Tax Instalments and Payments

Bulletin 4007
Published: January 2004
Content last reviewed: September 2012
ISBN: 1-4249-1850-2 (PDF)

Publication Archived

Notice to the reader: Effective January 1, 2009, the Canada Revenue Agency (CRA) administers Ontario's corporate income tax, capital tax, corporate minimum tax, and the special additional tax on life insurers.

As a result, the Corporations Tax Act provisions described on this page and in other publications are only applicable to taxation years ending December 31, 2008 and prior.

For taxation years beginning January 1, 2009, the Taxation Act rules apply.

This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.

References: clause 79(8)(c), subsection 48(3.2), 74.4(1), 78(2), (3), (4), (5), (6), (7), (9), (11) and 82(2), Regulation 183 (section 507)

Application

The bulletin sets out the policy of the Ministry. It is provided as a guide to taxpayers and is not intended as a substitute for the relevant legislation. Any references to legislation are to the provisions of the Corporations Tax Act (Ontario) (CTA) and its Regulations, unless otherwise noted.

This bulletin replaces portions of Information Bulletin 4007R, originally published January 2004. It has been updated to reflect amendments to Regulation 183 of the Corporations Tax Act, (CTA), which were filed December 8, 2005. These amendments parallel the calculation of instalments under the federal Income Tax Act (ITA), when a corporation has been involved in an amalgamation, wind-up, rollover or has a preceding short taxation year that is less than 183 days. The amendments come into force for taxation years beginning on or after January 1, 2006.

Introduction

  1. Generally, a corporation is required to make periodic instalments throughout a taxation year with respect to its estimated tax liability for that period.

    The requirements for instalments and other payments under the CTA vary depending on the type of corporation and its total tax liability. It is important for corporations to establish the timing and amount of their minimum instalments and payments, if any. In this way corporations will avoid being assessed for interest and penalties on late or insufficient instalments and payments.

Tax Payments

  1. Tax payments, payable to the Minister of Finance, should be sent to:

    Ministry of Finance
    33 King Street West, PO Box 620
    Oshawa ON  L1H 8E9
  2. Under clause 79(3)(a), an amount paid by a corporation is deemed to be paid on the day prescribed by subsection 503(5) of Regulation 183. This day is the day of receipt of the payment by the Ministry or its authorized agent (i.e., a bank or other financial institution).

Application of Payments Received

  1. Pursuant to subsection 78(7), payments received by the Minister on account of amounts owing for a taxation year by a corporation are applied in the following order:
    1. tax payable
    2. penalty payable
    3. interest payable, and finally
    4. any other amount payable under the CTA.

Monthly Instalments

  1. Except for corporations eligible for the small business instalment exemption (discussed in paragraphs 12 to 14) and corporations that qualify for the quarterly instalment option (discussed in paragraph 15), all corporations are required by clause 78(2)(a) to make monthly instalment payments. Corporations are able to calculate their tax instalments in one of three ways, whichever is the least:
    • 1/12th of the current taxation year's estimated tax, or
    • 1/12th of the first instalment base, or
    • for the first two months, 1/12th of the second instalment base and for the next 10 months, 1/10th of the difference between the first instalment base and the amount paid for the first two instalments.

    In general the first instalment base is the previous year's tax payable and the second instalment base is the tax payable for the second preceding year. This general rule is elaborated on in paragraphs 7 to 11.

  2. Corporations are permitted under clause 79(8)(c) to select the method that results in the lowest total amount of instalments for a taxation year without being charged interest. In addition, a corporation eligible to a tax credit under sections 43.2 to 43.13, or a mutual fund corporation entitled to a capital gains refund under section 48, may reduce their instalment requirements for a particular year (as computed under paragraph 5) by 1/12th of any tax credits or capital gains refunds for the particular year. However, pursuant to subsection 506(6) of Regulation 183, a corporation's minimum instalment requirements for a particular year are not recalculated and reduced by any loss carried back from a subsequent taxation year.

Calculation of the instalment base for a short preceding year

  1. When calculating instalments, as described in paragraph 5, if one of the prior taxation years used to calculate the instalment base was less than 365 days, the tax payable for the year must be grossed up to a full 365 day year. For taxation years beginning after December 31, 2005, if one of the prior taxation years used in the calculation of instalments was less than 183 days, the tax for that year is substituted by the greater of:
    1. That year's tax payable grossed up to a full 365 days; and
    2. The tax payable for the last preceding year that did exceed 182 days, grossed up to a full 365 days.

Reorganizations

  1. Amalgamations

    A corporation formed by an amalgamation is required to pay tax instalments beginning with its first taxation year. In calculating its instalments, the aggregate tax paid in the last taxation year by the predecessor corporations are treated as the new corporation's first instalment base. The aggregate tax of the taxation year preceding the last taxation year of the predecessor is treated as the new corporation's second instalment base.

  2. Wind-ups

    For taxation year's beginning on or after January 1, 2006, when a corporation is wound up into a parent corporation and subsection 88(1) of the federal ITA applies, the parent corporation will have to include, in addition to its own instalment bases, the instalment bases of its subsidiary.

  3. Rollovers

    Where all or substantially all, of the property of one corporation has been transferred to a nonarm's length corporation and subsection 85(1) or (2) of the federal ITA applies, the transferee must take into account the instalment bases of the transferor.

  4. Reorganizations and short taxation years

    Where any of the predecessor's or transferor corporations prior taxation year is a short taxation year, the rules outlined in paragraph 7 apply. The rules will apply to calculate the instalment bases of the successor, parent or transferee corporation.

Exemption from Instalment Requirement

  1. Under subsection 78(4), a corporation with tax payable less than $2,000 for the taxation year or the immediately preceding taxation year is not required to make monthly instalments. Instead, as explained in paragraph 17, the corporation would be required to pay its total tax liability for the taxation year within two or three months from the corporation's taxation year end.
  2. For purposes of determining whether a corporation is entitled to an exemption from the monthly instalment requirement, tax payable for the taxation year is computed net of any tax credits under subsections 43.2 to 43.13 (mining reclamation trust tax credit and refundable specified tax credits) or, if the corporation is a mutual fund corporation, net of any capital gains refund for the year. Tax payable for the immediately preceding taxation year is computed net of any mining reclamation trust tax credit and in the case of a mutual fund corporation, net of any capital gains refund for that taxation year.
  3. Corporations, filing for the first time do not have a tax payable for a preceding taxation year. Accordingly such corporations are not required to make monthly instalments and may, as explained in paragraph 17, pay their total tax for the taxation year within 2 or 3 months of the corporation's first taxation year end.

Quarterly Instalments

  1. For December 31, 2001, corporations with tax payable for the current or immediately preceding taxation year of at least $2,000 but less than $10,000 are allowed to calculate and pay their instalments on a quarterly basis.

Balance of Tax Due

  1. If a corporation's actual tax liability for a taxation year exceeds the amounts paid by instalments under clause 78(2)(a), the difference is referred to as the "balance of tax due".
  2. The balance of tax due must be paid on or before the last day of the:
    • third month after the end of the corporation's taxation year if the corporation:
      • was a Canadian-controlled private corporation throughout the taxation year, and
      • had taxable income in the preceding taxation year of not more than the corporation's "Ontario business limit" (described in paragraphs 18 and 19), or
    • the second month after the end of the corporation's taxation year, for all other corporations.
  3. Pursuant to subsection 41(3.2), effective January 1, 2001, a corporation's "Ontario business limit" has increased from $200,000 to $400,000. The following table summarizes the "Ontario business limit" during the period of the increase:
    For portion of taxation year ending Ontario business limit
    2000 or prior $200,000
    After December 31, 2000 and before October 1, 2001 $240,000
    After September 30, 2001 and before January 1, 2003 $280,000
    2003 $320,000
    2004 $400,000
  4. For purposes of determining the balance of tax due date, the Ontario business limit is prorated for taxation years straddling the 2000 to 2004 calendar years based on the number of days in each calendar year. In addition, pursuant to subsection 78(3), where the preceding taxation year is less than 51 weeks, the Ontario business limit is apportioned by multiplying the business limit by the ratio of the number of days in the immediately preceding taxation year to 365. For example, consider a corporation having a preceding taxation year of 91 days ending on November 30, 2001. The relevant Ontario business limit for the preceding taxation year is $66,520 computed as follows:

    [($240,000 × 30/91) + ($280,000 × 61/91 )] × 91/365 = $66,520

Payment Due Dates

  1. If a corporation's preceding taxation year ends on the last day of a calendar month, each monthly tax instalment and the balance of tax payment is due on the last day of the applicable calendar month. Where the corporation's preceding taxation year ends on a day other than the last day of a calendar month, pursuant to clause 78(9)(a), monthly instalment payments and the balance of tax payment are due on the day of the month corresponding to the day of the month on which the previous taxation year ended.
  2. For example, consider a corporation that is not a Canadian-controlled private corporation whose 2001 taxation year ended April 15, 2001. The corporation's monthly instalments for the ensuing taxation year are due on the 15th of each month commencing May 15, 2001. Assuming a 2002 taxation year of 12 months duration, any balance of tax payable for 2002 will be due on June 15, 2002.
  3. If the preceding taxation year ends on the 29th, 30th or 31st day of a month, any monthly instalment payment or balance of tax payment due in February is due on the last day of February.
  4. Pursuant to clause 78(9)(b), twelve monthly instalments are required where the taxation year of the corporation is more than 350 days. The last instalment is required to be paid on or before the last day of the taxation year. For example, if a corporation is required to make monthly instalments and it has successive taxation years ending on December 31, 2000 and December 20, 2001, the 12th monthly instalment for the December 20, 2001 taxation year will be due on December 20, 2001.
  5. When the last day of a month is a non-business day (i.e., Saturday, Sunday or a statutory holiday) the monthly tax instalment is due on the first business day following the non-business day.

Refund of Tax Instalments

  1. Pursuant to subsection 82(2), the Ministry may make a refund of instalments before assessing a corporation's return for the year if a request has been made in writing. The corporation may request a refund of all or part of instalments paid for the year. A request for refund will normally be made in situations where a corporation, having paid instalments for a few months of a year, realizes it has overestimated its tax for the year. The Branch may, in certain situations, require forecast financial statements in support of the request.

Exception: Insurance Exchange

  1. An insurance exchange is defined under subsection 74.4(1) of the CTA as a reciprocal or interinsurance exchange within the meaning of the Insurance Act. An insurance exchange is not required to pay tax instalments. Accordingly, the comments in paragraphs 1 to 24 do not apply to insurance exchanges. Pursuant to subsection 78(11) an insurance exchange is required to remit to the Minister of Finance within two months following the end of its taxation year, the net amount of premiums and deposits paid on account of premiums with respect to individuals and property situate in Ontario that have been collected by the exchange during the taxation year.
 
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