When and how to pay income tax

When and how to pay income tax

Corporations have to pay income tax in monthly or quarterly instalments, unless the total of Part I, Part VI, Part VI.1, and Part XIII.1 taxes payable for either the previous year or the current year is $3,000 or less.

The balance of tax the corporation owes for a tax year is due within either two or three months of the end of that tax year, depending on the circumstances of the corporation.

Interest and penalties apply to late payments. To be on time, you have to make instalment payments and other payments on or before the due date by using one of the several methods for making payments:

• your Canadian bank or credit union's online banking, mobile app, or telephone service

• the CRA's My Payment service at canada.ca/cra-my-payment with your activated debit card from a participating Canadian bank or credit union with a Visa® Debit or Debit Mastercard® logo (does not include credit cards)

• pre-authorized debit (PAD) at canada.ca/my-cra-business-account which lets you:

  • set up payments to the CRA from a Canadian chequing account on preset dates starting in five or more business days

  • pay an amount due, repay overpaid amounts or make instalment payments

  • view your account history and modify, cancel, or skip a payment

For more information on PAD, go to canada.ca/pay-authorized-debit.

• the "Proceed to pay" button in the "View and pay account balance" page and other pages within My Business Account

• your credit card, Interac e transfer or PayPal through one of the third-party service providers for a fee

• in person at a Canadian bank or credit union or, for a fee, at Canada Post. To do so, you have to use a remittance voucher, which you can request online in My Business Account at canada.ca/my-cra-business-account

  Note
  Remittance vouchers have a Quick Response (QR) code printed on them that contains all the information you need to pay with cash or debit at a Canada Post retail outlet.

For more information, go to canada.ca/payments or contact your financial institution.

The CRA considers the payment to be made on the day the CRA receives it, and not on the day you send it.

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, for calculating instalment interest and penalty, your payment is considered on time if the CRA receives it on or before the next business day. Several provinces and territories have their own unique holidays. Therefore, due dates may be affected depending on where you reside. For information on public holidays, go to canada.ca/cra-public-holidays.

Instalment due dates

Instalment payments for Parts I, VI, VI.1, and XIII.1 taxes are due on the last day of every complete month of a corporation's tax year. The first payment is due one month minus a day from the starting date of the corporation's tax year. The rest of the payments are due on the same day of each month that follows.

Eligible small-CCPCs can make quarterly instalment payments, instead of monthly ones. For more information, see Guide T7B-Corp, Corporation Instalment Guide.

You can view your instalment due dates by using the "Calculate and pay instalment payments" service through:

• My Business Account at canada.ca/my-cra-business-account, if you are the business owner

• Represent a Client at canada.ca/taxes-representatives, if you are an authorized representative or employee

Balance-due day

Generally, all corporation taxes (with the exception of Part III and Part XII.6) are due two months after the end of the tax year. However, the tax is due three months after the end of the tax year if the following conditions apply:

• the corporation is a CCPC throughout the tax year;

• the corporation is claiming the small business deduction for the tax year, or was allowed the small business deduction in the previous tax year; and either of the following applies:

  • the corporation's taxable income for the previous tax year does not exceed its business limit for that tax year (if the corporation is not associated with any other corporation during the tax year)

  • the total of the taxable incomes of all the associated corporations for their last tax year ending in the previous calendar year does not exceed the total of their business limits for those tax years (if the corporation is associated with any other corporation during the tax year)

The business limit is provided at "Line 410 - Business limit" on page 77. For more information about allocating the business limit among associated corporations, see "Schedule 23" on page 33.

Special rules apply to determine the balance-due day of a new corporation formed after an amalgamation or of a parent corporation after it receives the assets of a subsidiary corporation that is winding-up. For more information, go to canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/paying-your-balance-corporation-tax or see Guide T7B-Corp, Corporation Instalment Guide.

Reference
Sections 125 and 157

Partnerships - Limiting deferral of corporation tax

Under section 34.2, a corporation may have to accrue additional income in respect of a partnership (other than dividends for which a deduction is available under section 112 or 113), when the fiscal period of the partnership begins in the corporation's tax year and ends in a following tax year. The corporation is then required to accrue income under the adjusted stub period accrual (ASPA) regime for the portion of the partnership's fiscal period that falls in the corporation's tax year (the stub period). These rules do not affect a corporation's capital dividend account which is to be determined without reference to section 34.2.

Since the ASPA income inclusion in a tax year is an estimate of the stub period income, the corporation is entitled to claim that same amount in the immediately following tax year. Both the ASPA income inclusion and the treatment of that same amount in the following year are subject to the characterization rules under subsection 34.2(5). They are deemed to have the same character and be in the same proportions as the partnership income that they relate to. As such, the claim in the immediately following tax year may be a deduction or a deemed allowable capital loss, whichever applies. A corporation may have ASPA in respect of more than one partnership and, in such cases, the ASPA rules apply to the corporation on a partnership-by-partnership basis.

In general, a corporation (other than a professional corporation) has to include in its income for a tax year its ASPA for a partnership if all of the following apply:

• the corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the tax year

• another fiscal period of the partnership begins in the tax year and ends after the tax year of the corporation

• at the end of the tax year, the corporation is entitled to a share of an income, loss, taxable capital gain, or allowable capital loss of the partnership for the fiscal period referred to in the preceding bullet

A corporation has a significant interest in a partnership if the corporation, or the corporation together with affiliated or related parties, is entitled to more than 10% of the partnership's income or loss (or assets, net of liabilities, if the partnership were to cease to exist).

These rules apply to any corporation (described above), that is a member of a partnership, even if the partnership has a member that is an individual or a professional corporation that is subject to the 1995 rules limiting deferral for unincorporated businesses.

The definition of adjusted stub period accrual in subsection 34.2(1) gives the formulas for calculating a corporation's ASPA in respect of a partnership. The ASPA formula allows the corporation to designate two reductions. The first designation concerns qualified resource expenses incurred by the partnership during the corporation's stub period. The second allows a corporate partner to make a discretionary designation to reduce its ASPA to reflect its knowledge of the actual partnership income for the stub period. Once filed, the designations cannot be amended or revoked. If the amount of the discretionary designation is too high, creating an income shortfall, the corporation may be subject to an additional income inclusion. The additional income inclusion may increase if the shortfall is above a 25% threshold.

Under certain conditions, a corporation (other than a professional corporation) that becomes a member of a partnership in a tax year may make a designation to apportion its income from the partnership between two tax years:

• the tax year in which the fiscal period of the partnership began

• the tax year in which the fiscal period of the partnership ends

To calculate the income inclusion under section 34.2 and, if applicable, the income shortfall adjustment and additional amount under section 34.3, use Schedule 71, Income Inclusion for Corporations that Are Members of Single-Tier Partnerships, or Schedule 72, Income Inclusion for Corporations that Are Members of Multi-Tier Partnerships. These are worksheets and you do not have to file them with your return. To report the amounts, file a completed Schedule 73, Income Inclusion Summary for Corporations that Are Members of Partnerships, with your return.

References
Sections 34.2, 34.3, and 249.1

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