Running a company in Canada can be tough. Complying with tax laws – knowing how much, when, and where to pay corporate income tax – can make it even more challenging.
In this article, we’ll untangle some of the complex aspects of corporate income tax. We’ll lay out what it is, how to pay, and where to pay. Most importantly, we’ll go over tax deadlines to help keep your company on track.
What are corporate income taxes in Canada?
Your corporate income taxes in Canada are covered under the Income Tax Act (ITA) and is administered by the Canada Revenue Agency (CRA). This is in addition to your provincial or territorial tax laws.
The federal rate of corporate income taxes is computed as follows:
- 38%: basic rate of Part I tax, which is based on taxable income
- 28%: rate after federal tax abatement
- 15%: net tax rate after the general tax reduction
- 9%: net tax rate for Canadian-controlled private corporations (CCPCs) claiming small business deductions
These rates are in addition to the lower rate and higher rate imposed by the provinces and territories on corporations operating in their areas.
How do I pay corporate income tax in Canada?
All Canadian corporations must pay their income taxes in monthly or quarterly instalments according to Canada’s laws on corporate tax.
The exception to this is when the total of the following taxes is $3,000 or less for the previous year or the current year:
- Part I tax
- Part VI tax
- Part VI.1 tax
- Part XIII.1 tax
The tax your corporation needs to pay is due 2 or 3 months after the end of the tax year, depending on your circumstances.
Here is a summary of the tax payments that your corporation needs to do and its corresponding due date:
|
Due Date |
Payment |
|
Instalment due dates: last day of every complete month of a corporation’s tax year |
instalment payments for Parts I, VI, VI.1, and XIII.1 taxes |
|
Balance-due day: two months after the end of the tax year |
all corporation taxes (except for Part III and Part XII.6 taxes) |
|
Balance-due day: three months after the end of the tax year |
all corporation taxes (except for Part III and Part XII.6 taxes), if:
|
Balance-due day comprises of the balance of taxes that you need to pay for the tax year, after deducting the instalments that you have made for the same tax year.
Where can I pay corporate income tax in Canada?
You have two choices on how and where to pay your corporate income tax in Canada:
- in person
- online
To find out what is best for you, consider the rules set by the CRA if you’re required to pay your taxes and file your returns online or not.
This video shows a quick overview of where to pay corporate income tax to the CRA:
If you’re a Québecois company that wants to know how and where to pay your corporate income taxes, consult with the best corporate tax lawyers in Québec as ranked by Lexpert.
Methods on where to pay corporate income tax
There are many ways on how and where you can pay your corporate income tax in Canada. These methods include:
- Online payments:
- online banking: through its online banking services or tax filing service; payments are usually received by the CRA within 5 business days
- CRA’s My Payment service: needs an activated debit card; payments are usually processed by the CRA within 1 to 3 business days
- CRA’s third-party service providers: by using a credit card, PayPal or Interac e-transfer; and third-party service providers for T2 taxes like Canada Post, PaySimply, Plooto, and TelPay. Payments must be made before the due date as they are not automatically processed by CRA
- pre-authorized debit: by registering and using your My Business Account or BizApp
- other options in My Business Account: under the “Calculate and pay instalment payments” or the “View and pay account balance”
- In-person payments:
- Canadian financial institution: through a bank or credit union, using a remittance voucher through your My Business Account
- Canada Post retail outlet: pay using cash or debit card for a fee, by using a remittance form which can be requested online in your My Business Account
The methods above are also available for these tax payments:
- GST/HST
- Payroll source deductions
- Part XIII taxes – non-resident withholding tax for business
- T3 taxes (Trusts)
Considerations on how and where to pay corporate income tax
To help you decide on how to pay your corporate income tax and what method will suit you, here are some rules:
- if you’re going to remit over $10,000: you’re required to pay your corporate income tax through electronic payments
- if made through online channels: payment is considered made by the CRA based on the date it receives payment
- if it is processed at any financial institution: payment is considered made on the day if made with a financial institution of the Canadian Payments Association
- if your due date is on a weekend or public holiday: the payment is still considered on time, but only if the CRA received or postmarked the payment on or before the next business day
Deadlines when paying corporate income tax
Your corporate income tax return must be filed within 6 months of the end of each tax year. Your corporation’s tax year will be its fiscal period.
As for when exactly on the 6th month when you should be filing your corporate income tax returns, here are dates to remember:
- if the corporation's tax year ends on the last day of a month: the corporate income tax return must be filed by the last day of the sixth month after the end of the tax year
- if the last day of the tax year is not the last day of a month: the corporate income tax return must be filed by the same day of the sixth month after the end of the tax year
Consult with one of the Lexpert-Ranked best corporate tax lawyers in Canada to know more on how and where to pay your corporate income taxes.