CRA Payment Arrangement Calculator for Corporate Tax Debt

What a Payment Arrangement Actually Is

A payment arrangement is an agreement with a CRA collections officer to clear a balance by instalments rather than in one payment. It is not a settlement, it does not reduce what is owed, and it does not stop interest. It buys time, and in exchange CRA expects to see that the corporation cannot pay in full and can genuinely sustain what it is offering.

CRA’s published position is that it expects payment of the full amount when it is due. Arrangements are considered case by case, and the longer the term you ask for, the more likely the officer is to require financial disclosure: statements, bank records, receivable listings and a cash flow projection. Nothing here should be read as an entitlement to a particular number of months, because no such entitlement exists.

The practical consequence is that the figure you offer matters less than whether you can defend it. An offer supported by a projection that shows the payment is affordable is treated very differently from a figure produced by dividing the balance by a convenient number of months.

The Mix of the Debt Decides the Terms

Most corporations calling a collections officer think of the balance as one number. CRA does not. A corporate account is made up of separate accounts, and the three that matter here behave so differently that a plan built on the total is usually the wrong plan.

Read that table from right to left and the negotiation strategy writes itself. The dollars that carry personal exposure and trust status should be cleared first and fastest, because those are the dollars that follow the directors home. The corporation’s own income tax is the part where there is genuinely room to ask for time.

Source Deductions Are Trust Funds, and That Changes Everything

When the corporation deducts income tax, Canada Pension Plan contributions and Employment Insurance premiums from an employee’s pay, that money was never the corporation’s to spend. Subsections 227(4) and 227(4.1) of the Income Tax Act deem the amount to be held in trust for the Crown, separate from the corporation’s property and, importantly, separate from property subject to a security interest.

That last point is why banks care. A deemed trust can rank ahead of a general security agreement over the corporation’s assets, so a large unremitted source deduction balance is a problem for the corporation’s lender as well as for CRA.

The calculator therefore applies a shorter assumed term to the source deduction slice than to the T2 and GST/HST slices, and both terms are yours to change. If your officer tells you something different, use their number.

Director Liability: What Attaches and What Does Not

This is the single most important distinction on the page, and it is frequently stated backwards.

Under section 227.1 of the Income Tax Act, directors can be held jointly and severally liable for source deductions the corporation failed to withhold or remit, together with the associated interest and penalties. Under section 323 of the Excise Tax Act, directors can be held liable for net GST/HST the corporation failed to remit. There is no equivalent provision making a director personally liable for the corporation’s own income tax.

Both provisions carry a due diligence defence, available to a director who exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances to prevent the failure. Both also carry a limitation period: an assessment generally cannot be made more than two years after the person last ceased to be a director of the corporation. Neither is a formality, and neither should be relied upon without advice on the specific facts, because what counts as due diligence and when a person legally ceased to be a director are both frequently litigated.

Where the directors may already be outside the window, the director liability limitation period checker is the right place to start.

A Requirement to Pay Is Garnishment Without a Court Order

Section 224 of the Income Tax Act, and section 317 of the Excise Tax Act for GST/HST, allow the Minister to require a person who is liable or will become liable to pay money to a tax debtor to pay that money to the Receiver General instead. No court application is needed and no hearing takes place. The corporation usually finds out when a payment does not arrive.

A Requirement to Pay served on customers is usually the most damaging step, because it converts a private tax problem into a commercial one. Once a certificate has been registered in the Federal Court under section 223, the amount has the effect of a judgment and supports seizure and sale of the corporation’s property.

Interest Keeps Running While You Pay

Arrears interest is compounded daily at the prescribed rate plus a spread, and it does not pause because an arrangement is in place. Every month, part of the payment is absorbed by interest that accrued since the last one, and only the remainder reduces the balance. This is why a long plan costs so much more than a short one, and why the total interest figure in the calculator rises steeply as the term extends.

It also produces the edge case that catches people out. If the monthly payment is no greater than the interest accruing in the month, the balance does not fall at all. The plan runs, the payments leave the bank, and the debt is the same or larger a year later. The calculator detects this and tells you the minimum payment that beats the interest rather than reporting a meaningless number of months.

Relief from interest and penalties can be requested under subsection 220(3.1) of the Income Tax Act, and under section 281.1 of the Excise Tax Act for GST/HST, in limited circumstances such as serious illness, natural disaster or CRA error, subject to a ten-year limitation. It is worth applying where the facts support it, and it should never be built into a plan as an expected outcome.

Building a Plan That Will Not Fail

A failed arrangement is worse than a realistic one. When a payment is missed, CRA generally treats the arrangement as at an end and escalates, and the officer who was told the corporation could afford a figure it could not afford has reason to discount the next proposal. The stress test in the calculator exists for that reason: if the payment exceeds monthly free cash flow, the plan will fail, and it is better to know that before it is agreed than after.

Three things make a proposal credible. The returns must be filed, because CRA cannot agree a plan for a balance that is not yet determined, and a corporation several years behind needs the unfiled T2 catch-up and unfiled HST returns work done first. Current remittances must be maintained, because an arrangement on old debt while new debt accumulates will not survive. And the disclosure has to support the number.

Where the corporation can borrow, it is worth comparing the cost of doing so against arrears interest, which the CRA debt against bank loan comparison sets out. Commercial credit is often cheaper than CRA interest, and it removes the enforcement risk entirely. Our CRA collections and tax debt assistance service handles the negotiation, the disclosure and the arrangement itself.

Offer what you can sustain, and clear the trust funds first. A proposal that pays the source deduction balance quickly and asks for time on the T2 balance is both easier for an officer to accept and better for the directors personally, because it retires the exposure that attaches to them before the exposure that does not.

What This Calculator Does Not Cover

• Taxpayer relief applications under subsection 220(3.1) of the Income Tax Act or section 281.1 of the Excise Tax Act, which have their own criteria and a ten-year limitation
• Consumer proposals, Division I proposals and bankruptcy, which are insolvency matters requiring a licensed insolvency trustee and can change the treatment of the debt entirely
• The due diligence defence in detail, which turns on the specific conduct of each director and cannot be assessed from a balance
• Disputes over the underlying assessment, where a notice of objection or appeal has its own strict deadlines and is a separate track from collections
• The effect of a pending objection on collections, noting that the restrictions on collection action differ between income tax and GST/HST, and are considerably weaker for GST/HST
• Non-resident collection and the recovery of Canadian tax debts against assets or persons outside Canada
• Provincial tax debts, including Employer Health Tax and workplace insurance premiums, which are collected separately and are not part of this balance
• Secured creditor priorities and how a deemed trust interacts with an existing general security agreement in a restructuring
• Penalties for late filing and late remittance, which may already be inside the balances you entered and are not calculated here