or combined method. - Underpayment interest runs at CRA’s prescribed rate (7% in Q3 2026), plus a possible penalty over $1,000. 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. Work out your own date with the [T2 balance-due calculator](https://www.everstonecpa.com/t2-deadline#deadline-checker). **First-year exemption:** a brand-new corporation is not required to pay instalments in its very first taxation year, since there’s no prior-year base to calculate from. The obligation typically starts in year two, once you have a completed prior year to reference. **Not sure what instalments your corporation owes?** We calculate them, set the dates and build them into the year-end plan, with the T2 quoted in writing. Try the [instalment calculator](https://www.everstonecpa.com/tax-instalment-calculator), or [get a year-end quote](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form) ## 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](https://www.everstonecpa.com/glossary#associated): - 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. Not sure how this applies to you? Every corporation’s situation is different. Send an enquiry to a CPA and get a straight answer, plus a fixed quote before any work starts. [Send an Enquiry →](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form) [See fixed fees](https://www.everstonecpa.com/pricing) ## 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](https://www.everstonecpa.com/blog/t2-deadline-penalties-canada) for how those interact. ## What happens if you underpay Corporate instalment thresholds and underpayment charges The three numbers that govern corporate instalments, as stated on this page. | Trigger or charge | Amount | Applies when | | Instalments required | Net federal tax owing over $3,000 | In the current year, or either of the two preceding years | | Instalment interest | CRA prescribed rate — 7% in Q3 2026 | Compounded daily on the shortfall; the rate is reviewed quarterly | | Instalment penalty | Charged on top of the interest | Where instalment interest for the year exceeds $1,000 | 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](https://www.everstonecpa.com/blog/managing-cash-flow-seasonal-business-canada) 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](https://www.everstonecpa.com/cra-tax-deadlines) page. Sources - [CRA Guide T4012 — T2 Corporation Income Tax Guide](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012.html) - [Canada Revenue Agency — Corporation income tax](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations.html) - [Canada Revenue Agency — Forms and publications](https://www.canada.ca/en/revenue-agency/services/forms-publications.html) Missing an instalment is not the emergency owners assume — [what to do when you cannot pay a corporate tax balance](https://www.everstonecpa.com/blog/cra-payment-arrangements-cant-pay-tax-canada) covers arrears interest and how a payment arrangement is negotiated. About this article **EverStone CPA** Prepared and reviewed by a Chartered Professional Accountant at EverStone CPA, a CPA firm working with small and midsized businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form) 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. Instalment obligations are federal and do not change with your postal code. We plan them for owners across BC, including [Vancouver](https://www.everstonecpa.com/accountant-vancouver). Instalments are only part of the calendar. See [the full set of corporate dates](https://www.everstonecpa.com/t2-deadline). 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](https://www.everstonecpa.com/blog/direct-deposit-and-cra-online-mail-business). ### Related articles [Tax services →](https://www.everstonecpa.com/tax-services) Virtual corporate tax → [T2 deadlines & penalties →](https://www.everstonecpa.com/blog/t2-deadline-penalties-canada) [CRA tax deadlines →](https://www.everstonecpa.com/cra-tax-deadlines) [When the CRA instalment reminder is wrong →](https://www.everstonecpa.com/cra-letter-instalment-reminder)[CPP & EI for 2027: What’s Known, What Isn’t Yet →](https://www.everstonecpa.com/blog/cpp-ei-rates-2027)[Inter-Corporate Dividends in Canada: Tax-Free, With Conditions →](https://www.everstonecpa.com/blog/inter-corporate-dividends-canada) FAQ Never miss it again Subscribe to our Canadian tax deadline calendar — the fixed CRA dates land in your calendar every year with a reminder a week ahead. To see whether your corporation has to pay instalments, and on which schedule, use the [corporate tax instalment calculator](https://www.everstonecpa.com/tax-instalment-calculator). [Add the deadline calendar](https://www.everstonecpa.com/cra-tax-deadlines#ics) ## Frequently asked questions about corporate Tax Instalments: When and How Much **Does every corporation have to pay tax instalments?** No. You only have to pay instalments if your net federal tax owing was more than $3,000 in the current year or in either of the two preceding years, after certain adjustments. Below that, you simply pay your balance owing by the due date. Brand-new corporations are also exempt from instalments in their first taxation year. **Do I pay instalments monthly or quarterly?** Most corporations that owe instalments pay monthly. A Canadian-controlled private corporation may qualify for quarterly instalments instead if, together with any associated corporations, its taxable income and taxable capital are within CRA’s small-CCPC limits and it has a perfect compliance history — on-time filing and remitting for the past 12 months. **How is my instalment amount calculated?** You can choose from three CRA-accepted methods: base each instalment on your current year’s estimated tax, base it on your prior year’s tax payable, or use the no-calculation (combined) method, which uses your second-preceding year’s tax for the earliest instalments and adjusts to your prior year’s tax for the rest. Whichever method results in the lowest instalments generally avoids interest, provided your estimate turns out to be accurate. **When are corporate instalments due?** 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 of the tax year. Your final balance owing is due separately, either two or three months after your year-end depending on your corporation’s status. **What happens if I underpay my instalments?** The CRA charges instalment interest, compounded daily, at the prescribed rate for overdue amounts owed to the CRA — 7% for the third quarter of 2026. If the resulting instalment interest for the year exceeds $1,000, the CRA can also charge an instalment penalty on top of the interest. **Does a brand-new corporation have to pay instalments?** No. A corporation is not required to pay instalments in its very first taxation year, because there is no completed prior year to calculate from. The obligation typically begins in year two, once a prior year exists as a base. That first-year gap catches owners out, because the first instalment demand often arrives in the same period as a growing tax bill. **Can I lose quarterly instalments and be moved back to monthly?** Yes. Quarterly instalments depend on remaining an eligible small CCPC, which includes a clean compliance record over the preceding 12 months: GST/HST, payroll source deductions, CPP and EI all remitted on time, and all required returns filed on time. Slip on any of those conditions and CRA can move the corporation back to monthly instalments going forward. ## Not sure if your corporation owes instalments? Send us last year’s tax and this year’s expected profit. A CPA replies by email within one business day with your instalment schedule and a fixed fee for the year-end. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) **Run your own numbers with the free calculators:** [estimate your incorporation savings](https://www.everstonecpa.com/incorporation-calculator) · [run a paycheque calculation](https://www.everstonecpa.com/payroll-deduction-calculator) · [GST/HST calculator](https://www.everstonecpa.com/gst-hst-calculator) [← Choosing your corporate year-end: and changing it later](https://www.everstonecpa.com/blog/corporate-fiscal-year-end-canada-how-to-choose) [CPP for incorporated owners: salary vs dividends →](https://www.everstonecpa.com/blog/cpp-for-incorporated-business-owners-canada) More on this subject: [the corporate tax library](https://www.everstonecpa.com/corporate-tax-hub). ## Have a question about this? Ask it free through [the quick-question form](https://www.everstonecpa.com/quick-question) and a CPA replies by email within one business day. For something that needs a proper look, a one-off **Advice Call** is a paid 45-minute session with a Chartered Professional Accountant: $225 plus GST, booked by email or phone with a secure payment link. It is credited against your first invoice if you become a client within 60 days. Looking for an accountant to take this on rather than an answer? [Send an enquiry](https://www.everstonecpa.com/book-online?service=corporate-tax#enquiry-form). Instalments arrive on a calendar rather than with the work, which is why they belong permanently on [the cash forecast instalments sit on](https://www.everstonecpa.com/cash-flow-management). [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “…We switched to him last year for both our personal and small-business taxes — responsive, knowledgeable and quick.” Heather Powers · Google review --- Source: https://www.everstonecpa.com/blog/corporate-tax-installments-canada Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online