Are you familiar with instalments? These are partial tax payments that most businesses are required to make in monthly or quarterly intervals.
Income tax law requires companies to pay these instalments to ensure that they are not favoured over other taxpayers who have their taxes withheld at source.
Find out which businesses are required to pay GST and QST by instalments, as well as when and how they are required to do so.
Which businesses are required to pay GST and QST by instalments?
Not all businesses are required to pay their taxes in instalments. It is important to be aware of the different taxation rules to understand the obligations your business must meet.
Businesses subject to instalment payments in the GST system are those with a total tax and capital tax liability of more than $3,000 each. This is without taking into account the financial institutions' compensatory tax. This rule also applies to the QST system.
Corporations with a tax balance of less than $3,000 at the federal level and less than $3,000 at the provincial level for the previous or current year are not required to pay tax by instalments. The same applies to corporations that have just incorporated or are in their first year of operation.
Since the QST rate is higher than the GST rate (9.975% vs. 5%), you may have to make instalment payments under the QST system, even though you are not required to make them under the GST system.
How to calculate your instalments
There are 3 options to calculate instalments and accurately determine the amounts to be paid:
- The no-calculation option is best if your income, deductions and credits are more or less constant from one year to the next.
- The prior-year option is best if your current year's income, deductions and credits are very similar to the previous year, but significantly different from those of two years prior.
- The current-year option is best if your income, deductions and credits in 2021 are significantly different from year to year.
You can calculate these amounts using form VDZ-458.0.2-V for QST and form FPZ-558.C-V for GST and QST.
When do I have to pay taxes by instalments?
For GST and QST, businesses eligible for instalment payments must make 4 instalments per year if their business tax reporting period is annual and 12 if it is monthly.
These payments are due no later than one month after the last day of each quarter of your fiscal year. At the end of the year, the return to be completed allows you to compare the total of the instalments calculated with the net total of the GST and QST that you must actually pay.
Corporate taxation in Quebec can be very complex. When determining the amount to be paid in instalments, it is best to consult a corporate tax specialist.
How to pay your corporate taxes by instalments
There are three ways to pay your instalments.
Online
Businesses can pay over the Internet through their financial institution's online payment service. If you are filing separately for GST and QST, you will need to use the code indicated on the payment slip.
In person
You can also pay your taxes directly at a financial institution.
By mail
Finally, you can make instalment payments by mail by returning the payment slip and the GST/HST and QST instalment payment form that you must request from Revenu Québec's customer service.
Remember to declare your instalments
Always remember to enter the total instalments you paid during the year when you file your GST and QST return.
Hire an accountant or tax specialist for help with instalment payments
In Quebec, many companies have to pay GST and QST by instalments. This process must be completed four to twelve times a year, at the risk of additional penalties and interest.
Since this task requires a great deal of attention and organization, many companies hire a corporate tax specialist to calculate their instalments so that they can be paid on time.
If you are looking for an accountant or tax specialist who specializes in business taxes to help you with your instalment payments, please feel free to contact us today.
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
