What is a tax instalment (GST/QST)?

Do you understand the concept of tax instalments?

They are essentially partial tax payments that most businesses are required to make on a monthly or quarterly basis.

businesses are required to make these instalment payments so as not to receive preferential treatment compared to other taxpayers whose taxes are withheld at source.

Let’s find out which businesses are required to make tax instalments for GST and QST, as well as the appropriate timing and method for doing so.

Which businesses are subject to GST and QST tax instalments?

Not all businesses are required to make tax instalments. It is therefore important to understand the tax rules so you know your business’s specific obligations.

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

Corporations with a tax liability of less than $3,000 at both the federal and provincial levels for the previous year or the current year are not required to make tax instalments. This exemption also applies to newly incorporated corporations or those in their first year of operation.

Since the QST rate (9.975%) is higher than the GST rate (5%), you may need to make tax instalments for the QST, even if you don’t need to do so for the GST.

How are tax instalments calculated?

There are three methods for accurately calculating the amounts of tax instalments due:

• The "no-calculation" method is recommended if your income, deductions, and credits are relatively consistent from year to year.
• The prior-year method is appropriate when your income, deductions, and credits for the current year 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 income, deductions, and credits for the current year vary 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 the GST.

When do you need to make tax instalments?

With regard to the GST and QST, businesses eligible for tax instalments must make four payments per year if they file annually, and twelve payments per year if they file 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 of the estimated payments with the actual net amount of GST and QST you owe.

Since business taxation in Quebec is complex, it is recommended that you seek the assistance of an accountant to determine the amounts to be paid as tax instalments.

What are the payment methods for tax instalments?

There are three payment methods for making tax instalments:

• Online payment: Businesses can make payments online using a financial institution’s online payment service. If you file GST and QST separately, you’ll need to use the code indicated on the payment slip.
• In-person payment: You can also visit a financial institution’s teller window to make the payment directly.
• Payment by mail: Finally, you can mail the payment slip and the GST/HST and QST instalment payment form.

Don’t forget to report your tax instalments

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

How can you find an accountant to help you handle tax instalments?

Since many businesses in Quebec are required to make tax instalments for the GST and QST, it is essential to meet these obligations four to twelve times a year, or face penalties and additional interest.

Because of the attention to detail and organization required, many businesses hire accountants to calculate and make these payments on time.

So don’t hesitate to contact us if you’d like to find an accountant who understands your business needs and can help you through this process. https://www.bankeo.ca/