Corporation Instalment Guide - 2008

Includes 2009 worksheets for Ontario

T7B Corp.(E) Rev. 07

If you have a visual impairment, you can get our publications in braille, large print, or etext (CD or diskette), or on audio cassette or MP3. For details, visit our About multiple formats page or call 1-800-959-2221.

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Table of Contents

• General Information
  • What's new
• Before you start
  • Is this guide for you?
  • Do you need more information?
  • Forms and publications
  • Problem resolution program
  • Authorized representatives
  • Online requests
  • Alternate address
  • Direct deposit
  • Large Value Transfer System
• Instalment requirements
  • Parts I, VI, VI.1, and XIII.1 tax instalments
  • Part XII.1 - Tax on carved-out income
  • Part XII.3 - Tax on investment income of life insurers
  • Special situations - When do you not have to pay instalments?
  • Special rules
• Due dates
  • Instalment due dates
  • Balance due date
• Understanding statements
  • Statement of Interim Payments
  • Statement of Arrears
• Paying instalments
  • How to make a payment
  • Paying on time
  • Using the right payment voucher
  • Making large payments
  • Owing minimal amounts
• Transfers, refunds, and prepayments
  • Transferring instalments
  • Refund of instalments
  • Transferring overpayments
  • Prepaying reassessments
• Interest and penalties
  • Instalment interest
  • Instalment penalty
  • Arrears interest
  • Refund interest
  • Carryback
  • Forgiven interest
  • Cancelling small amounts of penalty and interest
  • Cancelling or waiving penalties and interest
• Worksheets
  • Rates of tax
  • Worksheet 1 - Calculating estimated tax payable and tax credits for 2008
  • Worksheet 2 - Calculating monthly instalment payments for 2008
  • Worksheet 3 - Calculating quarterly instalment payments for 2008
  • Worksheet 4 - Calculating estimated tax payable and tax credits for 2009 (Ontario)
  • Worksheet 5 - Calculating monthly instalment payments for 2009 (Ontario)
  • Worksheet 6 - Calculating quarterly instalment payments for 2009 (Ontario)
• Appendices
  • Appendix 1 - Instalment base - Amalgamations
  • Appendix 2 - Instalment base - Wind-ups
  • Appendix 3 - Instalment base - Transfers
  • Appendix 4 - Worksheet 2 - Example 1
  • Appendix 5 - Worksheet 2 - Example 2
  • Appendix 6 - Worksheet 3 - Example
  • Appendix 7 - Worksheet 5 - Example
• Your opinion counts

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General Information

Before you start

Is this guide for you?

Generally, corporations have to pay their taxes in instalments. An instalment payment is a partial payment of the total amount of tax payable for the year. The Income Tax Act requires corporations to make instalment payments so that they are treated the same as taxpayers who have tax deducted at source from their income.

Since special rules may apply, read the whole guide to determine if you have to make instalment payments.

The Income Tax Act authorizes us to charge instalment interest and penalty, and arrears interest, if we do not receive the required payments on time. See "Interest and penalties".

Note
The terms instalment payment and interim payment are interchangeable. Either term may appear in correspondence and publications you receive from us. Reference to the term reporting period has the same meaning as the term tax year since both terms describe the period assessed.

Do you need more information?

This guide uses plain language to explain the most common tax situations. If you need help after reading this guide or you have a question about your account or your instalment requirements, call our Business Enquiries line at 1-800-959-5525.

For detailed information on topics in this guide, see the federal Income Tax Act and the Income Tax Regulations. We have identified in parentheses the section, subsection, paragraph, or regulation.

For information about filing your T2 Corporation Income Tax Return, see Guide T4012, T2 - Corporation Income Tax Guide.

If you have a question about a non-resident corporation account, visit our Business - International and Non-resident Taxes page or call the International Tax Services Office at one of the following numbers:

Canada and the United States
1-800-561-7761, ext. 9155

Outside Canada and the United States
(we accept collect calls)
613-954-9681

Fax number
613-952-3845

Forms and publications

Visit our Forms and publications page or call 1-800-959-2221.

Problem resolution program

If you have a problem, you can call the Business Enquiries line at 1-800-959-5525.

If your problem is not resolved to your satisfaction, call the Problem Resolution Program co-ordinator listed in the government section of your telephone book.

Authorized representatives

If you want us to release any of your accounting information to an independent representative, such as an accountant, you can either authorize your representative through My Business Account, send us a signed letter of authorization, or complete the new Form RC59, Business Consent Form. The letter should indicate your name, title, and Business Number, the accounts and tax years to which the consent applies, the name, telephone and fax numbers of your representative, and the expiry date of the consent. The letter should be signed and dated. For more information, see our Represent a Client page.

Online requests

You can make a request online for:

• certain financial actions;
• the transfer of a credit;
• additional remittance vouchers;
• other communication products;
• reproductions of previously issued correspondence on your account;
• inhibition of statements;
• inhibition of return envelopes;
• an interest review; or
• a payment search.

For details, visit our Online Requests for Business page.

Alternate address

You can have your monthly Statement of Arrears, Statement of Interim Payments, and any Notification of Returned Payment sent to either your business address or the mailing address we have on record for your Business Number.

You can register an alternate address for a definite or indefinite period, effective immediately or in the future.

Contact your tax centre if you would like more information, or to register an alternate address. You do not have to contact us if you are satisfied with receiving your statements at your current mailing address.

Direct deposit

Direct deposit offers a safe, convenient, and dependable way of receiving refunds and eliminates the potential loss of credit interest if a cheque is delayed in the mail. If you request it, we will deposit your refunds directly into your account at most financial institutions.

To start direct deposit or change information that you have already given us:

• complete the "Direct deposit request" box on the T2 return; or
• send Form T2-DD, Direct Deposit Request Form for Corporations to your tax centre.

Your direct deposit request will stay in effect until you change the information or cancel the service. However, if your financial institution tells us that you have a new account, we may deposit the payments into the new account. If we cannot deposit your payments into a designated account, we will mail a cheque to you at the address we have on file.

Large Value Transfer System

The Canadian Payments Association has set a maximum value of $25 million for any cheque or other paper-based payment instrument cleared through the banking system. The rule also prohibits the splitting of amounts in excess of the set limit into smaller acceptable cheques. This initiative enhances the safety and stability of the Canadian payments system.

The CRA must transmit all large value refunds electronically through the Large Value Transfer System (LVTS).

If you are expecting a refund over $25 million, arrange for direct deposit, and contact your tax centre to register for the LVTS and provide the required banking information.

Instalment requirements

Corporations generally make monthly payments called instalments towards their tax liability under these parts of the Income Tax Act:

• Parts I, I.3, VI, VI.1, and XIII.1;
• Part XII.1; and
• Part XII.3.

Note
For tax years beginning after 2007, eligible Canadian-controlled private corporations will be allowed to make quarterly instalment payments.

Parts I, I.3, VI, VI.1, and XIII.1 tax instalments

These taxes are added together to determine your instalment requirements:

• Part I - Tax on income;
• Part I.3 - Tax on large corporations;
• Part VI - Tax on capital of financial institutions;
• Part VI.1 - Tax on corporations paying dividends on taxable preferred shares; and
• Part XIII.1 - Additional tax on authorized foreign banks.

Part I.3 tax, the federal capital tax, is zero as of January 1, 2006.

How to calculate your instalments of Parts I, VI, VI.1, and XIII.1 tax

There are three options you can use to calculate the least amount of tax you have to pay in instalments for the current tax year [subsections 157(1) and 157(3)], based on the current year, the previous year, or a combination of the previous year and the year before the previous year.

For all three options, you base the calculation on the total tax you have to pay under Parts I, VI, VI.1, and XIII.1 of the Act, and the tax you have to pay to provinces and/or territories (other than Quebec, Ontario, and Alberta). If you use option 3, you also have to include Part I.3 tax payable

Unlike other provinces and the territories, Quebec, Ontario, and Alberta administer and collect their own corporation taxes. Corporations that earned taxable income in these provinces pay provincial tax directly to those provinces.

Note
For tax years ending in 2009 and later, corporations that have a permanent establishment in Ontario will file a harmonized T2 Corporation Income Tax Return with the CRA. When calculating your instalment payments for tax years ending in 2009 and later, include the following Ontario corporation taxes: corporate income tax; corporate minimum tax; capital tax; and special additional tax on life insurance corporations.

Both refundable and non-refundable, federal, provincial and territorial tax credits are included in the calculation of instalment payments. Use the estimated credits for the current year to calculate your instalment payments under the three options.

We will assess your return using the option that results in the least amount payable by instalments. We will charge interest if you use option 1 and your estimated tax was lower than the year’s actual tax and the tax calculated using option 2 or 3.

Monthly instalment payments

You can calculate your monthly instalment payments using one of the following options:

Option 1 - One-twelfth of the estimated tax payable for the current tax year is due each month of the tax year.

Option 2 - One-twelfth of the tax payable from the previous tax year is due each month of the current tax year.

Option 3 - One-twelfth of the tax payable from the year before the previous tax year is due in each of the first two months of the current tax year. One-tenth of the difference between the tax for the previous tax year and total of the first two payments is due in each of the remaining 10 months of the current tax year.

We provide two worksheets to help you calculate your estimated tax payable and tax credits, as well as your monthly instalment payments:

• Worksheet 1 - Calculating estimated tax payable and tax credits for 2008; and
• Worksheet 2 - Calculating monthly instalment payments for 2008.

These worksheets can also be found on our Forms and Publications page as T2WS1 and T2WS2.

This year, we also provide a temporary version of these two worksheets for tax years ending in 2009, to help corporations with a permanent establishment in Ontario calculate their instalment payments for 2009:

• Worksheet 4 - Calculating estimated tax payable and tax credits for 2009 (Ontario); and
• Worksheet 5 - Calculating monthly instalment payments for 2009 (Ontario).

These worksheets can also be found on our Forms and Publications page as T2WS4 and T2WS5.

Note
Next year, the 2009 version of Worksheets 1 and 2 will replace Worksheets 4 and 5.

Other options for eligible Canadian-controlled private corporations (CCPC)

For tax years starting after 2007, you can calculate the quarterly instalment payments for an eligible CCPC using one of the following options:

Option 1 - One-quarter of the estimated tax payable for the current tax year is due each quarter of the tax year.

Option 2 - One-quarter of the tax payable from the previous tax year is due each quarter of the current tax year.

Option 3 - One-quarter of the tax payable from the year before the previous tax year is due the first quarter of the current tax year. One-third of the difference between the tax for the previous tax year and the first payment is due in each of the remaining three quarters of the current tax year.

We provide Worksheet 3, Calculating quarterly instalment payments for 2008, to help you calculate your quarterly instalment payments. We also provide a temporary version for 2009, called Worksheet 6, for corporations that have a permanent establishment in Ontario. These worksheets can also be found on our Forms and Publications page as T2WS3 and T2WS6.

Note
Next year, the 2009 version of Worksheet 3 will replace Worksheet 6.

Are you eligible to make quarterly instalment payments?

For tax years beginning after 2007, a CCPC will be eligible to make quarterly instalment payments if, at the time the payment is due:

• it has a perfect compliance history;
• it has claimed a small business deduction for the current or previous tax year;
• together with any associated corporations, for the current or previous tax year;
  • it has taxable income of $400,000 or less; and
  • it has taxable capital employed in Canada for the tax year of $10 million or less.

We consider you to have a perfect compliance history if, during the previous 12 months:

• you remitted on time all the amounts required for GST/HST, withholding under subsection 153(1) of the Income Tax Act, Canada Pension Plan contributions and Employment Insurance premiums; and
• you filed on time all returns required under the Income Tax Act or under Part IX of the Excise Tax Act (GST/HST).

Part XII.1 - Tax on carved-out income

Part XII.1 of the Income Tax Act applies to the income from carved-out property acquired after July 19, 1985 [section 209]. Carved-out property includes Canadian resource property where certain conditions are met. The tax rate is 45% of this income.

Arrears and refund interest apply to Part XII.1 of the Act.

Reporting Part XII.1 tax

Report the Part XII.1 tax you owe on Form T2096, Part XII.1 Tax Return - Tax on Carved-Out Income. We should receive the return within six months of the end of your tax year.

How to calculate instalments of Part XII.1 tax

You have to make instalment payments equal to one-twelfth of the tax payable under Part XII.1 of the Act each month in the tax year. Do not use option 1, 2, or 3 mentioned previously to calculate these instalments.

The remaining tax, if any, is due on or before your balance due date.

Part XII.3 - Tax on investment income of life insurers

Life insurers may have to pay tax under Part XII.3 of the Income Tax Act [section 211.1]. The amount of tax you may have to pay is 15% of your taxable Canadian life investment income for the year.

Arrears and refund interest apply to Part XII.3 of the Act.

Reporting Part XII.3 tax

Report the Part XII.3 tax you owe on Form T2142, Part XII.3 Tax Return - Tax on Investment Income of Life Insurers. We should receive the return no later than six months after the end of your tax year.

How to calculate instalments of Part XII.3 tax

Calculate each instalment payment as one-twelfth of the lesser of:

• the estimated Part XII.3 tax payable for the current tax year; and
• the Part XII.3 tax payable for the previous tax year.

Do not use option 1, 2, or 3 mentioned previously to calculate Part XII.3 instalment payments.

Use Form T901, Remittance Voucher, to make your instalment payments under Part XII.3. The remaining tax, if any, is due on or before your balance due date.

Note
If you use the estimated Part XII.3 tax payable for the current tax year to determine your instalment payments and the actual amount is greater than your estimate, you may not have made the required monthly instalments. If so, you may be charged interest.

Special situations - When do you not have to pay instalments?

Tax payable of $3,000 or less

For tax years beginning after 2007, you do not have to make instalment payments on your federal taxes if the total of your taxes payable under Parts I, VI, VI.1, and XIII.1, prior to the deduction of current year refundable tax credits, for either the current or previous year is $3,000 or less [subsection 157(2.1)].

If your Part XII.3 tax is $3,000 or less in the current or previous year, you do not have to make instalment payments on this tax.

Similarly, you do not have to make instalment payments on your provincial or territorial taxes if the total of your provincial or territorial taxes for the current or previous year is $3,000 or less.

For tax years beginning before 2008, the threshold amount is $1,000.

However, you have to pay your taxes, if any, on your balance due date.

New corporations

Except for Part XII.I tax, you do not have to make instalment payments for a new corporation until you have started your second year of operation. However, for your first year of operation, you have to pay any tax you owe on or before your balance due date for that tax year.

Note
You may have to start making instalment payments for your second year even before you pay your balance due or file your first return.

Your first tax year should start on your incorporation date. If you start your tax year after this date, it may affect your requirement to make instalments later.

Special rules

Short tax years

Your tax year may be less than 12 months. If so, you have to pay one-twelfth or one-tenth of your tax each complete month in the tax year, depending on which calculation option you choose. If you are an eligible CCPC, you have to pay one-quarter or one-third of your tax each complete quarter in the tax year. See previous sections on how to calculate instalments.

You do not have to make an instalment payment for a tax year that is shorter than one month, or in the case of an eligible CCPC, shorter than one quarter.

The tax you did not pay in instalments is due on your balance due date.

For option 2 or 3, when a previous tax year is less than 12 months, the tax payable for that year is adjusted to a 12-month equivalent [Regulation 5301(1)]. This is called the adjusted base.

To calculate the adjusted base, divide 365 by the number of days in the tax year. Multiply this figure by the actual tax payable for that year.

Note
365 is not adjusted for the leap year.

For option 2 or 3, when a previous tax year is less than 183 days, the adjusted base is whichever of the following amounts is greater:

• the adjusted base for that tax year; or
• the adjusted base for the next previous tax year of more than 182 days [Regulation 5301(3)].

Fluctuating filing period ending (fiscal period longer than 365 days)

No change to the fiscal period is considered to occur where a corporation follows the practice of ending its fiscal period on a chosen day of the week that is nearest to a certain day of the year, provided that the resulting period does not exceed 53 weeks.

Reference
IT-179, Change of fiscal period

Amalgamations

When a new corporation is formed by amalgamation, it is treated as a continuation of the predecessor corporations [section 87]. Generally, the instalment base of the new corporation is the total of the predecessor corporations' instalment bases [Regulation 5301(4)]. For an example, see Appendix 1.

Wind-ups

When a subsidiary corporation is wound up into a Canadian parent corporation [subsection 88(1)], the parent corporation generally has to include, in addition to its own instalment base, the instalment base of its subsidiary corporation [Regulation 5301(6)]. For an example, see Appendix 2.

Transfers or rollovers

There are situations where, in a transaction to which subsection 85(1) or 85(2) applies, a corporation receives all or substantially all (generally 90% or more) of the property of another corporation that it does not deal with at arm's length. In this case, the corporation has to include, in addition to its own instalment base, the instalment base of the other corporation [Regulation 5301(8)]. For an example, see Appendix 3.

Reference
IT-419, Meaning of Arm's Length

Change of control

If there is a change of control of a corporation under subsection 249(4), the corporation continues to exist as it was before, for instalment purposes.

When there is a short tax year, see the special rules for short tax years.

Reference
IT-302, Losses of a Corporation - The Effect that Acquisitions of Control, Amalgamations, and Windings-up have on Their Deductibility - After January 15, 1987

Specified future tax consequences

For instalment calculations, the tax payable for a tax year is the total tax payable for the year before taking into consideration the specified future tax consequences for the year [Regulation 5301(10)].

Specified future tax consequences are defined in subsection 248(1). These include things like loss carry-back, foreign tax credit adjustments, and flow-through share renunciation.

Due dates

Instalment due dates

Instalment payments are due on the last day of every complete month of your tax year [subsection 157(1)], or of every complete quarter, if you are an eligible CCPC with a tax year starting after 2007. The first payment is due one month or one quarter minus a day from the starting day of your tax year. The rest of the payments are due on the same day of each month or each quarter that follows.

Balance due date

The balance due date is the date you have to pay the remainder of the tax you owe for the tax year [paragraph 157(1)(b)].

Generally, all corporation taxes (except Part III and Part XII.6) charged under the Income Tax Act are due two months after the end of the tax year.

However, for Parts I, VI, VI.1, and XIII.1 tax, the balance of tax is due three months after the end of the tax year if the following conditions apply:

• the corporation is a Canadian-controlled private corporation (CCPC) throughout the tax year;
• the corporation claims the small business deduction for the tax year, or was allowed the small business deduction in the previous tax year; and either
  • the corporation's taxable income for the previous tax year does not exceed its business limit for that tax year (if the corporation is not associated with any other corporation during the tax year); or
  • the total of the taxable incomes of all the associated corporations for their last tax year ending in the previous calendar year does not exceed the total of their business limits for those tax years (if the corporation is associated with any other corporation during the tax year).

Note
For determining balance due dates, the previous-year taxable income of corporations and associated, subsidiary, and predecessor corporations means taxable income before applying loss carrybacks.

For information on business limits, see Guide T4012, T2 Corporation - Income Tax Guide.

Amalgamations

The balance due date of a new corporation formed after an amalgamation has taken place will be affected by the new corporation's taxable income for the previous year. This taxable income is the total of the predecessor corporations' taxable incomes for their tax years that ended just before they amalgamated [paragraph 87(2)(oo.1)]. The same rule applies for determining the business limit.

Wind-ups

To determine a parent corporation's balance due date in its first tax year after it receives the assets of a subsidiary corporation that is winding up [paragraph 88(1)(e.9)], the taxable income for the previous tax year is the total of:

• the parent corporation's taxable income for that year; and
• the subsidiary corporation's taxable income for its tax years ending in the calendar year that the parent corporation's previous tax year ended.

The same rule applies for determining the business limit.

Understanding statements

We issue statements on a monthly basis rather than on a transactional basis. These statements show interim or arrears balances carried forward from previous statements, plus the details of any account activity that occurs during the statement period.

All information is displayed by reporting period. Arrears information shows all amounts assessed and charged to your account. Interim information shows you the balance of instalment payments for each reporting period for which we have not processed a return.

Review each Statement of Interim Payments and Statement of Arrears you receive to make sure we have applied your payments correctly. Contact your tax centre immediately, if we made an error in applying any of your payments, as payments are not transferable once your tax return has been assessed. For more information, see the section called "Transferring instalments".

Keep the statements with your records for future use.

Statement of Interim Payments

The Statement of Interim Payments is dated the 7th of the month and mailed by the 18th of the month. It is used to:

• acknowledge receipt of interim payments;
• show credit movement (transfers in or out);
• show application of interim credits to assessments;
• provide interim credit balances by period(s);
• provide the grand total balance across all interim periods; and
• provide Forms RC160, Interim Payments Remittance Voucher, to make later instalment payments.

The instalment credits we show on your Statement of Interim Payments for each tax year should agree with your records. There may be a difference between our records and the amount you report on line 840 of your return. If so, we will assess your return using the instalment credits shown in our records, and we may refund the difference. If you return the refund, we will credit it with the date that we received it, as we would with any other payment.

Statement of Arrears

The Statement of Arrears is dated the 21st of the month and mailed by the end of the month. It is used to:

• acknowledge receipt of arrears payments;
• show all other transactions posted to assessed and non-reporting periods (for example, (re)assessments and transfers) since the last statement;
• provide processed balances by period(s);
• provide the grand total balance across all processed periods; and
• provide Form RC159, Amounts Owing Remittance Voucher.

Paying instalments

How to make a payment

Electronically

You may be able to pay by telephone or Internet banking. For information, see our Electronic payments page or contact your financial institution to see if they provide these services. Most financial institutions allow you to schedule future dated payments.

At your financial institution

You can make your payment free of charge at your financial institution in Canada. Present the part of your statement that displays your remittance voucher with your payment to the teller. The teller will return the top part to you as a receipt. You must have an original voucher from the CRA for your financial institution to accept the payment. Photocopies are not accepted.

By mail

You can mail a cheque or money order payable to the Receiver General, along with your completed remittance voucher to the following address.

Canada Revenue Agency
875 Heron Road
Ottawa ON  K1A 1B1

To help us process your payment correctly, write your full 15-digit Business Number (BN), for example 12345 6789 RC0001, on the back of the cheque or money order. Cheques that are post-dated to the due date are acceptable. Do not send cash in the mail.

Paying on time

We consider you to have made tax payments on the day that:

• they are received by the CRA; or
• they are processed at any financial institution belonging to the Canadian Payments Association. (Payments made at an Automated Teller Machine (ATM) may not be processed that same day.)

If you mail your payment, we consider you to have made the payment on the day we receive the payment, not on the day you mailed it [subsection 248(7) of the Income Tax Act].

If your payment due date falls on a Saturday, Sunday, or a public holiday, the payment will be considered as having been received on time if it is received the first business day after the due date.

Using the right payment voucher

We have two common personalized remittance vouchers that we send with your statements:

• Form RC159, Amount Owing Remittance Voucher; and
• Form RC160, Interim Payments Remittance Voucher.

We will automatically send you the appropriate type(s) based on your account status and needs, along with your Statement of Interim Payments or Statement of Arrears, as applicable. If you need more vouchers, you can make an online request at our Online Requests for Business page or you can call us at 1-800-959-5525. Financial institutions will not accept photocopied remittance vouchers.

Note
If you are a new corporation making its first payment, you may not have a personalized remittance form and should request one. We will process your first payment, and then we will send you a personalized form with a statement to show the balance of your account.

If you make a payment with a cheque that your financial institution does not honour, including a payment on which you put a stop payment, we will charge you an administrative fee.

Note
It is important to complete the remittance vouchers accurately to avoid misallocations.

Form RC159, Amount Owing Remittance Voucher

Use Form RC159 to make payments on an existing debt or to make a prepayment for an anticipated reassessment. When using this payment voucher to make a prepayment, indicate on the voucher that the payment is a prepayment and provide the tax year-end of the reassessment. Form RC159 can also be used to pay tax under Parts IV, IV.1 and XIV.

Form RC160, Interim Payments Remittance Voucher

Use Form RC160 only to make interim payments for the tax year-end for which we have not processed a return. Form RC160 will show the remittance period end, that is, your monthly or quarterly instalment payment due date, not the tax year-end.

After all monthly or quarterly interim payments are made for the current year (for example, 2008-12-31), you will receive the first Form RC160 for the next year (for example, 2009-12-31), along with another Form RC160. This additional form will show the tax year-end of the current year (for example, 2008-12-31). Use the form to remit your balance due date payment, if applicable.

If you are making one payment for taxes under different parts of the Income Tax Act, tell us how to allocate each amount to make sure that we credit your accounts correctly.

Making large payments

The Canadian Payments Association sets a maximum value of $25 million for any cheque or other paper-based payment instrument cleared through the banking system. Canadian financial institutions will not accept cheques in excess of $25 million that you drop off or mail to one of our locations.

You are encouraged to make arrangements with your financial institutions for payments of large amounts.

Owing minimal amounts

After we process your return and apply any interest or penalty charges, if the total amount owing at that time is $2 or less, you do not have to pay that amount. If an amount of $2 or less is owed to you, the amount will not be paid; however it will be applied to any existing liability.

Transfers, refunds, and prepayments

Transferring instalments

Our transfer policy allows for the movement of excess instalment payments from one account where they are not immediately needed to another account where they are needed. We will transfer an amount to pay an outstanding balance on a Corporation, a GST, or an Employer account; or to cover a required payment on an Employer account.

We will consider transfers within the same corporation account or between related corporation accounts based on the following guidelines:

• Only an authorized officer of the corporation can ask in writing or by telephone for a transfer of instalment payments.
• The request has to specify how you want to apply the payments.
• You can transfer funds between tax years in the same account or to another account.
• You can transfer either part of a payment or an amount made up of several payments.
• You can request more than one transfer during the year.
• You cannot transfer a payment after we have assessed the income tax return for the tax year in question.

For calculating interest, transferred payments keep their original payment date [section 221.2]. We consider any other allocation not to have occurred.

You must make every effort to remit your payments to the correct account. Our transfer policy is meant to provide you with flexibility in reallocating payments when it has been determined that the instalment requirement previously estimated has been overpaid. If you make continuous requests for multiple transfers, we may ask you to explain why in writing.

Note
If you do not file an income tax return within three years of the end of the tax year, instalment payments correctly processed to this tax year will not be refunded [subsection 164(1)]. You will not be able to apply these payments to another debt.

You can make a request for a transfer:

• online at our Online Requests for Business page;
• by telephone at 1-800-959-5525; or
• you can address your request to Corporation Services at your tax centre.

Refund of instalments

We will normally not refund instalment payments until we have assessed the return for the year in question. Then we will refund any overpayment [subsection 164(1)], provided there is no debt or missing return on your account or any of your related Business Number account.

Note
You must file a return no later than three years after the end of a tax year to receive a tax refund.

We will consider refunding an instalment payment when you inform us that the payment was remitted to us but was intended for a third party. We do not pay refund interest on this type of refund.

If you are expecting a refund greater than $25 million see "Large Value Transfer System".

Transferring overpayments

You may ask to transfer an overpayment when you file your income tax return. This can be done by either entering "2" on line 894 of the return or by attaching a letter to the front page of the return.

Note
If a "2" is entered on line 894, the overpayment will first be applied to any outstanding debits on your account and any related Business Number account, and the rest of the overpayment will be transferred to the next instalment year.

When asking for a reassessment of your tax return, it is necessary to request that any overpayment be transferred; otherwise, we will refund the overpayment after the offset of any outstanding debits on your account and any related Business Number account (for example, your GST/HST account). However, since April 1, 2007, we do not refund the overpayment if there is a missing return on these accounts.

If you enter "2", we will transfer the residual overpayment to the next year's instalment account, as well as any applicable refund interest. We will calculate refund interest using the effective interest rate [subsection 164(3)].

Since April 1, 2007, we do not transfer the overpayment to a related Business Number account if there is a missing return on your account.

Prepaying reassessments

If you prepay tax for an anticipated reassessment you may reduce charges of arrears interest.

To make prepayments, use Form RC159, Amount Owing Remittance Voucher (however, we will accept any corporation remittance voucher). Clearly indicate that the payments are prepayments. Also include your Business Number and the tax year-end for which the prepayments are intended. We will hold the payments for this purpose and apply them when we process the reassessments.

Interest and penalties

We will charge interest if you make late or insufficient payments. This interest is called instalment interest or arrears interest, depending on the debt. We pay refund interest up to the day an overpayment is refunded or applied.

The interest rate on underpayments is based on the average rate of 90-day treasury bills sold during the first month of the previous quarter (rounded to the next higher whole percentage point) plus 4 percentage points.

The interest rate on overpayments is based on the average rate of 90-day treasury bills sold during the first month of the previous quarter (rounded to the next higher whole percentage point) plus 2 percentage points.

For a list of prescribed interest rates, see our Prescribed interest rates page.

Instalment interest

We will charge interest [subsection 161(2)] according to the prescribed interest rate [Regulation 4301] if you make late or insufficient instalment payments.

We calculate instalment interest compounded daily [subsection 157(1)], according to your instalment requirements for the year.

We use the offset method to calculate instalment interest. This means we give you credit when you prepay or overpay your instalments, and this can reduce or eliminate the interest we charge on late or insufficient payments. We do not refund any excess of this credit. It is used only when calculating instalment interest charges. See the example below.

Note
Credit instalment interest is only calculated on instalment payments from the start of the tax year.

Generally, the interest rate on overpayments is 2% lower than on underpayments. However, when we calculate instalment interest using the offset method, the interest rate is the same on prepayments and overpayments as it is on underpayments.

Instalment penalty

When instalment interest is more than $1,000, we may charge an instalment penalty under section 163.1 of the Act.

We calculate the penalty by subtracting from the instalment interest the greater of:

• $1,000; and
• 25% of the instalment interest calculated if no instalment payment had been made for the year.

One-half of the difference is the amount of the penalty.

Arrears interest

We charge arrears interest [subsection 161(1)] according to the prescribed interest rate [Regulation 4301]. Arrears interest is compounded daily on any unpaid balance from the balance due date to the date of payment.

There is no penalty on arrears interest.

Refund interest

We pay refund interest [subsection 164(3)] according to the prescribed interest rate [Regulation 4301]. Refund interest is compounded daily on an overpayment [subsection 164(7)] up to and including the day the overpayment is refunded or applied.

When we refund or apply an overpayment, we pay refund interest from whichever of the following dates is later:

• the date of the overpayment;
• the 120th day after the end of the tax year if the return for the year is filed on time; or
• the 30th day after the date the return was filed if it is filed late.

Carryback

You cannot use a carryback to reduce instalment interest [subsection 161(7)]. We will not adjust instalment interest we previously charged if the amount of the current year credit (for example, dividend refund or capital gains refund) is adjusted because of the carryback.

We will calculate arrears interest, refund interest, or both, for the carryback from 30 days after whichever of the following dates is later:

• the first day following the tax year in which the carryback originates;
• the date the tax return in which the carryback originates is filed;
• the date a prescribed form, such as Schedule 4, or an amended return is filed; or
• the date a request is made in writing to reassess a year to take into account a loss from another tax year.

Forgiven interest

If you pay an amount quoted on a notice of assessment or reassessment in full within 20 days of that notice, any additional interest from the notice date to the date of payment will not be charged.

Cancelling small amounts of penalty and interest

We will cancel any penalty or interest on an amount owed if the total amount of penalty and interest charged is $25 or less when the tax is paid in full. However, if a future adjustment is processed, this cancellation will be reversed and the account reviewed.

Cancelling or waiving penalties and interest

We may cancel or waive failure to file penalties or interest charges in situations where you fail to pay an amount due to circumstances beyond your control. The types of situations in which we may cancel or waive a penalty or interest charge include the following:

• natural or human-made disasters, such as floods or fires;
• civil disturbances or disruptions in services, such as postal strikes;
• a serious illness or accident suffered by the person who is responsible for making a payment when due; and
• wrong information being given to the corporation, either in a letter from us or in one of our publications.

Requests will only be considered for a tax year that ended ten calendar years or less before the beginning of the calendar year of the request.

If you are in one of these situations, let us know about the problem and try to pay any amount owing as soon as possible. If you think there is a valid reason for cancelling penalty or interest charges, send us a letter explaining why it was impossible to make the payment on time. You can also use Form RC4288, Request for Taxpayer Relief, to make a request. You can get a printed copy of this form by calling us at 1-800-959-2221.

For more information on cancelling or waiving penalties and interest, see Information Circular 07-01, Taxpayer Relief Provisions, and the taxpayer relief provisions on our Fairness and Taxpayer Rights: Overview page.

You may have paid an amount of interest or a penalty that is later cancelled after you make an application under the CRA's Taxpayer Relief Program. We will calculate interest on this overpayment 30 days after the taxpayer relief application was received.

Worksheets

The six worksheets in this section will help you determine your instalments of Parts I, VI, VI.1, and XIII.1, and provincial and territorial tax for 2008 (Worksheets 1, 2, and 3) and, if you have a permanent establishment in Ontario, for 2009 (Worksheets 4, 5, and 6).

Use Worksheet 1 or Worksheet 4 to estimate your current-year tax payable and your tax credits. Then use these amounts to complete the current-year information area on Worksheet 2, Worksheet 3, Worksheet 5 or Worksheet 6.

Use Worksheet 2 or Worksheet 5 to determine your monthly instalments for the year. Use Worksheet 3 or Worksheet 6 to determine your quarterly instalments. After you have calculated the taxes you owe under Parts I, I.3, VI, VI.1, and XIII.1 of the Income Tax Act, and your provincial and territorial tax, enter the amounts in the appropriate columns for options 1, 2, and 3. See "How to calculate your instalments of Parts I, VI, VI.1, and XIII.1 tax" for information on the three options. You can use the option that results in the least amount payable by instalments. Any remaining unpaid tax is payable on or before the balance due date.

You may have instalments to pay for Parts XII.1 or XII.3 tax. If so, see "How to calculate instalments of Part XII.1 tax" or "How to calculate instalments of Part XII.3 tax".

Rates of tax

The information in this part will help you estimate your taxes payable and tax credits for 2008 on Worksheet 1 and for 2009 on Worksheet 4, if you have a permanent establishment in Ontario.

Federal

The basic rate of Part I tax is 38% of your taxable income.

Provincial or territorial

You have to calculate and pay provincial or territorial income tax in addition to your federal income tax.

Generally, provinces and territories have two rates of income tax-a lower rate and a higher rate.

The lower rate applies to either:

• the income eligible for the federal small business deduction; or
• the income based on limits established by the particular province or territory.

The higher rate applies to all other income. Various deductions, credits, and tax relief may affect the above rates. For more detailed information, see Guide T4012, T2 Corporation - Income Tax Guide, or your provincial or territorial legislation.

Quebec, and Alberta do not have corporation tax collection agreements with the federal government. If you have a permanent establishment in these provinces send your income tax return and your instalment payments for the provincial corporation tax to your province.

If you have a permanent establishment in Ontario, send your provincial corporations tax return and your instalment payments for the Ontario corporations tax to Ontario for tax years ending before 2009. Send your harmonized T2 Corporation Income Tax Return and your combined instalment payments for the Ontario and federal corporation tax to the CRA for tax years ending in 2009 or later.

Include New Brunswick and Nova Scotia tax on large corporations as a provincial tax when establishing tax payable or determining the instalment base for a particular year. Include the following Ontario corporation taxes payable when establishing tax payable or determining the instalment base for tax years ending in 2009:

• corporate income tax;
• corporate minimum tax;
• capital tax; and
• special additional tax on life insurance corporations

If you have a permanent establishment in more than one province or territory, you have to calculate the taxable income you earned in each province or territory and file Schedule 5, Tax Calculation Supplementary - Corporations. See the schedule or refer to Part IV of the Income Tax Regulations for more details.

The following table shows the approximate 2008 income tax rates for the provinces and territories that have corporation tax collection agreements with the federal government.

These rates are in effect on January 1, 2008, and many will change during 2008. For more details, see our Corporation tax rates page.

Province or territory	Tax rate on taxable income eligible for the small business deduction (lower rate)	Tax rate on other taxable income (higher rate)
Newfoundland and Labrador	5%	14%
Nova Scotia	5%	16%
Prince Edward Island	4.3%	16%
New Brunswick	5%	13%
Ontario	5.5%	14%
Manitoba	2%	14%
Saskatchewan	4.5%	13%
British Columbia	4.5%	12%
Yukon	4%	15%
Northwest Territories	4%	11.5%
Nunavut	4%	12%

Worksheet 1 - Calculating estimated tax payable and tax credits for 2008

Estimated taxable income
Calculating the estimated tax payable
Total of the following estimated amounts:
Base amount of federal Part I tax
Federal surtax*
Recapture of investment tax credit
Refundable tax on CCPC's investment income
Subtotal					A
Minus the total of the following estimated amounts:
Small business deduction
Federal tax abatement
Manufacturing and processing profits deduction
Investment corporation deduction
Additional deduction - credit unions
Federal foreign non-business income tax credit
Federal foreign business income tax credit
Resource deduction
General tax reduction for CCPCs
General tax reduction
Federal logging tax credit
Federal political contribution tax credit
Federal qualifying environmental trust tax credit
Investment tax credit
Subtotal					B
Total estimated 2008 Part I tax payable** (line A minus line B)
Total estimated 2008 Part VI tax payable**
Total estimated 2008 Part VI.1 tax payable**
Total estimated 2008 Part XIII.1 tax payable**
Estimated 2008 net provincial and territorial tax payable before refundable credits***					C
*  The federal surtax is eliminated as of January 1, 2008. ** Use these amounts when you calculate your monthly instalment payments on Worksheet 2 or your quarterly instalment payments on Worksheet 3. *** Use this amount when you calculate your monthly instalment payments on Worksheet 2 or your quarterly instalment payments on Worksheet 3. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario or Alberta.

 

Worksheet 1 - Calculating estimated tax payable and tax credits for 2008 (continued)

Calculating the estimated refundable tax credits for 2008
Total of:
Investment tax credit refund
Dividend refund
Federal capital gains refund
Federal qualifying environmental trust tax credit refund
Canadian film or video production tax credit refund
Film or video production services tax credit refund
Tax withheld at source
Provincial and territorial capital gains refund
Newfoundland and Labrador research and development tax credit
Newfoundland and Labrador film and video industry tax credit
Nova Scotia film industry tax credit
Nova Scotia research and development tax credit
Nova Scotia digital media tax credit
New Brunswick film tax credit
New Brunswick refundable research and development tax credit
Manitoba film and video production tax credit
Manitoba refundable manufacturing investment tax credit
Manitoba refundable co-operative education tax credit
Manitoba refundable odour-control tax credit for agricultural corporations
Manitoba green energy equipment tax credit
Saskatchewan refundable manufacturing and processing investment tax credit
Saskatchewan qualifying environmental trust tax credit
Saskatchewan film employment tax credit
British Columbia qualifying environmental trust tax credit
British Columbia film and television tax credit
British Columbia production services tax credit
British Columbia mining exploration tax credit
British Columbia SR&ED refundable tax credit
British Columbia book publishing tax credit
British Columbia training tax credit
Yukon mineral exploration tax credit*
Yukon research and development tax credit
Total estimated refundable tax credits for 2008**				D
* This credit applies to eligible mineral exploration expenses incurred in the Yukon before April 1, 2007. ** Use this amount when you calculate your monthly instalment payments on Worksheet 2 or your quarterly instalment payments on Worksheet 3.

Worksheet 2 - Calculating monthly instalment payments for 2008

Instalment payments are due each month of your corporation's tax year.

	Option 1 2008	Option 2 2007	Option 3 2006
Add: Part I tax payable
Part I.3 tax payable*			+
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax**	=	=	=
Add: Provincial and territorial tax payable before refundable credits***	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2008 estimated refundable credits (enter the amount from line D of Worksheet 1)	-	-	-
Instalment base amount	=	=	=
Divide by:	÷      12	÷      12	÷      12
Each of the 12 payments due under options 1 and 2	=	=
Each of the first 2 payments under option 3			=
Previous-year instalment base (option 2 instalment base amount above)
Subtract: The total of payments 1 and 2 under option 3			-
Difference			=
Divide by:			÷      10
Each of the remaining 10 payments under option 3			=
* Part I.3 tax is zero as of January 1, 2006. ** If the current tax year begins in 2008, and the total of Parts I, VI, VI.1 and XIII.1 tax is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the total of Parts I, VI, VI.1, and XIII.1 tax is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. *** This amount is net of provincial and territorial non-refundable credits. If the current tax year begins in 2008, and the provincial and territorial tax before refundable credits is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the provincial and territorial tax before refundable credits is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario, or Alberta.

Note
For examples of how to calculate monthly instalment payments with Worksheet 2, see appendices 4 and 5.

Worksheet 3 - Calculating quarterly instalment payments for 2008

Instalment payments are due each quarter of your CCPC's tax year.

	Option 1 2008	Option 2 2007	Option 3 2006
Add: Part I tax payable
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax*	=	=	=
Add: Provincial and territorial tax payable before refundable credits**	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2008 estimated refundable credits (enter the amount from line D of Worksheet 1)	-	-	-
Instalment base amount	=	=	=
Divide by:	÷      4	÷      4	÷      4
Each of the four payments due under options 1 and 2	=	=
First payment under option 3			=
Previous-year instalment base (option 2 instalment base amount above)
Subtract: First payment under option 3			-
Difference			=
Divide by:			÷      3
Each of the remaining three payments under option 3			=
* If the total of Parts I, VI, VI.1, and XIII.1 tax is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. ** This amount is net of provincial and territorial non-refundable credits. If the provincial and territorial tax before refundable credits is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario, or Alberta.

Note
For an example of how to calculate quarterly instalment payments with Worksheet 3, see Appendix 6.

Worksheet 4 - Calculating estimated tax payable and tax credits for 2009 (Ontario)

Estimated taxable income
Calculating the estimated tax payable
Total of the following estimated amounts:
Base amount of federal Part I tax
Recapture of investment tax credit
Refundable tax on CCPC's investment income
Subtotal					A
Minus the total of the following estimated amounts:
Small business deduction
Federal tax abatement
Manufacturing and processing profits deduction
Investment corporation deduction
Additional deduction - credit unions
Federal foreign non-business income tax credit
Federal foreign business income tax credit
Resource deduction
General tax reduction for CCPCs
General tax reduction
Federal logging tax credit
Federal political contribution tax credit
Federal qualifying environmental trust tax credit
Investment tax credit
Subtotal					B
Total estimated 2009 Part I tax payable* (line A minus line B)
Total estimated 2009 Part VI tax payable*
Total estimated 2009 Part VI.1 tax payable*
Total estimated 2009 Part XIII.1 tax payable*
Estimated 2009 net provincial and territorial tax payable before refundable credits**					C
* Use these amounts when you calculate your monthly instalment payments on Worksheet 5 or your quarterly instalment payments on Worksheet 6. ** Use this amount when you calculate your monthly instalment payments on Worksheet 5 or your quarterly instalment payments on Worksheet 6. Include New Brunswick and Nova Scotia tax on large corporations and Ontario tax payable before refundable credits, but do not include provincial tax payable from Quebec or Alberta. Ontario tax payable before refundable credits includes only corporate income tax (net of non-refundable credits), corporate minimum tax, capital tax, and special additional tax on life insurance corporations.

Worksheet 4 - Calculating estimated tax payable and tax credits for 2009 (Ontario) (continued)

Calculating the estimated refundable tax credits for 2009
Total of:
Investment tax credit refund
Dividend refund
Federal capital gains refund
Federal qualifying environmental trust tax credit refund
Canadian film or video production tax credit refund
Film or video production services tax credit refund
Tax withheld at source
Provincial and territorial capital gains refund
Newfoundland and Labrador research and development tax credit
Newfoundland and Labrador film and video industry tax credit
Nova Scotia film industry tax credit
Nova Scotia research and development tax credit
Nova Scotia digital media tax credit
New Brunswick film tax credit
New Brunswick refundable research and development tax credit
Ontario qualifying environmental trust tax credit
Ontario co-operative education tax credit
Ontario apprenticeship training tax credit
Ontario computer animation and special effects tax credit
Ontario film and television tax credit
Ontario production services tax credit
Ontario interactive digital media tax credit
Ontario sound recording tax credit
Ontario book publishing tax credit
Ontario innovation tax credit
Ontario business-research institute tax credit
Manitoba film and video production tax credit
Manitoba refundable manufacturing investment tax credit
Manitoba refundable co-operative education tax credit
Manitoba refundable odour-control tax credit for agricultural corporations
Manitoba green energy equipment tax credit
Saskatchewan refundable manufacturing and processing investment tax credit
Saskatchewan qualifying environmental trust tax credit
Saskatchewan film employment tax credit
British Columbia qualifying environmental trust tax credit
British Columbia film and television tax credit
British Columbia production services tax credit
British Columbia mining exploration tax credit
British Columbia SR&ED refundable tax credit
British Columbia book publishing tax credit
British Columbia training tax credit
Yukon research and development tax credit
Total estimated refundable tax credits for 2009*				D
* Use this amount when you calculate your monthly instalment payments on Worksheet 5 or your quarterly instalment payments on Worksheet 6.

Worksheet 5 - Calculating monthly instalment payments for 2009 (Ontario)

Instalment payments are due each month of your corporation's tax year.

	Option 1 2009	Option 2 2008	Option 3 2007
Add: Part I tax payable
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax*	=	=	=
Add: Provincial and territorial tax payable before refundable credits**	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2009 estimated refundable credits (enter the amount from line D of Worksheet 4)	-	-	-
Instalment base amount	=	=	=
Divide by:	÷      12	÷      12	÷      12
Each of the 12 payments due under options 1 and 2	=	=
Each of the first 2 payments under option 3			=
Previous-year instalment base (option 2 instalment base amount above)
Subtract: The total of payments 1 and 2 under option 3			-
Difference			=
Divide by:			÷      10
Each of the remaining 10 payments under option 3			=
* If the total of Parts I, VI, VI.1, and XIII.1 tax is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. **This amount is net of provincial and territorial non-refundable credits. If the provincial and territorial tax before refundable credits is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. Include New Brunswick and Nova Scotia tax on large corporations and Ontario tax payable before refundable credits, but do not include provincial tax payable from Quebec or Alberta. Ontario tax payable before refundable credits includes only corporate income tax (net of non-refundable credits), corporate minimum tax, capital tax, and special additional tax on life insurance corporations. In determining options 2 and 3, ensure that the Ontario tax payable is before the application of Ontario specified tax credits.

Note
For an example of how to calculate monthly instalment payments with Worksheet 5, see Appendix 7.

Worksheet 6 - Calculating quarterly instalment payments for 2009 (Ontario)

Instalment payments are due each quarter of your CCPC's tax year.

	Option 1 2009	Option 2 2008	Option 3 2007
Add: Part I tax payable
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax*	=	=	=
Add: Provincial and territorial tax payable before refundable credits**	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2009 estimated refundable credits (enter the amount from line D of Worksheet 4)	-	-	-
Instalment base amount	=	=	=
Divide by:	÷      4	÷      4	÷      4
Each of the four payments due under options 1 and 2	=	=
First payment under option 3			=
Previous-year instalment base (option 2 instalment base amount above)
Subtract: First payment under option 3			-
Difference			=
Divide by:			÷      3
Each of the remaining three payments under option 3			=
* If the total of Parts I, VI, VI.1, and XIII.1 tax is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. ** This amount is net of provincial and territorial non-refundable credits. If the provincial and territorial tax before refundable credits is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. Include New Brunswick and Nova Scotia tax on large corporations and Ontario tax payable before refundable credits, but do not include provincial tax payable from Quebec or Alberta. Ontario tax payable before refundable credits includes only corporate income tax (net of non-refundable credits), corporate minimum tax, capital tax, and special additional tax on life insurance corporations. In determining options 2 and 3, ensure that the Ontario tax payable is before the application of Ontario specified tax credits.

Appendices

Appendix 1 - Instalment base - Amalgamations
[Regulation 5301(4)]

Corporation A	Corporation B	Corporation C
Start of tax year: January 1, 2006	Start of tax year: January 1, 2006	Start of tax year: January 1, 2006
End of tax year: December 31, 2006	End of tax year: December 31, 2006	End of tax year: December 31, 2006
Tax payable: $2,000	Tax payable: $2,500	Tax payable: $3,000
Start of tax year: January 1, 2007	Start of tax year: January 1, 2007	Start of tax year: January 1, 2007
End of tax year: December 31, 2007	End of tax year: December 31, 2007	End of tax year: December 31, 2007
Tax payable: $4,000	Tax payable: $5,000	Tax payable: $6,000

Corporations A, B, and C amalgamated on January 1, 2008, to form Corporation ABC.

For its first tax year, which will end on December 31, 2008, Corporation ABC estimated its tax payable to be $20,000.

For Regulation 5301(4), the instalment base amounts for Corporation ABC's first tax year (which ends on December 31, 2008) would be:

Tax year-end December 31, 2008	First instalment base amount (1)	Second instalment base amount (2)
Corporation ABC	Predecessors (Corporation A + B + C)	Predecessors (Corporation A + B + C)
$20,000	4,000 + 5,000 + 6,000 = $15,000	2,000 + 2,500 + 3,000 = $7,500

(1) The first instalment base amount for the successor's 2008 tax year is $15,000. This amount is the total of the predecessor corporations' tax payable (2007) for their last tax year before amalgamation.

(2) The second instalment base amount for the successor's 2008 tax year is $7,500. This amount is the total of the predecessor corporations' first instalment base amount for the 2007 tax year.

For Regulation 5301(4), the instalment base year amounts for Corporation ABC's second tax year that ends on December 31, 2009, would be:

Tax year-end December 31, 2009	First instalment base amount (1)	Second instalment base amount (2)
Corporation ABC	Corporation ABC	Predecessors' bases (Corporation A + B + C)
$25,000*	$20,000	4,000 + 5,000 + 6,000 = $15,000

* Estimate of tax payable for 2009.

(1) The first instalment base amount for the successor's 2009 tax year is $20,000.

Note
If the successor's first tax year had been less than 183 days, the first instalment base amount for 2009 would have equalled the greater of the following two amounts:

• the adjusted base amount for 2008; and
• the adjusted base amount for the next previous tax year of more than 182 days, as stated in the requirements related to short tax years.

(2) The second instalment base amount for the successor's 2009 tax year is $15,000. This amount is the successor's first instalment base amount for its first tax year (2008).

Appendix 2 - Instalment base - Wind-ups
[Regulation 5301(6)]

On July 31, 2008, a subsidiary corporation wound up and dissolved, and all its assets were distributed to its parent corporation.

Note
Although the subsidiary must file a return for the tax year that includes January 1, 2008, to July 31, 2008, the tax assessed for this period will not be part of the instalment base in any year for the parent corporation.

Tax year-end	Tax payable (parent)	Tax payable (subsidiary)
December 31, 2006	$14,000	$5,000
December 31, 2007	$12,000	$6,000
December 31, 2008*	$20,000	N/A

* For the current tax year ending on December 31, 2008, the estimated tax payable is $20,000.

For Regulation 5301(6), the instalment base year amounts for the parent corporation's tax year that ends on December 31, 2008, would be:

Before the wind-up

Tax year-end December 31, 2008	First instalment base amount	Second instalment base amount
$20,000	$12,000	$14,000

Seven instalment payments of $1,000 each ($12,000 ÷ 12) are due up to July 31, 2008.

After the wind-up

Tax year-end December 31, 2008	First instalment base amount (1)	Second instalment base amount (2)
$20,000	12,000 + 6,000 = $18,000	14,000 + 5,000 = $19,000

Five instalment payments of $1,500 each ($18,000 ÷ 12) are due up to December 31, 2008.

(1) The first instalment base amount for the parent's 2008 tax year is $18,000. This amount is the total of:

• the parent's normal first instalment base amount of $12,000; and
• the subsidiary's first instalment base amount of $6,000 for its 2008 tax year.

(2) The second instalment base amount for the parent's 2008 tax year is $19,000. This amount is the total of:

• the parent's normal second instalment base amount of $14,000; and
• the subsidiary's second instalment base amount of $5,000 for its 2008 tax year.

For Regulation 5301(6), the instalment base year amounts for the parent's tax year that ends on December 31, 2009, would be:

Tax year-end December 31, 2009	First instalment base amount (1)	Second instalment base amount (2)
$26,000*	20,000 + (6,000 × 7/12) = $23,500	12,000 + 6000 = $18,000

* Estimate of tax payable for the next tax year.

(1) The first instalment base amount for the parent's 2009 tax year is $23,500. This amount is the total of:

• the parent's normal first instalment base amount of $20,000; and
• the subsidiary's first instalment base amount of $6,000 for its 2008 tax year, multiplied by the number of complete months (7) in the parent's 2008 tax year before the winding-up distribution divided by 12. Calculate this amount as follows: ($6,000 × 7) ÷ 12 = $3,500.

(2) The second instalment base for the parent's 2009 tax year is $18,000. This amount is the total of:

• the parent's normal first instalment base amount of $12,000 for its 2008 tax year; and
• the subsidiary's first instalment base amount of $6,000 for its 2008 tax year.

Appendix 3 - Instalment base - Transfers or rollovers
[Regulation 5301(8)]

On October 31, 2007, a corporation (transferor) disposed of all its property through a section 85 rollover to another corporation it was not dealing with at arm's length (transferee).

Note
Although the transferor may have an income tax liability for its tax year that includes the period July 1, 2007, to October 31, 2007, in which all or substantially all of its property has been disposed of, the actual tax assessed for that year will not be part of the transferee's instalment base in any year.

Tax year-end	Tax payable (transferee)	Tax payable (transferor)
June 30, 2006	$14,000	$5,000
June 30, 2007	$12,000	$6,000
June 30, 2008*	$20,000	N/A

* For the current tax year ending on June 30, 2008, the transferee estimated its tax payable to be $20,000.

For Regulation 5301(8), the instalment base year amounts for the transferee's tax year that ends on June 30, 2008, would be:

Before the rollover

Tax year-end June 30, 2008	First instalment base amount	Second instalment base amount
$20,000	$12,000	$14,000

Four instalment payments of $1,000 each ($12,000 ÷ 12) are due up to October 31, 2007.

After the rollover

Tax year-end June 30, 2008	First instalment base amount (1)	Second instalment base amount (2)
$20,000	12,000 + 6,000 = $18,000	14,000 + 5,000 = $19,000

Eight instalment payments of $1,500 each ($18,000 ÷ 12) are due up to June 30, 2008.

(1) The first instalment base amount for the transferee's 2008 tax year is $18,000. This amount is the total of:

• the transferee's normal first instalment base amount of $12,000; and
• the transferor's first instalment base amount of $6,000 for its 2008 tax year.

(2) The second instalment base amount for the transferee's 2008 tax year is $19,000. This amount is the total of:

• the transferee's normal second instalment base amount of $14,000; and
• the transferor's second instalment base amount of $5,000 for its 2008 tax year.

For Regulation 5301(8), the instalment base year amounts for the transferee's tax year that ends on June 30, 2009, would be:

Tax year-end June 30, 2009	First instalment base amount (1)	Second instalment base amount (2)
$27,000*	20,000 + (6,000 × 4/12) = $22,000	12,000 + 6,000 = $18,000

* Estimate of tax payable for the transferee's next tax year.

(1) The first instalment base amount for the transferee's 2009 tax year is $22,000. This amount is the total of:

• the transferee's normal first instalment base amount of $20,000; and
• the transferor's first instalment base amount of $6,000 for its 2008 tax year, multiplied by the number of complete months (4) in the transferee's 2008 tax year before the rollover, divided by 12. Calculate this amount as follows: ($6,000 × 4) ÷ 12 = $2,000.

(2) The second instalment base for the transferee's 2009 tax year is $18,000. This amount is the total of:

• the transferee's normal first instalment base amount of $12,000 for its 2008 tax year; and
• the transferor's first instalment base amount of $6,000 for its 2008 tax year.

Appendix 4 - Worksheet 2 - Example 1

Corporation A has estimated its tax for 2008 at $900,000. The actual taxes for 2007 and 2006 are $912,000 and $60,000 respectively. Using Worksheet 2, we will determine the most advantageous option.

Worksheet 2 - Calculating monthly instalment payments for 2008

Instalment payments are due each month of your corporation's tax year.

	Option 1 2008	Option 2 2007	Option 3 2006
Add: Part I tax payable	900,000	912,000	60,000
Part I.3 tax payable*			+
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax**	=	=	=
Add: Provincial and territorial tax payable before refundable credits***	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2008 estimated refundable credits (enter the amount from line D of Worksheet 1)	-	-	-
Instalment base amount	=    900,000	=    912,000	=    60,000
Divide by:	÷    12	÷    12	÷    12
Each of the 12 payments due under options 1 and 2	=    75,000	=    76,000
Each of the first 2 payments under option 3			=   5,000
Previous-year instalment base (option 2 instalment base amount above)			912,000
Subtract: Total of payments 1 and 2 under option 3			-     10,000
Difference			=  902,000
Divide by:			÷   10
Each of the remaining 10 payments under option 3			=   90,200
* Part I.3 tax is zero as of January 1, 2006. ** If the current tax year begins in 2008, and the total of Parts I, VI, VI.1 and XIII.1 tax is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the total of Parts I, VI, VI.1, and XIII.1 tax is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. ***This amount is net of provincial and territorial non-refundable credits. If the current tax year begins in 2008, and the provincial and territorial tax before refundable credits is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the provincial and territorial tax before refundable credits is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario or Alberta.

Option 1 is the most advantageous of the three options. Therefore, Corporation A will have to remit an instalment payment of $75,000 for each month. We may charge interest if the corporation uses option 1 and its estimated tax was lower than the year's actual tax and the tax calculated using option 2 or 3.

Appendix 5 - Worksheet 2 - Example 2

Corporation A has estimated its tax for 2008 at $912,000. The actual taxes for 2007 and 2006 are $912,000 and $60,000, respectively. Using Worksheet 2, we will determine the most advantageous option.

Worksheet 2 - Calculating monthly instalment payments for 2008

Instalment payments are due each month of your corporation's tax year.

	Option 1 2008	Option 2 2007	Option 3 2006
Add: Part I tax payable	912,000	912,000	60,000
Part I.3 tax payable*			+
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax**	=	=	=
Add: Provincial and territorial tax payable before refundable credits***	+	+	+
Total of Parts I, I.3, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2008 estimated refundable credits (enter the amount from line D of Worksheet 1)	-	-	-
Instalment base amount	=    912,000	=    912,000	=    60,000
Divide by:	÷    12	÷    12	÷    12
Each of the 12 payments due under options 1 and 2	=    76,000	=    76,000
Each of the first 2 payments under option 3			=    5,000
Previous-year instalment base (option 2 instalment base amount above)			912,000
Subtract: Total of payments 1 and 2 under option 3			-      10,000
Difference			=   902,000
Divide by:			÷    10
Each of the remaining 10 payments under option 3			=    90,200
* Part I.3 tax is zero as of January 1, 2006. ** If the current tax year begins in 2008, and the total of Parts I, VI, VI.1 and XIII.1 tax is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the total of Parts I, VI, VI.1, and XIII.1 tax is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. ***This amount is net of provincial and territorial non-refundable credits. If the current tax year begins in 2008, and the provincial and territorial tax before refundable credits is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. If the current tax year begins in 2007, and the provincial and territorial tax before refundable credits is $1,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario or Alberta.

Option 3 is the most advantageous of the three options. Therefore, Corporation A will have to remit an instalment payment of $5,000 in each of the first two months and $90,200 for each of the last 10 months.

Note
The total amount of instalments calculated under option 3 is always the same as under option 2, but option 3 is often chosen when the first two payments are lower.

Appendix 6 - Worksheet 3 - Example

Corporation A has estimated its tax for 2008 at $240,000. The actual taxes for 2007 and 2006 are $240,000 and $36,000, respectively. Using Worksheet 3, we will determine the most advantageous option.

Worksheet 3 - Calculating quarterly instalment payments for 2008

Instalment payments are due each quarter of your CCPC's tax year.

	Option 1 2008	Option 2 2007	Option 3 2006
Add: Part I tax payable	240,000	240,000	36,000
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax*	=	=	=
Add: Provincial and territorial tax payable before refundable credits**	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=	=	=
Subtract: Total 2008 estimated refundable credits (enter the amount from line D of Worksheet 1)	-	-	-
Instalment base amount	=    240,000	=    240,000	=    36,000
Divide by:	÷      4	÷      4	÷      4
Each of the four payments due under options 1 and 2	=    60,000	=    60,000
First payment under option 3			=      9,000
Previous-year instalment base (option 2 instalment base amount above)			240,000
Subtract: First payment under option 3			-      9,000
Difference			=    231,000
Divide by:			÷       3
Each of the remaining three payments under option 3			=     77,000
* If the total of Parts I, VI, VI.1, and XIII.1 tax is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. ** This amount is net of provincial and territorial non-refundable credits. If the provincial and territorial tax before refundable credits is $3,000 or less for either 2008 or 2007, you do not have to make instalment payments on this amount for 2008. Include New Brunswick and Nova Scotia tax on large corporations, but do not include provincial tax payable from Quebec, Ontario, or Alberta.

Option 3 is the most advantageous of the three options. Therefore, Corporation A will have to remit an instalment payment of $9,000 for the first quarter and $77,000 for each of the last 3 quarters.

Note
The total amount of instalments calculated under option 3 is always the same as under option 2, but option 3 is often chosen when the first payment is lower.

 

Appendix 7 - Worksheet 5 - Example

Corporation A has a permanent establishment only in Ontario and has estimated its federal tax for 2009 at $200,000 and its Ontario provincial tax payable for 2009 at $100,000. Corporation A has also estimated its refundable credits, including Ontario refundable credits, for 2009 at $42,000. The actual federal taxes for 2008 and 2007 are $175,000 and $150,000 respectively. The actual Ontario taxes for 2008 and 2007 are $60,000 and $40,000 respectively. The Ontario taxes for 2008 and 2007 included premium tax payable of $7,000 and $5,000 respectively. In addition, the Ontario taxes for 2008 and 2007 were net of Ontario specified tax credits of $12,000 and $13,000 respectively.

Using Worksheet 5, we will determine the most advantageous option. But first, we will calculate Ontario tax payable for purposes of determining option 2 (2008) and option 3 (2007):

	Option 2 (2008)	Option 3 (2007)
Actual Ontario tax payable	60,000	40,000
Premium tax payable	-       7,000	-       5,000
Ontario specified tax credit	+    12,000	+     13,000
Ontario tax payable	65,000	48,000

Worksheet 5 - Calculating monthly instalment payments for 2009 (Ontario)

Instalment payments are due each month of your corporation's tax year.

	Option 1 2009	Option 2 2008	Option 3 2007
Add: Part I tax payable	200,000	175,000	150,000
Part VI tax payable	+	+	+
Part VI.1 tax payable	+	+	+
Part XIII.1 tax payable	+	+	+
Total of Parts I, VI, VI.1, and XIII.1 tax*	=	=	=
Add: Provincial and territorial tax payable before refundable credits**	+          100,000	+          65,000	+          48,000
Total of Parts I, VI, VI.1, and XIII.1 tax, as well as provincial and territorial tax	=          300,000	=         240,000	=         198,000
Subtract: Total 2009 estimated refundable credits (enter the amount from line D of Worksheet 4)	-          42,000	-          42,000	-          42,000
Instalment base amount	=         258,000	=         198,000	=         156,000
Divide by:	÷          12	÷          12	÷          12
Each of the 12 payments due under options 1 and 2	=          21,500	=          16,500
Each of the first 2 payments under option 3			=          13,000
Previous-year instalment base (option 2 instalment base amount above)			198,000
Subtract: The total of payments 1 and 2 under option 3			-          26,000
Difference			=         172,000
Divide by:			÷          10
Each of the remaining 10 payments under option 3			=          17,200
* If the total of Parts I, VI, VI.1, and XIII.1 tax is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. **This amount is net of provincial and territorial non-refundable credits. If the provincial and territorial tax before refundable credits is $3,000 or less for either 2009 or 2008, you do not have to make instalment payments on this amount for 2009. Include New Brunswick and Nova Scotia tax on large corporations and Ontario tax payable before refundable credits, but do not include provincial tax payable from Quebec or Alberta. Ontario tax payable before refundable credits includes only corporate income tax (net of non-refundable credits), corporate minimum tax, capital tax, and special additional tax on life insurance corporations. In determining options 2 and 3, ensure that the Ontario tax payable is before the application of Ontario specified tax credits.

Option 3 is the most advantageous of the three options. Therefore, Corporation A will have to remit an instalment payment of $13,000 in each of the first two months and $17,200 for each of the last 10 months.

Note
The total amount of instalments calculated under option 3 is always the same as under option 2, but option 3 is often chosen when the first two payments are lower.

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