1 September 1999 External T.I. 9911035 - EMPLOYEE DEDUCTIONS - PROVINCIAL RATE

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Which provincial payroll deduction rate should be used for an employee who reports to work in a province but resides in another province

Position: The province where he reports to work

Reasons: The rules are governed by provincial law and the Department is only acting as a collection agent

XXXXXXXXXX 991103
S. Leung
Attention: XXXXXXXXXX

September 1, 1999

Dear Sirs:

Re: Employee Deductions - Provincial Withholding Rate

We are writing in reply to your letter of April 15, 1999 in which you requested our opinion as to which provincial withholding rate is applicable with respect to payroll deductions for employees of XXXXXXXXXX.

XXXXXXXXXX

Our Comments

Payroll deductions of each province or territory of Canada is governed by the law of that province or territory. For example, the Taxation Act of Quebec and the Regulations related thereto dictate the manner and the amounts of how payroll deductions should be withheld and remitted to the Province of Quebec. In this regard, the relevant provisions are likely sections 1015, 1020, 1021, 1022, 1023 and 1024 of the Taxation Act of Quebec and the Regulations related thereto. Revenue Canada is merely acting as a collection agent for the provinces and territories under separate agreements with respect to provincial payroll deductions. We, therefore, suggest that you refer to the provisions of the law of each province or territory for the authority and procedures of provincial payroll deductions.

From the information you provided as described above, it appears that XXXXXXXXXX has a permanent establishment in Quebec to which these employees report for work. If such is the case, notwithstanding that these employees are not resident in Quebec for income tax purposes, under the Taxation Act of the Province of Quebec, Quebec's withholding rate with respect to payroll deductions would be applicable.

As described in the publication "Employers' Guide to Payroll Deductions", if these employees, who work in Quebec but reside in a province other than Quebec, are subject to excessive tax deductions, they can ask for a reduction in tax deductions by obtaining a letter of authority from their respective tax service offices and submitting it to their employer.

When filing their income tax returns, if the total tax deductions for the year are more than the tax liabilities, they will be entitled to a refund for the excess.

We trust that you will find the above to be of assistance.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch