Income Tax Rates
Income tax in Canada is administered at both a Federal and Provincial level. Calculating income tax is thus a two-step calculation, basic federal tax and then applying the provincial rate to the federal tax payable. However, the federal government collects both the federal taxes and the provincial taxes on behalf of the provinces with the exception of Quebec.
You can find the Provincial/Territorial Tax rates here http://turbotax.intuit.ca/tax-resources/canada-tax.jsp
Expats are able to offset their taxable income with relevant business expenses.
- 0 – 43,953: 15%
- 43,953-87,907: 22%
- 87,907 – 136,270: 26%
- 136,270+: 29%
Tax Returns Supplied
Employers Social Security and statutory contributions
CPP (Canada Pension Plan) 4.95%. Maximum contributions of $2,479.95 per annum.
Employment Insurance Max $1,302.84 p/a.
Employees Social Security and statutory contributions
CPP (Canada Pension Plan) 4.95%. Maximum $2,479.95 p/a.
Employment Insurance 1.88%. Max $930.60 p/a.
There are specific rules for payroll and taxation in Canada, depending upon whether your company employs foreign nationals or local Canadian employees, and the type of business structure used. The primary concerns for a foreign company that needs to comply with tax laws in Canada are: individual income tax (IIT) for employees in Canada, social security costs, payroll tax, GST/HST tax, withholding tax, corporate tax and permanent establishment concerns.
Employment standards in Canada provide a set of minimum standards by law for work conditions. Both the federal and provincial governments have authority over labour and employment law in Canada, which could affect payroll administration.
A remote payroll in Canada is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Canada. This path will still require the company to report Canadian source earnings and tax withholdings, so it can carry quite an administrative burden. One option for a non-resident company to payroll its employees (local and foreign) in Canada is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Canada under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to Canada may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Canadian payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Canadian employment laws.
Setting up payroll in Canada
Employee Information Required
Canadian laws require that the following information shall be provided to employees, or printed on employees’ pay statement:
- Employee name;
- Date of pay period;
- Rate of pay and hours of work at each rate;
- Gross earnings;
- Itemised deductions;
- Net pay.
Tax Registration Requirements
In Quebec, employers are required to register with Revenu Québec if income is paid to an employee who reports for work at one the employer’s establishments in Québec or the amount is paid to an employee who is not required to report for work at any of the employer’s establishments (in Québec or elsewhere), but is paid from one of your establishments in Québec.
Social Security Registration
Pension Plan contributions in Canada and Quebec are required by both the employee and employer.
Documentation Required for New Employees
Documents required for new employees in Canada are as follows:
- Written statement of the main terms and conditions of employment, signed by both the employee and employer. See the CPA’s New Hire Guidelines for more information (member login required).
- Itemised pay statement: Each employee must receive an itemised pay statement and the information reported must comply with employment/labour standards as per the legislation of where the work is performed.
Online filing is preferred. Majority of payments, indeed, are done electronically and may be a requirement based on remitter type
Frequency of Salary Payment
Most common are:
- Weekly – 52 pay periods (53 every seven years) – 18% of employers
- Bi-weekly – 26 pay periods (27 every eleven years) – 60% of employers
- Semi-monthly – 24 pay periods – 15% of employers
- Monthly – 12 pay periods – 7% of employers
Invoice / Payslips required
A payslip is required and can be provided either by paper or electronically, depending on the jurisdiction.
Ranges from $8.90/hour to $11.00/hour by jurisdiction and legislated by the provincial and territorial governments.