Hello! Please note that payroll taxes are always shifting, so for an updated cheat sheet on Québec payroll taxes, check out our post here.
We all have to pay taxes, no matter what. Some taxes are just paid by the employee and some are matched by the employer as well. Some have an amount you are exempt from paying tax on, but no matter how much you make you will have to pay at least some tax. There are five main types of employee taxes for Québec and two additional employer rates.
How taxes are handled: Federal and Provincial taxes are always based on the estimated income of the employee for the year. Salaried employees are fairly straightforward to work with, but time-based employees have variable earnings. The five main employee taxes to be aware of are; Federal tax, provincial tax, QPP, EI and QPIP. How these taxes are calculated can vary depending on the payment type, this post will be related to regular wages.
1.The first tax taken off of an employee’s pay is QPP (Québec Provincial Plan). QPP is 5.4% of an employee’s pensionable earnings. *Pensionable earnings are the employees’ wages plus taxable benefits less your pay period exemption. The pay period exemption, in simple terms, is that everyone gets $3500/year that they don’t have to pay QPP on. This is broken down per pay period. So if your employees are paid on a bi-weekly frequency you would take 3500/26 to get an exemption amount of $134.61 per pay. NOTE: (never round up on the exemption!)
- Let’s say your wages + benefits= $1,000. To get your pensionable earnings you do 1000-134.61= $865.39
- QPP is 865.39 x .054= $46.73
- The company will match the employee portion of QPP dollar for dollar
- Note: An employee is exempt from QPP if they are under the age of 18 or over 70, and some other special cases. Please speak to your accountant or CRA/RQ to see if you are exempt.
- The annual employee maximum of QPP for 2017 is $2,797.20
2. EI – Employment Insurance is the second tax taken from an employees pay. EI is calculated at 1.27% of the insurable earnings. Insurable earnings are any cash based earning or benefit. Non-cash benefits are not subject to EI in most cases. The company pays 1.4 times the employee amount for EI unless they have secured a reduced rate from CRA. The annual maximum of EI for 2017 is $651.51.
3. QPIP- In Québec, employees also pay QPIP on their insurable earnings. This is calculated at 0.548% of insurable amounts. The annual maximum for QPIP is $397.30 for 2017.
4. Federal/Provincial tax: everyone gets a basic amount each year that they can make before they are subject to taxes. For 2017 that amount is $11635 federally and in QC, this means you can make this much without being taxed. After that (or based on the estimated earnings for the year) you will be taxed within the tax bracket for your estimated earnings.
- For tax brackets and rates see here: http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
- These rates are not a simple percentage- so be aware, there is more that goes into the calculation behind the scenes than just these rates!
- CRA publishes tax tables each year for deducting federal and provincial taxes manually. 2017 tables can be found here: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/t4032/crrntyrt4032-eng.html
Employer Taxes- as an employer, you are required to pay the company portions of QPP and EI and in QC you may also have to pay CNESST (formerly called CSST) and HSF (Health Services Fund). You will need to register to CNESST for a contribution rate as they can vary. HSF should always be calculated as part of your payroll taxes unless the wages are exempt per Revenue Québec. Exemptions are listed here http://www.revenuquebec.ca/en/entreprises/ras/calculer-ras/fss/remunerationsassujetties.aspx. The HSF rate varies based on your total payroll for the year as well as the industry you are in. The amount owed is estimates throughout the year by your payroll provider and then is reconciled at year-end once you submit your RL-1 and you find out whether you have over or underpaid.
The HSF rate varies based on your total payroll for the year as well as the industry you are in. The amount owed is estimated throughout the year by your payroll provider and then is reconciled at year-end once you submit your RL-1 and you find out whether you have over or underpaid.
If you have any further questions about taxes in Québec, contact your accountant.
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