Calculating corporate tax instalments
Corporations are responsible for calculating and remitting their own instalment payments.
We do not send out instalment payment reminder notices for corporations.
The following taxes are included in the main instalment calculation:
- Income tax (Part I tax)
- Tax on capital of financial institutions (Part VI tax)
- Tax on dividends on taxable preferred shares(Part VI.1 tax)
- Additional tax on authorized foreign banks (Part XIII.1 tax)
- The tax you have to pay to provinces and territories, other than Quebec and Alberta
Corporations that earned taxable income in Quebec or Alberta pay provincial tax directly to those provinces.
There are separate steps to calculate instalments for other types of tax:
Steps
Estimate your amounts for the current year
The first step when calculating your instalments is to estimate your total federal and provincial taxes and credits for the current year.
Complete Worksheet 1 to determine these amounts.
Choose monthly or quarterly payments
All corporations are eligible to make monthly instalment payments.
Some Canadian-controlled private corporations (CCPCs) are eligible to make quarterly instalment payments.
To find out if you are eligible for quarterly instalments, refer to: Eligibility for quarterly instalments
Calculate and choose one of 3 options
Use your information from previous years' taxes for the 3 instalment calculation options. Whether your corporation pays monthly or quarterly instalments, you will calculate your instalment base options using the same information:
- An estimate of your taxes for the current year (option 1)
- Your taxes for the previous year (option 2)
- A combination of your taxes for the previous 2 years (option 3)
Your instalment base is the total amount you will owe in instalments for the year. This amount is then divided into recurring instalment payments:
- 12 payments if you pay monthly
- 4 payments if you pay quarterly
The instalment payments you calculate are estimates and any remaining unpaid tax is payable on or before the balance–due day. If you choose to pay your instalments based on an estimate of the taxes you will owe for the current year (option 1), interest or penalties may apply in some circumstances.
You can calculate your instalments online in My Business Account, or by using downloadable worksheets.
Online
You can calculate instalment payments and due dates online using Calculate and pay instalment payments in:
- My Business Account, if you are the business owner
- Represent a Client, if you are an authorized representative or employee
Once you enter the information and calculate, the results will provide your instalment base for each calculation, along with a schedule of payments to be made and the due dates based on the smallest instalment base.
Using a worksheet
You can calculate your instalment payments using worksheets.
If you pay monthly instalments, calculate your payments using Worksheet 2.
If you pay quarterly instalments, calculate your payments using Worksheet 3.
You do not need to file these worksheets with your T2 Corporation income tax return.
Instalments of tax on carved-out income or investment income of life insurers
Instalments for the tax on carved out income (Part XII.1) and investment income of life insurers (Part XII.3) are calculated differently. Do not use other tax instalment calculation methods to calculate Part XII.1 or Part XII.3 tax.
Calculate instalments for the tax on carved-out income (Part XII.1)
Part XII.1 applies to the income from carved-out property acquired after July 19, 1985 [section 209]. Carved-out property includes Canadian resource property when certain conditions are met. The tax rate is 45% of this income.
Arrears and refund interest apply to Part XII.1.
How to calculate the instalment payments for tax on carved-out income
You have to make instalment payments equal to one-twelfth (1/12) of the estimated tax payable under Part XII.1 each month in the tax year. The remaining tax, if any, is due on or before your balance-due day.
Unlike some other taxes, you do have to make instalment payments even if your Part XII.1 tax is $3,000 or less in the current or previous year.
Report the Part XII.1 tax you owe on Form T2096, Part XII.1 Tax Return – Tax on Carved-out Income. We should receive the return within 6 months of the end of your tax year.
Calculate instalments for the tax on investment income of life insurers (Part XII.3)
Life insurers may have to pay tax under Part XII.3 [section 211.1]. The amount of tax you may have to pay is 15% of your taxable Canadian life investment income for the year.
Arrears and refund interest apply to Part XII.3.
How to calculate the instalment payments for tax on investment income of life insurers
Calculate each instalment payment as one-twelfth (1/12) of the lesser of:
- The estimated Part XII.3 tax payable for the current tax year
- The Part XII.3 tax payable for the previous tax year
To make your instalment payments under Part XII.3, request Form T901, Remittance Voucher at Order remittance vouchers or payment forms. The remaining tax, if any, is due on or before your balance-due day.
Note
If you use the estimated Part XII.3 tax payable for the current tax year to determine your instalment payments and the actual amount is greater than your estimate, you may not have made the required monthly instalments. If so, you may be charged interest.
If your Part XII.3 tax is $3,000 or less in the current or previous year, you do not have to make instalment payments on this tax.
Report the Part XII.3 tax you owe on Form T2142, Part XII.3 Tax Return – Tax on Investment Income of Life Insurers. We should receive the return no later than 6 months after the end of your tax year.
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