Corporate Tax Instalments for 2027: What Your 2026 Year-End Sets

Reviewed by Bader A. Chowdry, CPA, CA, LPA on October 28, 2026

Corporate tax instalments for 2027 are largely decided by the tax your corporation pays for 2026: under the Income Tax Act as in force, the previous year’s tax is one of three permitted bases, and the small-CCPC test that allows quarterly payments looks at the current or preceding year. For an Ontario owner-manager in Mississauga or anywhere in the GTA, the 2026 year-end is therefore the moment to see what the 2027 corporate tax instalments will be, and which option fits.

This article walks through who has to pay instalments, monthly versus quarterly, the three ways to calculate them, what late or short payments cost, and the decision an LPA works through before the first 2027 payment falls due.

Who has to pay corporate tax instalments?

Most corporations that owe more than a small amount of tax pay it during the year, not after it. The Income Tax Act provides, in force under section 157(2.1), that a corporation whose total taxes for the year, or whose first instalment base, is $3,000 or less may pay the whole amount by its balance-due day instead.

The CRA states the same test from the other side on its instalment requirements page: a corporation owing $3,000 or less, in the year itself or in the year before, does not need to make instalments. The threshold counts federal tax and provincial tax together.

That matters in Ontario. The Ontario Ministry of Finance notes that the CRA administers Ontario’s corporate income tax, so the Ontario portion of a T2 sits in the same instalment base as the federal portion. A corporation does not pay Ontario separately.

A newly incorporated company gets a pause. CRA says most corporate taxes need no instalments for the first tax year after incorporation; the tax for that year is paid by the balance-due day. From the second year on, the normal rules apply, and the first full year of results becomes the base.

Monthly or quarterly: the small-CCPC test

A corporation pays monthly unless it is a small-CCPC, in which case it may pay quarterly. The definition is in force in ITA s.157(1.2), and every condition has to hold.

• It is a CCPC.
• Its taxable income for the current or preceding year, combined with associated corporations, does not exceed $500,000.
• Its taxable capital employed in Canada for the current or preceding year, again combined with associated corporations, does not exceed $10 million.
• It deducted the small business deduction under section 125 for the current or preceding year.
• Throughout the previous 12 months it remitted its source deductions on time and filed the returns the Act requires on time.

The last condition is the one owner-managers miss. Source deductions mean the CPP, EI and income tax withheld from payroll, plus related amounts. One late payroll remittance, or one late return, can switch the corporation to monthly instalments for a period, even if the income and capital tests are comfortably met.

The association rule also catches people. A second company owned by the same family can be associated with the first, and the $500,000 taxable income test is then measured on the group, not on each company. Insight Accounting CPA covers that grouping in more depth in its article on associated corporations and the business limit.

The three ways to calculate the 2027 instalments

The Act gives three options, and a corporation may use whichever produces the payments it can support. The CRA’s calculation page describes them in plain terms: an estimate of the current year’s tax, the previous year’s tax, or a combination of the previous two years.

For monthly payers, ITA s.157(1)(a), in force, sets them out as follows.

1. Estimate: 1/12 of the estimated total tax for the year, each month.
2. Previous year: 1/12 of the first instalment base, which for 2027 reflects the 2026 tax, each month.
3. Two years: for the first two months, 1/12 of the second instalment base (reflecting 2025); for each of the remaining months, 1/10 of the first instalment base less what was paid in those first two months.

Quarterly payers under ITA s.157(1.1), also in force, use the same structure in quarters: 1/4 of the estimate, 1/4 of the first instalment base, or 1/4 of the second instalment base for the first quarter and 1/3 of the remaining first instalment base for each later quarter.

The CRA attaches a specific warning to the estimate option: if the estimate turns out low, interest and penalties may apply in some circumstances. The prior-year and two-year options rest on the tax of earlier years, so there is no forecast to get wrong. Whatever is still owing for the year is due on the balance-due day.

When each payment is due

For a December 31 year-end, monthly instalments are due by the last day of each month of the year. The CRA’s due dates page frames it generally: the first payment is due one month less a day from the start of the tax year, and later payments fall on the same day of each following month.

A quarterly payer’s first instalment is due one quarter less a day from the start of the year. For a calendar-year small-CCPC that means March 31, June 30, September 30 and December 31. If a due date lands on a weekend or a CRA-recognised holiday, the payment counts as on time when the CRA receives it by the next business day.

The balance is separate. The CRA’s balance-due day page gives two months after year-end in general, and three months for a CCPC that claimed the small business deduction for the current or previous year and whose previous-year taxable income stayed within its business limit. For a December 31, 2026 year-end that is March 1, 2027 (February 28 is a Sunday) or March 31, 2027. The T2 return has its own, later filing deadline: paying and filing are different dates.

What a missed or short instalment costs

Late or short instalments attract instalment interest, compounded daily at the CRA’s prescribed rate, which is reset every three months. For October 1 to December 31, 2026, the prescribed rate on overdue taxes is 7%. Because it compounds daily, a shortfall left in place for several months grows faster than a simple annual rate suggests.

A penalty sits on top only for larger shortfalls. CRA applies the instalment penalty only when instalment interest for the year is more than $1,000. It then takes the greater of $1,000 and 25% of the interest that would have been charged had no instalments been made at all, subtracts it from the actual instalment interest, and charges half of the difference.

The practical reading: a small, short-lived shortfall usually costs interest only. A corporation that ignores instalments entirely for a profitable year can face both interest and the penalty, and the cash still has to be found on the balance-due day.

What an LPA adds beyond the CRA page

The CRA page lists the options. It does not tell an owner-manager which one fits a year that is about to change. That is where the year-end review comes in, and Bader A. Chowdry, CPA, CA, LPA works through it in the same meeting as the salary, dividend and bonus decisions, because each of those changes the 2026 tax that becomes the 2027 base.

The decision rule. Compare three numbers at year-end: the 2025 tax, the 2026 tax and a reasoned 2027 estimate. If 2027 looks lower than 2026, the estimate option may be worth the risk, but only with a forecast documented and revisited mid-year. If 2027 looks similar or higher, the prior-year or two-year option keeps the corporation out of instalment interest whatever happens. When 2025 was lower than 2026, the two-year option front-loads the smaller figure into the first two months.

The named failure mode: a one-off year. A large capital gain, a disposal that brings back CCA, or a year of unusually high passive income can push 2026 tax well above normal. The prior-year option then sets 2027 instalments on that peak, and the corporation pays tax in advance it may not owe. The opposite also happens: a corporation that relies on an optimistic estimate during a growth year pays interest at 7% or whatever the prescribed rate becomes. The second failure mode is administrative: one late payroll remittance during the year breaks the 12-month compliance condition, and a company that budgeted quarterly finds itself on monthly payments.

Illustrative example. Assume a calendar-year Ontario CCPC that qualifies as a small-CCPC, with total tax of $24,000 for 2026 and $18,000 for 2025. These figures are assumptions for illustration, not a client’s numbers.

• Monthly, previous-year option: $24,000 / 12 = $2,000 a month.
• Quarterly, previous-year option: $24,000 / 4 = $6,000 a quarter, on March 31, June 30, September 30 and December 31.
• Monthly, two-year option: $1,500 in each of the first two months ($18,000 / 12, so $3,000 in total), then ($24,000 minus $3,000) / 10 = $2,100 for each of the next ten months.

The totals match; what changes is timing. Quarterly payment keeps cash in the business longer between payments, which is why the 12-month compliance condition deserves attention in the payroll calendar, not just at year-end. Insight Accounting CPA’s article on the bonus accrual timing rule shows how a year-end bonus moves taxable income, and with it the base, while the article on the T2 filing deadline covers the return that follows.

A year-end instalment checklist

Before December 31, an owner-manager can put four questions to their accountant.

1. What is the corporation’s projected 2026 tax, federal and Ontario together, and does it clear $3,000?
2. Does the corporation still meet each small-CCPC condition, including the association, capital and on-time remittance tests?
3. Which of the three options produces the 2027 schedule the business can carry, and is 2026 a one-off year?
4. Are the instalments set up as recurring payments in the corporation’s CRA account, separate from GST/HST, T4 and T5 obligations?

The one concrete step: book the instalment review into the same year-end meeting as the salary and dividend mix, so the base is chosen on purpose rather than by default.