Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Does an employer have to calculate and withhold tax, CPP and EI on the full amount of the salary paid to an employee that is hired under the BC-WCB "Hire-a-Worker" program?
Position: Yes.
Reasons: The employer is paying salary or wages to the employee.
2005-011837
XXXXXXXXXX Luisa A. Majerus, CA
613) 832-3488
April 14, 2005
Dear XXXXXXXXXX:
Re: Hire-a-Worker Program
This is in reply to your facsimile dated February 25, 2005, requesting confirmation on the calculation of deductions required to be withheld on the salary of one of your employees. Specifically, one of your employees has been hired under the "Hire-a-Worker" program administered by the Workers' Compensation Board of British Columbia ("BC-WCB"). Under this program BC-WCB will reimburse, directly to an employer, up to 50% of the employee's salary for a period of 26 months. As the employer you are requesting confirmation that the deductions for tax, Canada Pension Plan ("CPP") and Employment Insurance ("EI"), are calculated based on the full amount of salary paid to the employee.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Where an employer hires an employee under the "Hire-a-Worker" program and is reimbursed for a portion of the wages paid by BC-WCB, it is our view that the amount the employer receives from BC-WCB is financial assistance that must be included in the employer's business income in the year received.
It is also our view that the full amount paid by the employer to the employee hired under this program is a salary or wage and must be included in the employee's income as income from employment by virtue of subsection 5(1) of the Income Tax Act (the "Act").
Furthermore, paragraph 153(1)(a) of the Act requires that every person paying at any time in a taxation year salary or wages shall deduct or withhold tax from the full amount of the payment. CPP and EI deductions must also be withheld on the full amount of salary or wages paid by an employer to an employee.
Information on your responsibility to deduct CPP contributions, EI premiums, and income tax from the salary or wages you pay to your employees is discussed in Chapter 1 of our publication T4001 - Employers Guide - Payroll Deductions - Basic Information ("T4001"). A copy of T4001 can be found on our website at www.cra-arc.gc.ca.
We trust this information meets your needs at the current time.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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