Instalment Payments

What is an Instalment Payments?

Instalments are payments made throughout the year to pay tax for the current year. They apply to both individuals and companies when the tax payable exceeds certain thresholds.

Who has to pay instalments?

For individuals, the obligation to make instalments arises when two conditions are met: the estimated net tax for the current year exceeds $1,800 and the net tax payable exceeded $1,800 in one of the two previous years. This situation mainly affects individuals whose income is not subject to sufficient deductions, such as the self-employed, retirees or those with investment income.

For corporations, instalments must be paid at the federal level if the tax payable for the current or previous year exceeds $3,000. This amount includes Part I, VI, VI.1 and XIII.1 tax. At the provincial level, the obligation applies if the tax payable for the current and previous year exceeds $3,000.

When do you pay your instalments?

As an individual, your instalments must be paid four times a year.

• March 15;

• June 15;

• September 15;

• December 15.

Companies must make an advance payment by the last day of each month of the tax year.

A Canadian-controlled private corporation may elect to pay its instalments quarterly if it meets the following conditions: combined taxable income with associated corporations of $500,000 or less, combined taxable capital with associated corporations of $10,000,000 or less used in Canada, eligibility for the small business deduction and no default in its tax and social security obligations. The provincial conditions are essentially the same.

To calculate instalments, an individual must pay one quarter of the estimated tax for the year or the tax for the previous year. A company must pay, at its option: one-twelfth of the estimated tax for the year, one-twelfth of the tax for the previous year or, for the first two months, one-twelfth of the previous tax, then one-tenth of the difference between the tax payable for the previous year and the total of the first two instalments paid.

How do you pay your instalments?

Instalments can be paid by various means, depending on what is most convenient for you.

Electronic payment

You can make your payment online, in particular :

• via your financial institution's website;

• at a participating financial institution, over the counter or at an ATM, using the payment slip associated with form TPZ-1026.A (depending on the options offered by your institution).

Payment by post

You can also send your payment by post, together with the payment slip attached to form TPZ-1026.A.

If you do not have this slip, you can request one directly online from your My Account area, in order to obtain a payment document for your instalments.

To remember: important payments

Since 1 January 2024, all payments over $10,000 must be made electronically, except in special circumstances. Failure to comply with this requirement may result in the application of penalties.

Interest and penalties for late or insufficient payment

Any late or insufficient instalment will incur interest calculated daily at the prescribed rate. At the provincial level, additional interest of 10% per year applies if the instalment is less than 75% for an individual or 90% for a company of the amount required. At the federal level, a penalty is added if the interest exceeds $1,000: it corresponds to the greater of $1,000 or 25% of the interest, divided by two. These charges are not deductible, which increases their financial impact.

Do you have any questions about instalments?

Effective planning of instalments helps you to remain compliant and avoid unnecessary costs.

Need some guidance? Contact our tax team today to secure your tax obligations.