Do you understand the concept of instalments?

They are essentially partial tax payments that most companies have to make at monthly or quarterly intervals.

Under income tax legislation, companies are required to make these advance payments in order to avoid preferential treatment compared with other taxpayers whose taxes are deducted at source.

Find out which companies are required to make instalment payments of GST and QST, and when and how.

Which companies are affected by GST and QST instalments?

Not all companies are required to make tax instalments. That's why it's important to understand the tax rules so you're aware of your company's specific obligations.

Businesses affected by GST and QST instalments are those whose total tax and capital tax each exceed $3,000. This does not include the compensatory tax for financial institutions. The same rule applies to QST.

Companies with a federal or provincial tax balance of less than $3,000 for the previous or current year are not required to make instalment payments. This exemption also applies to newly incorporated companies or companies in their first year of operation.

Since the QST rate (9.975%) is higher than the GST rate (5%), you may be required to make instalment payments for QST, even though this is not necessary for GST.

How are instalments calculated?

There are three methods for accurately calculating instalment payments:

• The no-calculation method is recommended if your income, deductions and credits are relatively constant from one year to the next.
• The prior-year method is appropriate when your current-year income, deductions and credits are similar to those of the previous year, but differ significantly from those of two years ago.
• The current-year method is appropriate when your current-year income, deductions and credits differ significantly from one year to the next.

You can use form VDZ-458.0.2 to calculate QST instalments and form FPZ-558.C for GST and TPQ.

When are instalments due?

For GST and QST, companies eligible for instalment payments must make four payments per year if they have an annual reporting period, and twelve payments per year if the reporting period is monthly.

These payments must be made no later than one month after the end of each quarter of your fiscal year. At the end of the year, when you file your tax return, you compare the total instalments calculated with the actual net amount of GST and QST you have to pay.

Since corporate taxation in Quebec is complex, we recommend that you seek the help of an accountant to determine the amounts to be paid in instalments.

How can I pay my instalments?

There are three payment methods for making instalment payments:

• Online payment: Companies can pay online using a financial institution's online payment service. If you declare GST and QST separately, you must use the code indicated on the payment slip.
• Payment in person: You can also go to the counter of a financial institution to make the payment directly.
• Payment by mail: Finally, you can send the payment slip and the GST/HST and QST instalment payment form by mail. You can request these forms from Revenu Québec customer service.

Don't forget to declare your instalments

When you file your GST/QST return, be sure to indicate the total amount of instalments you paid during the year.

How can I find an accountant to help me process my instalments?

Since many businesses in Quebec are required to make instalment payments of GST and QST, it's essential to meet these obligations four to twelve times a year, or risk additional penalties and interest.

Because of the rigor and organization required, many companies call on accountants to calculate and make these payments on time.

So don't hesitate to contact us if you'd like to find an accountant adapted to your entrepreneurial reality to help you in this process. https://www.bankeo.ca/