A significant corporate income tax bill can create pressure on business cash flow. Canadian corporations may have several ways to manage an amount owing, including paying CRA directly, discussing a payment arrangement, using existing business credit or exploring third-party business tax financing.
A company can be profitable and still face a timing mismatch between when corporate taxes become payable and when cash is available.
Corporate income taxes are a normal cost of doing business, but the amount owing can still represent a substantial use of cash. Depending on the business, a tax payment may compete with payroll, inventory, equipment purchases, supplier payments or other operating requirements.
The issue is often less about whether the corporation owes the tax and more about how the payment affects liquidity at a particular point in time.
Seasonal businesses, fast-growing companies and businesses waiting on large customer receivables can be especially sensitive to timing.
Understanding the available payment and financing options can help a company decide how to satisfy its obligation without creating unnecessary strain elsewhere in the business.
There is no single best solution for every corporation. The appropriate choice depends on cash availability, timing, cost and the financial priorities of the business.
The lowest-cost option is not always automatically the best operating decision, but financing should never be considered without looking at its cost.
If a corporation can comfortably pay the tax bill and still maintain enough cash for normal operations, paying in full may be the simplest approach.
Financing becomes more relevant when using available cash would leave the business with an uncomfortable working-capital position.
A corporation may need liquidity for payroll, supplier commitments, inventory, project costs, equipment repairs, expansion or unexpected expenses.
In those situations, management may decide that retaining liquidity has enough value to justify the financing cost.
Tell Taxio about your business and approximate tax obligation to see whether a financing option may be available.
Check your eligibilityBoth approaches may allow a business to avoid making the entire cash payment at once, but they work differently.
A CRA payment arrangement is made directly between the taxpayer and the Canada Revenue Agency. CRA may request financial information, and interest may continue to apply to unpaid balances.
With financing, an eligible corporation obtains credit from a third-party financing provider and repays that financing according to the agreed terms.
The business should compare the costs, requirements and cash-flow implications of each option before deciding how to proceed.
Taxio is not a CRA payment arrangement and is not affiliated with the Canada Revenue Agency. Businesses may wish to compare both routes, along with existing credit and paying in full, before deciding which option best fits their circumstances.
Growing companies can sometimes experience significant tax obligations at the same time that they need additional cash to fund the growth that created those profits.
Hiring employees, carrying more inventory, purchasing equipment, opening new locations and taking on larger contracts can all consume working capital.
That can create a situation where the financial statements show a profitable business while the company's available cash remains committed to operations.
Tax financing does not reduce the underlying tax obligation, but it may provide an eligible business with another way to manage the timing of that obligation.
Taxio helps eligible Canadian businesses explore flexible financing options for certain corporate and other business tax obligations.
Answer a few quick questions about your corporation and tax obligation. The initial eligibility request only takes a few minutes.
Check your eligibilityTaxio is not affiliated with or endorsed by the Canada Revenue Agency or any federal or provincial government agency. Information on this page is general only and is not tax, accounting, legal or financial advice. Businesses should consult CRA and qualified professional advisors regarding their specific tax obligations.
Common questions from Canadian corporations facing a significant income tax payment.
CRA may allow certain taxpayers to establish a payment arrangement when they cannot pay an outstanding balance in full. Businesses should contact CRA directly to determine what may be available in their specific circumstances.
Depending on its credit availability and eligibility, a corporation may use existing business borrowing or third-party financing to address certain tax obligations.
It depends on the business. Financing can preserve liquidity but adds borrowing cost. Companies should compare that cost with the value of keeping cash available for operations and growth.
Certain corporate tax obligations may be eligible for Taxio financing. All requests are subject to eligibility, underwriting, documentation and final approval.
No. Taxio is an independent service and is not affiliated with, endorsed by or acting on behalf of the Canada Revenue Agency.
Depending on eligibility and final approval, financing options may include repayment periods of 6, 9, 12 or 18 months.
See whether your Canadian corporation may qualify for a flexible financing option through Taxio.
Check your eligibility