Corporate Tax Installments Canada 2026 — When & How to Pay

1. What Are Corporate Tax Installments?

Corporate income tax installments are quarterly prepayments of a corporation's estimated annual income tax liability. Rather than waiting until the corporate tax return is filed and paying the full year's tax in a single payment, CRA requires corporations whose net tax owing exceeds a threshold to spread their payments across the fiscal year in four equal quarterly installments.

The installment system exists because the federal government and provincial governments rely on a steady, predictable stream of corporate tax revenue throughout the year — not a single lump sum once a year. For corporations, installments also prevent the cash flow shock of a large unexpected tax bill at year-end by building the obligation gradually throughout the year alongside the income that generated it.

Installments are required for both federal corporate income tax (Part I tax under the Income Tax Act) and for provincial corporate income tax in most provinces. In Ontario, Alberta and several other provinces, the province administers its own corporate income tax separately and has its own installment requirements — though in practice most provinces follow CRA's quarterly schedule.

2. Who Must Pay Corporate Tax Installments?

A corporation is required to pay quarterly tax installments if its net tax owing for either the current taxation year or the immediately preceding taxation year exceeds $3,000. This is true for both federal and most provincial income taxes. If either threshold is met, installments are required — not only when both are met.

The installment obligation applies to virtually every type of Canadian corporation — Canadian-Controlled Private Corporations (CCPCs), public corporations, Crown corporations and foreign-controlled private corporations — subject to the $3,000 threshold. There is no size exemption and no revenue threshold. A corporation with a single employee that owes $3,001 in corporate tax for the year is required to pay installments in the following year.

Corporations that are exempt from paying installments include those whose net tax owing has never exceeded $3,000 in either the current or immediately preceding year — typically very small corporations with minimal taxable income after deductions. New corporations in their very first taxation year are also generally not required to pay installments — though they must still pay the full year's tax by the balance-due day.

3. The $3,000 Threshold — What It Means in Practice

The $3,000 threshold refers to net tax owing — not gross revenue, not taxable income, and not the full tax liability before credits. Net tax owing is calculated as total Part I federal corporate income tax payable minus applicable federal tax credits (including the general tax reduction, small business deduction, foreign tax credits and other applicable credits).

For a Canadian-Controlled Private Corporation qualifying for the Ontario Small Business Deduction, the combined federal-provincial corporate tax rate is 12.2%. At this rate, a CCPC needs approximately $24,590 in net active business income before its net tax owing first reaches $3,000 — triggering the installment requirement in subsequent years.

4. The Three Installment Calculation Methods

CRA permits corporations to calculate their quarterly installment amounts using any one of three methods. Corporations may choose a different method for each taxation year — and may even mix methods within a year in limited circumstances. The goal is always to ensure the total of four installments equals at least the corporation's actual net tax owing for the year — to avoid installment deficiency interest.

Method 1 — Current Year Estimate

Under the Current Year Estimate method, each quarterly installment is one-quarter of the corporation's estimated net tax owing for the current taxation year. The corporation estimates what it will owe at year-end based on projected income, deductions and credits — and pays 25% of that estimate each quarter.

This method produces the most accurate installments — payments closely reflect actual income as it is earned during the year. However, it requires ongoing income projection and creates risk if the year-end tax liability turns out to be higher than estimated. If the actual tax exceeds the current-year estimate, CRA charges interest on the deficiency retroactively from each installment's due date.

Method 2 — Prior Year Method

Under the Prior Year method, each quarterly installment is one-quarter of the corporation's actual net tax owing for the immediately preceding taxation year. This method eliminates estimation risk — because the prior year's tax is already known — and is the simplest approach for corporations with relatively stable year-over-year income.

If you pay four installments each equal to one-quarter of last year's tax, CRA will not charge installment deficiency interest even if this year's actual tax turns out to be higher — provided the prior-year installments were paid in full and on time. Any excess of current-year tax over the installment total is paid as a final balance on the balance-due day, without interest on the shortfall.

Method 3 — Two-Year Prior Year Method (First Two Installments)

The Two-Year Prior Year method is a hybrid approach that CRA also accepts as a safe harbour. Under this method:

• First two installments (Q1 and Q2): Each equals one-quarter of the net tax owing from the second preceding taxation year (two years ago)
• Last two installments (Q3 and Q4): Together, they make up the difference needed to reach the total tax from the immediately preceding year (last year)

This method is less commonly used than Method 2 but may be beneficial in specific circumstances — for example, when the corporation had a very high-tax second-preceding year and a significantly lower immediately preceding year. Like Method 2, if the installments are calculated correctly and paid on time, CRA will not assess deficiency interest even if actual current-year tax is higher.

5. Which Calculation Method Is Best for Your Corporation?

6. Installment Due Dates by Fiscal Year-End

Corporate tax installment due dates fall at the end of each of the four quarters in your fiscal year. Installments are due on the last day of each complete quarter that falls within your taxation year. The specific calendar dates depend on your fiscal year-end.

7. Due Dates — December 31 Fiscal Year-End

The most common corporate fiscal year-end in Canada is December 31. For a corporation with a December 31 year-end, the four quarterly installment due dates for the 2026 taxation year are:

8. Non-Calendar Fiscal Year-Ends

Many Canadian corporations choose a fiscal year-end other than December 31. For corporations with non-calendar fiscal year-ends, the installment due dates shift accordingly — always falling on the last day of each quarter counting from the start of the fiscal year.

For corporations with a fiscal year-end that does not fall on a calendar quarter-end, the installment due dates are calculated as the last day of the month that is three, six, nine and twelve months after the start of the taxation year.

9. Final Balance — The 2-Month vs. 3-Month Rule

The final balance of corporate income tax owing after all installments have been paid is due on the balance-due day. The balance-due day differs depending on whether the corporation qualifies as a Canadian-Controlled Private Corporation under the Income Tax Act.

10. How to Make Corporate Tax Installment Payments to CRA

CRA provides several methods for making corporate income tax installment payments. Online payment through My Business Account or a major Canadian financial institution is the fastest and most reliable — providing same-day or next-day CRA receipt for payments made before the financial institution's daily cut-off time.

Payment Methods Available

• My Business Account (CRA online portal): Log in and select "Make a payment" under your corporate income tax account. Payments are processed immediately and credited to your RC account. This is the recommended method for all corporate installments.
• Online banking — Pay bill: Add CRA as a payee ("Federal — Corporation Tax Payments RT") through your business bank account's bill payment service. Use your 15-digit Business Number (BN) with the RT0001 suffix as the payee account number. Allow at least one business day for processing.
• My Payment (CRA web tool): Available at canada.ca/cra-my-payment. Accepts Visa Debit, Mastercard Debit and Interac Online for corporate payments. Credit cards are not accepted.
• Wire transfer or large-payment service: For payments over $25,000, wire transfer through your financial institution's large-value transfer system (Lynx) provides same-day settlement.
• Cheque: Payable to "Receiver General for Canada." Write your Business Number and the tax year on the memo line. Allow 5–10 business days for processing. Not recommended for deadline payments.

11. Interest on Installment Deficiencies

Unlike late-filed income tax returns, CRA does not impose a separate penalty for late or deficient installment payments. However, CRA does charge compound daily interest at the prescribed rate on any installment deficiency — calculated from the date each installment was due to the date the deficiency is paid.

The prescribed interest rate for amounts owing to CRA in 2026 is 7% per annum, compounded daily. This rate is set quarterly by CRA and can change. The interest calculation is applied separately to each installment shortfall — not to the total annual deficiency.

Worked Interest Example

12. Installment Interest Income — Overpayments

If a corporation's total installments paid exceed its actual net tax owing for the year, the excess is credited to the corporation's account and refunded after the T2 return is assessed. CRA does not pay interest on overpaid installments in the way that it charges interest on deficiencies. The prescribed rate for overpayments is 2% less than the deficiency rate — which means in 2026, CRA pays approximately 5% on excess corporate tax balances held in credit — but this only applies after the return is filed and assessed, not during the year while installments are held.

13. Provincial Corporate Tax Installments

In addition to federal corporate income tax installments, most provinces require corporations to pay provincial income tax installments on the same quarterly schedule. The province's treatment depends on whether it has a tax collection agreement with the federal government.

For Ontario corporations — the most common case — both federal and Ontario corporate income tax installments are paid in a single combined quarterly payment to CRA. The T2 return allocates the combined tax between federal and provincial based on the applicable rates. There is no separate Ontario installment payment or Ontario installment form.

14. New Corporations — First-Year Rules

A corporation in its very first taxation year is generally not required to pay quarterly tax installments — because there is no prior year from which to calculate installment amounts, and the current-year income is not yet known. The first-year corporation pays its entire tax liability as a single payment on the balance-due day (three months after fiscal year-end for CCPCs, two months for others).

In the second taxation year, installments are required if the prior year's net tax owing exceeded $3,000 — which it will for any modestly profitable Ontario CCPC. Many first-year corporations are caught off guard when they realise that quarterly installment obligations begin in year two — even when year-two income is uncertain. Planning for the first installment payment in year two should begin in the later months of year one, before the first installment due date arrives.

15. The CCPC 3-Month Balance-Due Day — Planning Implications

The extra month that CCPCs receive — paying their final balance 3 months after year-end rather than 2 months — creates a meaningful cash flow planning opportunity. For an Ontario CCPC with a December 31 fiscal year-end, the balance is due March 31 — giving the corporation the full January, February and March to prepare the T2 return, calculate the exact balance owing and arrange payment without interest.

However, this benefit is easily lost if CCPC status is inadvertently compromised. Common ways Ontario CCPCs lose CCPC status mid-year include:

• Non-resident shareholders acquiring more than 50% of voting shares (directly or indirectly)
• A public corporation acquiring control through share purchase or convertible instrument
• Inter-corporate transactions that transfer de facto control to a non-resident or public corporation
• Sale of shares to an employee share ownership plan with more than 10% participation by non-residents

If CCPC status is lost during the year, the 3-month balance-due day is no longer available — the entire year's tax becomes due 2 months after year-end. For corporations with significant retained earnings and a late-fiscal-year CCPC status change, the cash flow impact of the one-month shortfall can be material. Review CCPC status with your CPA before any significant share transaction.

16. Excess Installments — Overpayment and Refunds

When a corporation's total installments exceed its actual tax for the year, the excess sits as a credit on the corporation's RC account. The credit is applied first against any other outstanding CRA obligations — HST owing, payroll remittances, prior-year balances — and any remaining excess is refunded to the corporation after the T2 return is assessed.

CRA typically takes 4 to 8 weeks to issue a corporate income tax refund after assessing a T2 return. Corporations that expect a refund should file the T2 as early as possible after fiscal year-end — there is no financial benefit to delaying a return when a refund is owed, and the sooner the return is filed, the sooner the refund is issued.

If a corporation knows early in the year that its income will be significantly lower than prior year — and that installments based on prior year will substantially exceed actual tax — it may voluntarily reduce its installment payments to match the lower current-year estimate. This is done by electing Method 1 (current year) rather than Method 2 (prior year) — the corporation must be confident in its lower income estimate to avoid interest if actual tax exceeds the reduced amounts.

17. Common Installment Mistakes

• Missing the first installment in year two: First-year corporations frequently overlook that installments begin in their second year. The first quarterly payment for a December 31 corporation comes due March 31 of year two — often before the T2 for year one has even been filed. Set a calendar reminder well before the first due date.
• Using the wrong Business Number: Installments must be directed to the RC (corporate income tax) account — not the RT (GST/HST) account or RP (payroll) account. Payments to the wrong account do not count as tax installments and accrue interest even though the money is held by CRA.
• Paying a round number not matched to a safe harbour method: Paying an arbitrary round number — $10,000 per quarter when the prior-year-based amount is $12,500 — means you are not protected by the safe harbour and will owe interest on the $2,500 quarterly shortfall from each installment's due date.
• Assuming the installment requirement disappears in a low-income year: The requirement to pay installments is triggered by the prior year's tax — not the current year's expected tax. Even if this year looks like it will be a low-income year, if last year's net tax exceeded $3,000, installments are still required. Use Method 1 (current year estimate) to reduce payments, but make them.
• Not adjusting for a change in provincial operations: Corporations that expand or contract their operations across provinces may have changes in their provincial income allocation — affecting both the provincial and federal portions of their installment amounts. Review the allocation annually if your corporation operates in multiple provinces.
• Treating installment interest as deductible: Interest charged by CRA on installment deficiencies is expressly non-deductible under the Income Tax Act. Claiming it as a business expense on the T2 will result in a reassessment of that deduction.