A Montreal manufacturer with $850,000 in annual revenue missed its March 15 instalment deadline by eleven days. The owner assumed filing the T2 on time would cover it. By December, the CRA had added $2,100 in interest to a $7,000 quarterly payment, interest that began compounding the moment the deadline passed, regardless of whether the return was filed.

For the first time in Equifax Canada's tracking history, 60-day delinquency rates on business instalment loans hit 3.98% in the first quarter of 2026, surpassing credit card delinquency. That reversal signals something structural. Businesses historically defaulted on variable credit first to protect fixed obligations. When the pattern flips, it means cash reserves are gone.

The Instalment System Most Owners Learn About Too Late

Corporate tax instalments are quarterly prepayments of the tax a business expects to owe for the current year. If your corporation's net tax owing exceeded $3,000 in either of the previous two years, the CRA requires instalments. The deadlines are fixed: the 15th of the final month in each quarter. March 15, June 15, September 15, December 15.

The trap is structural. There is no invoice. No statement arrives in the mail warning you a payment is coming due. The CRA expects you to calculate what you owe, set aside the cash, and remit on time. If you don't, interest begins accruing daily at the prescribed rate, currently hovering near 9%, roughly triple what most commercial term loans charge.

That interest is not a penalty. Penalties come later if the shortfall is large enough. The 9% charge is the cost of what the CRA treats as an involuntary loan you took from the federal government the day you missed the deadline. It compounds. It does not forgive. And it accrues whether you file your T2 return on time or not.

Why Cash Flow Planning Fails at the Quarterly Line

Most businesses operate on monthly cycles. Payroll is bi-weekly or monthly. Rent is monthly. Supplier terms are 30 or 60 days. Instalments arrive on a calendar that intersects those cycles awkwardly. March 15 falls before many Q1 financials are even closed. June 15 lands in the middle of summer planning. September 15 competes with back-to-school inventory pulls for retailers.

The business that paid its suppliers in February to keep the doors open often has nothing left for the instalment that same month. The CRA does not negotiate. A vendor might accept late payment. The landlord might grant a week. The CRA charges 9% from day one and does not return calls offering extensions.

In Montreal specifically, that pressure is compounding. RBC Economics projects 1.1% GDP growth for Quebec in 2026, weighed down by tariff uncertainty and manufacturing sector stress. A business growing at 1% cannot absorb a 9% cost on a missed obligation and still hit its margin. The instalment becomes the line item that erases the year's profit.

The Double Jeopardy Problem for Quebec Corporations

Montreal businesses face two separate instalment regimes. The CRA handles federal corporate tax. Revenu Québec handles provincial. The deadlines align, but the systems do not communicate. Missing the federal instalment while paying the provincial one does not reduce the federal interest. The reverse is also true.

An owner managing tight liquidity must prioritize both or face compounding charges from two directions. The provincial rate mirrors the federal structure. The combined weight can push the effective cost of a missed quarter into double digits before the fiscal year even closes.

What Changes If You See Instalments as Fixed Costs

The businesses avoiding this trap treat the 15th of each quarter like payroll: non-negotiable, budgeted in advance, funded before discretionary spending. They set aside roughly one-quarter of the prior year's tax liability every 90 days, adjusting only if current-year revenue is demonstrably lower.

That approach requires seeing instalments not as a year-end obligation spread across four payments, but as a recurring cost with a higher penalty than almost any other missed payment in the business. The landlord's late fee might be $100. The CRA's is 9% annualized on the full amount, starting immediately.

Cash flow models that allocate for instalments first, before vendor payments, before inventory buys, before owner draws, treat the obligation the way it actually functions: as a creditor with terms you cannot renegotiate and interest rates you cannot appeal.