Quick answer
Current income tax is the tax for the current reporting period based on the period’s taxable income under the applicable tax rules. Current tax expense records the portion of that tax cost recognized in profit or loss, while Income Taxes Payable records the amount still owed after considering instalments and other payments.
A business can report accounting income and taxable income that are different amounts. Accounting income is measured under the reporting framework; taxable income is determined under the applicable tax law and filing rules. Current-tax accounting records the tax attributable to the current period. Future tax effects embedded in reported assets and liabilities are addressed separately in Deferred Income Taxes.
Expense, payable, and payment
The two accounts answer different questions. Income Tax Expense reports the portion of current-period tax cost recognized in profit or loss. Income Taxes Payable reports the balance owed to the tax authority at the reporting date. A tax instalment is recorded as a payment toward the current tax account; it does not create a second tax expense. If the underlying transaction is recognized outside profit or loss, the related tax presentation must be assessed under the applicable requirements rather than forced into this expense account.
Canadian corporate income tax includes federal and provincial or territorial tax. Where CRA instalments are required, payments are generally monthly; eligible small Canadian-controlled private corporations (CCPCs) may pay quarterly. The balance is generally due two months after year-end, or three months for CCPCs meeting the CRA conditions. Alberta and Quebec administer their own provincial corporate income taxes, with separate payment requirements; the CRA administers the other provincial and territorial corporate taxes.
Reconciling accounting income to taxable income
A current-tax calculation commonly starts with accounting income and adjusts for differences required by the applicable tax rules. The simplest bridge may contain only one non-deductible expense. In this context, deductible means the tax rules allow the amount to reduce taxable income; an accounting expense is not automatically a tax deduction.
Difference that does not reverse
An amount may be included in accounting income but never deductible for tax, or included in taxable income without entering accounting income. It changes the current-tax calculation without creating a future reversal from that item.
Difference in timing
Accounting and tax may recognize the same economic amount in different periods. The current-tax calculation follows the amount included in taxable income now; the related future tax consequence may also require a separate deferred-tax analysis.
Current-tax calculation and entries
Calculate current tax by determining taxable income under the applicable tax rules and applying the enacted or substantively enacted rate required by the framework. When the tax relates to items recognized in profit or loss, current tax expense records that period’s tax cost. Instalments already paid are then applied against the amount, leaving either a payable when tax remains due or an asset when payments exceed the current obligation.
Maple Design’s current tax for 2026
Maple Design reports $100,000 of accounting income before income tax. A $5,000 expense included in that amount is permanently non-deductible for tax. Assume a 20% applicable tax rate, no other book-to-tax differences or credits, and $8,000 of tax instalments paid during the year. Maple meets the CRA conditions for a three-month balance-due date.
- Start with accounting income: $100,000.
- Add the non-deductible amount: $100,000 + $5,000 = $105,000 taxable income.
- Apply the tax rate: $105,000 × 20% = $21,000 current tax.
Maple paid $8,000 before the year-end calculation established the period’s total tax cost. The payment therefore increases an Income Tax Instalments asset and reduces Cash. It is an amount paid toward the tax account, not a second measure of tax expense.
Scroll horizontally to see all columns.
| Account | Debit | Credit |
|---|---|---|
| Income Tax Instalments | 8,000 | |
| Cash | 8,000 |
At December 31, the $21,000 calculation becomes Income Tax Expense. Applying the $8,000 instalment asset leaves $13,000 unpaid, so the remaining credit is recorded as Income Taxes Payable.
Scroll horizontally to see all columns.
| Account | Debit | Credit |
|---|---|---|
| Income Tax Expense | 21,000 | |
| Income Tax Instalments | 8,000 | |
| Income Taxes Payable | 13,000 |
Effect of recognizing current tax
Scroll horizontally to see all columns.
| Statement | Account | Effect |
|---|---|---|
| Income statement | Income Tax Expense | Increases by $21,000; profit decreases by $21,000 |
| Balance sheet | Income Taxes Payable | $13,000 remains payable after applying $8,000 of instalments |
| Cash flow statement | Cash | No cash effect from the accrual entry |
- Income statement
- AccountIncome Tax Expense
- EffectIncreases by $21,000; profit decreases by $21,000
- Balance sheet
- AccountIncome Taxes Payable
- Effect$13,000 remains payable after applying $8,000 of instalments
- Cash flow statement
- AccountCash
- EffectNo cash effect from the accrual entry
After the year-end entry, Income Taxes Payable contains the $13,000 balance still owed. Paying that amount reduces Cash and removes the liability; it does not change the $21,000 expense already recognized for 2026.
Scroll horizontally to see all columns.
| Account | Debit | Credit |
|---|---|---|
| Income Taxes Payable | 13,000 | |
| Cash | 13,000 |
Effect of the final settlement
Scroll horizontally to see all columns.
| Statement | Account | Effect |
|---|---|---|
| Balance sheet | Income Taxes Payable | Decreases by $13,000 to nil |
| Cash flow statement | Tax payments | A further $13,000 cash outflow occurs |
| Income statement | Income Tax Expense | Remains $21,000; payment does not create another expense |
- Balance sheet
- AccountIncome Taxes Payable
- EffectDecreases by $13,000 to nil
- Cash flow statement
- AccountTax payments
- EffectA further $13,000 cash outflow occurs
- Income statement
- AccountIncome Tax Expense
- EffectRemains $21,000; payment does not create another expense
A timing difference becomes a deferred-tax question when it leaves a difference between a reported carrying amount and its tax base. For example, if capital cost allowance (CCA)—the Canadian tax deduction for equipment—runs ahead of book depreciation, current tax uses the deduction available now, while the equipment’s carrying amount and remaining tax deductions preserve a future difference.
ASPE income tax accounting policy choice
ASPE Section 3465 allows an entity to choose either the taxes-payable method or the future-income-taxes method and apply that policy consistently. The taxes-payable method recognizes current tax assets, liabilities, and qualifying current loss-carryback benefits without recording future-income-tax balances. The future-income-taxes method also records current tax, then separately accounts for supported future tax consequences. The current-tax lifecycle remains relevant under either choice; the additional future-tax analysis is explained in Deferred Income Taxes.
Common errors
- Using accounting income as taxable income without examining the stated tax rules.
- Recording an instalment as a new expense instead of a payment toward tax, tracked as an asset or reduction of a payable.
- Calling the entire book-to-tax difference deferred tax.
- Assuming one tax rate or deduction rule applies to every Canadian entity and situation.