Payroll Deductions Formulas - 118th Edition Effective July 1, 2023
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Payroll Deductions Formulas - 118th Edition Effective July 1, 2023
T4127JUL(E) Rev. 23/05
La version française de cette publication est intitulée Formules pour le calcul des retenues sur la paie – 118e édition.
On this page
- Is this guide for you?
- Distribution of this guide
- Electronic mailing lists – more ways to serve you!
- Payroll Deductions Online Calculator
- Payroll Deductions Tables
- What's new for July 1, 2023?
- Chapter 1 – General information
- Chapter 2 – Personal tax credits return (Form TD1)
- Chapter 3 – Glossary
- Chapter 4 – Option 1 – Tax Formulas
- Step 1 – Formula to calculate annual taxable income (A)
- Step 2 – Formula to calculate basic federal tax (T3)
- Step 3 – Formula to calculate the annual federal tax payable (T1)
- Step 4 – Formula to calculate annual basic provincial or territorial tax (T4)
- Step 5 – Formulas to calculate the annual provincial or territorial tax deduction (T2)
- Step 6 – Formula to calculate the estimated federal and provincial or territorial tax deductions (T) for the pay period
- Chapter 5 – Option 2 – Tax formula based on cumulative averaging
- Chapter 6 – Canada Pension Plan (CPP)
- Chapter 7 – Employment Insurance (EI)
- Chapter 8 – Rates and amounts
- Appendix 1: Upcoming Guidance for T4127 January 2024 Edition
- Chapter 1 – General Information
- Chapter 2 – Personal Tax Credit Returns (Form TD1)
- Chapter 3 – Glossary
- Chapter 4 – Option 1 – Tax Formulas
- Chapter 5 – Option 2 – Tax Formulas based on cumulative averaging
- Chapter 6 – Canada Pension Plan (CPP)
- To determine second additional CPP contributions for employees receiving salary or wages
- To determine second additional CPP contributions – only for employees paid by commission
- To determine second additional CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year receiving salary or wages
- To determine second additional CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year – only for employees paid by commission
- To determine second additional QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year receiving salary or wages
- To determine second additional QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year – only for employees paid by commission
- Chapter 7 – Employment Insurance (EI)
- Chapter 8 – Rates and amounts
- Appendix 2: Example Scenarios
Is this guide for you?
Use this guide if you are a payroll software provider or a company which develops its own in-house payroll solution.
This guide has the formulas you need to determine federal, provincial (except Quebec) and territorial income taxes, Canada Pension Plan (CPP) contributions and employment insurance (EI) premium deductions. The formulas also let you calculate payroll deductions for income sources such as commission, pension, bonuses and retroactive pay increases.
The formulas used in this guide to calculate statutory deductions have been approved for purposes of the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act, as well as their related regulations and any amendments proposed to these acts.
For more information on income amounts that are subject to payroll deductions, see the publication T4001, Employers’ Guide – Payroll Deductions and Remittances.
If you have questions about the formulas in this guide, contact your tax services office or tax centre. For the address and telephone numbers of your tax services office or tax centre, see the listings in the government section of your telephone book or visit canada.ca/taxes.
Distribution of this guide
This guide is available in electronic format only.
Electronic mailing lists – more ways to serve you!
We provide an electronic service that can notify you immediately, free of charge, of any changes for payroll deductions.
To subscribe, go to canada.ca/cra-email-lists and enter your business's email address for each mailing list that you want to join.
Payroll Deductions Online Calculator
For your payroll deductions, you can use our Payroll Deductions Online Calculator (PDOC). The calculator includes an option to help you make sure that enough Canada Pension Plan contributions and employment insurance premiums have been withheld for full-year employees.
It calculates payroll deductions for the most common pay periods, as well as the applicable province (except Quebec) or territory. The calculation is based on exact salary figures.
PDOC is available at canada.ca/pdoc.
Payroll Deductions Tables
Using the following links, you can download the publications T4032, Payroll Deductions Tables and T4008, Payroll Deductions Supplementary Tables. You can also choose to print only the pages or information that you need. For more information on payroll, see our webpage at canada.ca/payroll.
What's new for July 1, 2023?
This guide reflects some income tax changes recently announced which, if enacted as proposed, would be effective July 1, 2023.
At the time of publishing, these proposed changes were not law. Please refer to the 117th edition for any sections that have not been reproduced. We recommend that you use PDOC, the publication T4032 Payroll Deductions Tables, or the publication T4008 Payroll Deductions Supplementary Tables and the formulas in this guide for withholding, starting with your first payroll in July 2023.
Federal Changes
At the time of publishing, there were no federal changes announced.
Provincial and territorial tax changes
You will find below the provincial and territorial tax changes effective July 1, 2023. The current figures for the most commonly used rates, amounts and claim codes can be found in Chapter 8.
Please note that there is no change for Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Saskatchewan, Yukon or Outside Canada. For information on Quebec provincial tax, refer to Revenu Québec.
Manitoba
Basic Personal Amount
- On March 7, 2023, the Government of Manitoba announced an increase to the basic personal amount, effective January 1, 2023. Subject to approval by the Government of Manitoba, the basic personal amount will increase from $10,855 to $15,000.
- Since employees have received a lower basic personal amount for the first six months of the year, a prorated basic personal amount of $19,145 will apply for the remaining six months commencing with the first payroll in July.
- The Option 2 personal amounts will not be prorated.
Changes in the guide
A note was added to the LCF and LCP formulas to also allow for users to calculate the labour-sponsored funds credit on an annual basis.
Upcoming Guidance for January 2024
As per Canada Pension Plan Regulations Subsection 5.1 (1), for the year 2024 and each subsequent year, pensionable earnings up to the second earnings ceiling are subject to the second additional CPP contributions.
The new formulas and factors for 2024 were initially published in Appendix 2 of the 116th Edition of the T4127; they have been reproduced in Appendix 1 of this guide. Examples illustrating the new factors have been added in Appendix 2 in order to allow users to test their systems ahead of the legislated implementation, in January 2024. A theoretical Year’s Additional Maximum Pensionable Earnings (YAMPE) and maximum contribution have been used based on the 2023 Year's Maximum Pensionable Earnings (YMPE).
Chapter 1 – General information
As the general information has not changed, this section has not been reproduced.
Chapter 2 – Personal tax credits return (Form TD1)
As the formula to calculate the personal tax credits return and the explanatory variables have not changed, they have not been reproduced.
Chapter 3 – Glossary
All factor definitions appear only in the Glossary unless further details are required in specific situations.
Table 3.1 Glossary
| Factor | Meaning (for complete details, see the formulas) |
|---|---|
| A | Annual taxable income |
| B | Gross bonus, retroactive pay increase, vacation pay when vacation is not taken, accumulated overtime payment or other non-periodic payment |
| B1 | Gross bonuses, retroactive pay increases, vacation pay when vacation is not taken, accumulated overtime payments or other non-periodic payments year-to-date (before the pay period) |
| BPAF | Federal Basic Personal Amount |
| BPANS | Basic Personal Amount for Nova Scotia |
| BPAYT | Basic Personal Amount for Yukon |
| C | Canada (or Quebec) Pension Plan contributions for the pay period. This amount includes the base CPP and/or QPP contributions and the first additional CPP and/or QPP contributions. |
| CEA | Canada Employment Amount, a non-refundable tax credit used in the calculation for K4 and K4P |
| D | Employee’s year-to-date (before the pay period) Canada Pension Plan contribution with the employer (cannot be more than the annual maximum) |
| DQ | Employee’s year-to-date (before the pay period) Quebec Pension Plan contribution with the employer (cannot be more than the annual maximum) |
| D1 | Employee’s year-to-date (before the pay period) employment insurance premium with the employer |
| E | Total commission expenses deductions reported on Form TD1X |
| EI | Employment insurance premiums for the pay period |
| F | Payroll deductions for the pay period for employee contributions to a registered pension plan (RPP) for current and past services, a registered retirement savings plan (RRSP), to a pooled registered pension plan (PRPP), or a retirement compensation arrangement (RCA). For tax deduction purposes, employers can deduct amounts contributed to an RPP, RRSP, PRPP, or RCA by or on behalf of an employee to determine the employee's taxable income |
| F1 | Annual deductions such as childcare expenses and support payments, requested by an employee or pensioner and authorized by a tax services office or tax centre |
| F2 | Annual alimony or maintenance payments required by a legal document dated before May 1, 1997, to be payroll-deducted authorized by a tax services office or tax centre |
| F3 | Employee registered pension plan or registered retirement savings plan contributions deducted from the current non-periodic payment. You can also use this field or design another to apply other tax-deductible amounts to the non-periodic payment, such as union dues |
| F4 | Employee registered pension plan or registered retirement savings plan contributions deducted from the year-to-date non-periodic payments. You can also use this field or design another to apply other tax-deductible amounts to the non-periodic payment, such as union dues |
| F5 | Deductions for Canada Pension Plan additional contributions for the pay period |
| F5A | Deductions for Canada (or Quebec) Pension Plan additional contributions for the pay period deducted from the periodic income |
| F5B | Deductions for Canada (or Quebec) Pension Plan additional contributions for the pay period deducted from the non-periodic payment |
| F5Q | Deductions for Quebec Pension Plan additional contributions for the pay period |
| G | Gross commission amount including gross salary at the time of payment, plus any taxable benefits for commission-remunerated employees who have filled out Form TD1X. When an employee has not filed Form TD1X, tax is calculated the regular way |
| HD | Annual deduction for living in a prescribed zone, as shown on Form TD1 |
| I | Gross remuneration for the pay period. This includes overtime earned and paid in the same pay period, pension income, qualified pension income, and taxable benefits, but does not include bonuses, retroactive pay increases, or other non-periodic payments |
| I1 | Total remuneration for the year reported on Form TD1X. This includes commission payments, salary (where applicable), non-periodic payments, and taxable benefits |
| IE | Insurable earnings for the pay period including insurable taxable benefits, bonuses, and retroactive pay increases |
| K | Federal constant. The constant is the tax overcharged when applying the 20.5%, 26%, 29%, and 33% rates to the annual taxable income A |
| KP | Provincial or territorial constant |
| K1 | Federal non-refundable personal tax credit (the lowest federal tax rate is used to calculate this credit) |
| K1P | Provincial or territorial non-refundable personal tax credit (the lowest tax rate is used to calculate this credit) |
| K2 | Federal Canada Pension Plan base contributions and employment insurance premiums tax credits for the year (the lowest federal tax rate is used to calculate this credit). Note: If an employee has already contributed the maximum CPP and EI, for the year with the employer, use the maximum CPP base contribution and the maximum EI premium to calculate the credit for the rest of the year. If, during the pay period in which the employee reaches the maximum, the CPP and EI, when annualized, is less than the annual maximum, use the maximum CPP base contribution and the maximum EI premium in that pay period |
| K2P | Provincial or territorial Canada Pension Plan base contributions and employment insurance premiums tax credits for the year (the lowest provincial or territorial tax rate is used to calculate this credit). If an employee reaches the maximum CPP or EI for the year with an employer, the instructions in the note for the K2 factor also apply to the K2P factor. For employees paid by commission, use the federal K2 formula for commissions and replace the lowest federal rate in the K2 formula with the lowest provincial or territorial tax rate |
| K2Q | Quebec Pension Plan base contributions, employment insurance premiums, and Quebec Parental Insurance Plan premiums federal tax credits for the year (the lowest federal tax rate is used to calculate this credit) |
| K2R | Canada Pension Plan base contributions and employment insurance premiums tax credits for the year (the lowest federal tax rate is used to calculate this credit), for employees that are transferred from Quebec to a location outside Quebec. The term “location outside Quebec” refers to a province or territory outside Quebec |
| K2RQ | Quebec Pension Plan base contributions, employment insurance premiums, and Quebec Parental Insurance Plan premiums federal tax credits for the year (the lowest federal tax rate is used to calculate this credit), for employees that are transferred to Quebec from a location outside Quebec. The term “location outside Quebec” refers to a province or territory outside Quebec |
| K3 | Other federal non-refundable tax credits (such as medical expenses and charitable donations) authorized by a tax services office or tax centre |
| K3P | Other provincial or territorial non-refundable tax credits (such as medical expenses and charitable donations) authorized by a tax services office or tax centre |
| K4 | Federal non-refundable tax credit calculated using the Canada employment amount (the lowest federal tax rate is used to calculate this credit) |
| K4P | Territorial non-refundable tax credit calculated using the provincial or territorial Canada employment amount (the lowest territorial tax rate is used to calculate this credit) |
| L | Additional tax deductions for the pay period requested by the employee or pensioner as shown on Form TD1 |
| LCF | Federal labour-sponsored funds tax credit |
| LCP | Provincial or territorial labour-sponsored funds tax credit (only applies to Manitoba, New Brunswick, Nova Scotia, and Saskatchewan) |
| M | Accumulated federal and provincial or territorial tax deductions (if any) to the end of the last pay period |
| M1 | Year-to-date tax deducted on all payments included in B1 |
| N | The number of days since the last payment. The minimum basic exemption amount of $67.30 is included in the formula in line with CPP legislation |
| NI | Net income for the year from the employer |
| P | The number of pay periods in the year |
| PI | Pensionable income for the pay period, or the gross income plus any taxable benefits for the pay period, including bonuses and retroactive pay increases where applicable |
| PM | The total number of months during which CPP and/or QPP contributions are required to be deducted (used in the proration of maximum contribution). For detailed information and examples, refer to T4001 Employers’ Guide – Payroll Deductions and Remittances |
| PR | The number of pay periods left in the year (including the current pay period) |
| R | Federal tax rate that applies to the annual taxable income A |
| S | Provincial tax reduction (only applies to Ontario and British Columbia) |
| S1 | Annualizing factor |
| S2 | Basic amount used in the calculation of Factor S (only applies to Ontario and British Columbia) |
| T | Estimated federal and provincial or territorial tax deductions for the pay period |
| T1 | Annual federal tax deduction |
| T2 | Annual provincial or territorial tax deduction (except Quebec) |
| T3 | Annual basic federal tax |
| T4 | Annual basic provincial or territorial tax |
| TB | Tax deductions, i.e., bonuses or retroactive pay increases, payable now |
| TC | "Total claim amount" reported on federal Form TD1. If Form TD1 is not filed by the employee or pensioner, calculate TC using BPAF formula, and for non-resident individuals, TC is $0. If the claim code is E, T = $0. If the province is Ontario, even if the claim code is E, the Ontario Health Premium is payable on annual income over $20,000 |
| TCP | "Total claim amount" reported on the provincial or territorial Form TD1. If that form is not filed, TCP is the provincial or territorial basic personal amount, refer to table 8.2. For Nova Scotia and Yukon, use BPANS and BPAYT formulas respectively. |
| U1 | Union dues for the pay period paid to a trade union, an association of public servants, or dues required under the law of a province to a parity or advisory committee or similar body |
| V | Provincial or territorial tax rate for the year (does not apply to Quebec, outside Canada, or in Canada beyond the limits of any province or territory) |
| V1 | Provincial surtax calculated on the basic provincial or territorial tax (only applies to Prince Edward Island and Ontario) |
| V2 | Additional tax calculated on taxable income (only applies to the Ontario Health Premium) |
| Y | Additional provincial tax reduction amount based on the number of eligible dependents used in the calculation of Factor S (only applies to Ontario) |
| YTD | Year-to-date, not including current pay period |
Chapter 4 – Option 1 – Tax Formulas
Step 1 – Formula to calculate annual taxable income (A)
As the formula to calculate the annual taxable income (A) and the explanatory variables have not changed, they have not been reproduced.
Step 2 – Formula to calculate basic federal tax (T3)
As the formula to calculate the basic federal tax (T3) and the explanatory variables have not changed, they have not been reproduced.
Step 3 – Formula to calculate the annual federal tax payable (T1)
As the formula to calculate the annual federal tax and the explanatory variables have not significantly changed, only the changes have been reproduced.
T1 = Annual federal tax deduction, except for employees in Quebec, outside Canada, and in Canada beyond the limits of any province or territory
= T3 – (P × LCF)*
* If the result is negative, enter $0.
Only for employees in Quebec:
T1 = [(T3 – (P × LCF))* – (0.165 × T3)]*
* If the result is negative, enter $0.
Only for employees outside Canada and in Canada beyond the limits of any province or territory:
T1 = [T3 + (0.48 × T3) – (P × LCF)]*
* If result is negative, enter $0.
LCF = The lesser of:
(i) $750;
(ii) 15% of the amount deducted or withheld for the pay period for the acquisition, by the employee,
of approved shares of the capital stock of a prescribed labour-sponsored venture capital corporation
Note:
If the shares are invested in a registered retirement savings plan (RRSP), the amount invested can be used to determine the annual taxable income amount. If you want to calculate the credit on an annual basis, (P x LCF) is replaced by LCF, where LCF is 15% of the amount deducted or withheld for the year for the acquisition, by the employee, of approved shares of the capital stock of a prescribed labour-sponsored venture capital corporation. The maximum LCF credit for the whole year cannot exceed $750.
Step 4 – Formula to calculate annual basic provincial or territorial tax (T4)
As the formula to calculate the annual basic provincial or territorial tax and the explanatory variables have not significantly changed, only the changes have been reproduced.
T4 = (V × A) – KP – K1P – K2P* – K3P – K4P
If the result is negative, T4 = $0.
* For employees that are transferred from Quebec to a location outside Quebec, replace K2P with K2RP
Manitoba
K1P = 0.1080 × TCP
Where:
TCP = The total of personal non‑refundable tax credits amounts reported on Form TD1MB. If Form TD1MB
is not filed, TCP is $19,145.
Step 5 – Formulas to calculate the annual provincial or territorial tax deduction (T2)
As the formula to calculate the annual provincial or territorial tax and the explanatory variables have not significantly changed, only the changes have been reproduced.
T2 = T4 + V1 + V2 – S – (P × LCP)
If the result is negative, T2 = $0.
Only for employees in Quebec:
T2 = $0
Only for employees outside Canada and in Canada beyond the limits of any province or territory:
T2 = $0
Where:
T4 = (V × A) – KP – K1P – K2P – K3P – K4P
V and KP are based on 2023 values for A. See the Rates (R, V), income thresholds (A), and constants (K, KP) for 2023 Table 8.1 in Chapter 8.
Note:
If you want to calculate the LCP credit on an annual basis, (P x LCP) is replaced by LCP. The maximum LCP credit for the whole year cannot exceed the maximum labour-sponsored funds tax credit for the province or territory.
Step 6 – Formula to calculate the estimated federal and provincial or territorial tax deductions (T) for the pay period
As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not changed, they have not been reproduced.
Chapter 5 – Option 2 – Tax formula based on cumulative averaging
As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not significantly changed, only the changes have been reproduced.
Formulas to calculate provincial and territorial tax payable (T4)
Manitoba
K1P = 0.1080 × TCP
Where:
TCP = The total of personal non refundable tax credits amounts reported on Form TD1MB. If Form TD1MB is not filed, TCP is $15,000.
Chapter 6 – Canada Pension Plan (CPP)
As the formula to calculate the Canada Pension Plan contributions and the explanatory variables have not changed, they have not been reproduced.
Chapter 7 – Employment Insurance (EI)
As the formula to calculate the employment insurance premiums and the explanatory variables have not changed, they have not been reproduced.
Chapter 8 – Rates and amounts
To download the Chapter 8 tables in comma-separated value (CSV) format see the T4127 Payroll Deductions Formulas website.
Note:
Only the tables with changes have been reproduced.
Table 8.2 Other rates and amounts for 2023
| Territory | Basic amount | Index rate | LCP rate | LCP amount | CEA | S2 | T4 to V1 | V1 rate | Abatement | Surtax |
|---|---|---|---|---|---|---|---|---|---|---|
| Federal | BPAF | 0.063 | 0.150 | 750 | 1,368 | |||||
| AB | 21,003 | 0.060 | ||||||||
| BC | 11,981 | 0.060 | 521 | |||||||
| MB | 19,145 | 0.070 | 0.150 | 1,800 | ||||||
| NB | 12,458 | 0.063 | 0.200 | 2,000 | ||||||
| NL | 10,382 | 0.059 | ||||||||
| NS | BPANS | – | 0.200 | 2,000 | ||||||
| NT | 16,593 | 0.063 | ||||||||
| NU | 17,925 | 0.063 | ||||||||
| ON | 11,865 | 0.065 | 274 | 0 | 0.000 | |||||
| ON | 5,315 | 0.200 | ||||||||
| ON | 6,802 | 0.360 | ||||||||
| PE | 12,000 | – | 0 | 0.000 | ||||||
| PE | 12,500 | 0.100 | ||||||||
| QC | 0.165 | |||||||||
| SK | 17,661 | 0.063 | 0.175 | 875 | ||||||
| YT | BPAYT | 0.063 | 1,368 | |||||||
| Outside Canada | 0.480 |
For information on 2023 federal personal amounts, see the form TD1, Personal Tax Credits Return and the form TD1X, Commission Income and Expenses for Payroll Tax Deductions. For information on 2023 provincial or territorial personal amounts, see the respective form TD1AB, TD1BC, TD1MB, TD1NB, TD1NL, TD1NS, TD1NT, TD1NU, TD1ON, TD1PE, TD1SK, or TD1YT. For information on QC amounts, refer to Revenu Québec.
Table 8.11 Manitoba claim codes
| Claim code | Total claim amount ($) from | Total claim amount ($) to | Option 1, TCP = ($) | Option 1, K1P ($) |
|---|---|---|---|---|
| 0 | No claim amount | No claim amount | 0.00 | 0.00 |
| 1 | 0.00 | 19,145.00 | 19,145.00 | 2,067.66 |
| 2 | 19,145.01 | 20,838.00 | 19,991.50 | 2,159.08 |
| 3 | 20,838.01 | 22,531.00 | 21,684.50 | 2,341.93 |
| 4 | 22,531.01 | 24,224.00 | 23,377.50 | 2,524.77 |
| 5 | 24,224.01 | 25,917.00 | 25,070.50 | 2,707.61 |
| 6 | 25,917.01 | 27,610.00 | 26,763.50 | 2,890.46 |
| 7 | 27,610.01 | 29,303.00 | 28,456.50 | 3,073.30 |
| 8 | 29,303.01 | 30,996.00 | 30,149.50 | 3,256.15 |
| 9 | 30,996.01 | 32,689.00 | 31,842.50 | 3,438.99 |
| 10 | 32,689.01 | 34,382.00 | 33,535.50 | 3,621.83 |
Appendix 1: Upcoming Guidance for T4127 January 2024 Edition
This Appendix reproduces the content of the 116th Edition of the T4127 Appendix 2. Based on the 2023 YMPE, the theoretical YAMPE and maximum contribution were calculated. Combining the information in this Appendix with the information in the 117th Edition of the T4127 will allow users to test their system ahead of the legislated implementation in January 2024.
Chapter 1 – General Information
As the general information has not changed, this section has not been reproduced.
Chapter 2 – Personal Tax Credit Returns (Form TD1)
As the formula to calculate the personal tax credits return and the explanatory variables have not changed, they have not been reproduced.
Chapter 3 – Glossary
The factors in the following table only includes the new factors added due to the CPP Regulation Amendment.
| Factor | Meaning (for complete details, see the formulas) |
|---|---|
| C2 | Second additional Canada (or Quebec) Pension Plan contributions for the pay period |
| D2 | Employee’s year-to-date (before the pay period) second additional Canada Pension Plan contribution with the employer (cannot be more than the annual maximum) |
| D2Q | Employee’s year-to-date (before the pay period) second additional Quebec Pension Plan contribution with the employer (cannot be more than the annual maximum) |
| YAMPE | Year's Additional Maximum Pensionable Earnings |
| YMPE | Year's Maximum Pensionable Earnings |
| W | The greater of year-to-date (before the pay period) pensionable earnings (PIYTD or GYTD) and employee’s Year’s Maximum Pensionable Earnings (YMPE). This is used to calculate Factor C2 |
Chapter 4 – Option 1 – Tax Formulas
This chapter only includes the formulas to be impacted or added due to the CPP Regulation Amendment. Based on the 2023 YMPE, the theoretical YAMPE and maximum contribution were calculated and are used for illustrative purposes only.
Step 1 – Formula to calculate annual taxable income (A)
A = Annual taxable income
= [P × (I – F – F2 – F5A – U1)] – HD – F1
If the result is negative, T = L.
Only for employees paid by commission:
A = I1 – F* – F2* – F5A – U1* – HD – F1 – E
If the result is negative, T = L.
* Estimated deduction amounts for the year. For registered retirement savings plan (RRSP) contributions included in F, you will need to find out from your employee paid by commission the estimated or expected annual deduction. We recommend that you caution employees not to exceed their RRSP contribution limit for the year.
F5 = C × (0.0100/0.0595) + C2
Only for employees in Quebec:
F5Q = C × (0.0100/0.0640) + C2
Only for employees paid by commission:
F5* = (0.0100 × (I1 – $3,500.00)**, maximum $631.00 × (PM/12)) + (0.04 × (I1 – ($66,600.00 × (PM/12)))**, maximum $184.00 × (PM/12))
* Estimated annual amount
** If the resulting amount is negative, enter $0.
Only for employees in Quebec:
F5Q * = (0.0100 × (I1 – $3,500.00)**, maximum $631.00 × (PM/12)) + (0.04 × (I1 – ($66,600.00 × (PM/12)))**, maximum $184.00 × (PM/12))
* Estimated annual amount
** If the resulting amount is negative, enter $0.
Chapter 5 – Option 2 – Tax Formulas based on cumulative averaging
Formula to calculate annual taxable income (A)
A = Projected annual taxable income
= [S1 × (I – F – F2 – F5A – U1)] + (B1 – F4 – F5B) – HD – F1
If the result is negative, A = $0.
F5 = C × (0.0100/0.0595) + C2
Only for employees in Quebec:
F5Q = C × (0.0100/0.0640) + C2
Chapter 6 – Canada Pension Plan (CPP)
For the following formulas, round the resulting amount to the nearest $0.01.
Note:
This chapter also outlines the Quebec Pension Plan (QPP) formulas. In addition, the term "location outside Quebec" refers to a province or territory outside Quebec.
To determine second additional CPP contributions for employees receiving salary or wages
C2 = The lesser of:
(i) $184.00 × (PM/12) – D2*;
(ii) (PIYTD + PI – W) × 0.04
W = The greater of:
(i) PIYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
* For employees employed in Quebec, use D2Q instead of D2
To determine second additional CPP contributions – only for employees paid by commission
C2 = The lesser of:
(i) $184.00 × (PM/12) – D2*;
(ii) (GYTD + G – W) × 0.04
W = The greater of:
(i) GYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
* For employees employed in Quebec, use D2Q instead of D2
To determine second additional CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year receiving salary or wages
C2 = The lesser of:
(i) $184.00 × (PM/12) – [(D2Q × (0.04/0.04)) + D2];
(ii) (PIYTD + PI – W) × 0.04
W = The greater of:
(i) PIYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
To determine second additional CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year – only for employees paid by commission
C2 = The lesser of:
(i) $184.00 × (PM/12) – [(D2Q × (0.04/0.04)) + D2];
(ii) (GYTD + G – W) × 0.04
W = The greater of:
(i) GYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
To determine second additional QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year receiving salary or wages
C2 = The lesser of:
(i) $184.00 × (PM/12) – [(D2 × (0.04/0.04)) + D2Q];
(ii) (PIYTD + PI – W) × 0.04
W = The greater of:
(i) PIYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
To determine second additional QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year – only for employees paid by commission
C2 = The lesser of:
(i) $184.00 × (PM/12) – [(D2 × (0.04/0.04)) + D2Q];
(ii) (GYTD + G – W) × 0.04
W = The greater of:
(i) GYTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
Chapter 7 – Employment Insurance (EI)
As the formula to calculate the employment insurance premiums and the explanatory variables have not changed, they have not been reproduced.
Chapter 8 – Rates and amounts
This chapter only includes the table to be impacted by the CPP Regulation Amendment. Based on the 2023 YMPE, the theoretical YAMPE and maximum contribution were calculated, and are used for illustrative purposes only.
| CPP/QPP | Year's Maximum Pensionable Earnings (YMPE) | Year’s Additional Maximum Pensionable Earnings (YAMPE) | First Additional Employee and Employer Contribution Rate | Maximum First Additional Employee and Employer Contribution | Second Additional Employee and Employer Contribution Rate | Maximum Second Additional Employee and Employer Contribution* | Year’s Additional Maximum Pensionable Earnings (YAMPE) Before Rounding |
|---|---|---|---|---|---|---|---|
| CPP (Canada except QC) | 66,600.00 | 71,200.00 | 0.0100 | 631.00 | 0.04 | 184.00 | 71,262.00 |
| QPP (QC) | 66,600.00 | 71,200.00 | 0.0100 | 631.00 | 0.04 | 184.00 | 71,262.00 |
* All self-employed workers pay both the employer and employee portions of CPP contributions.
Appendix 2: Example Scenarios
This appendix provides example scenarios that illustrate the impact of the second additional CPP contribution formulas. Note that the theoretical 2023 rates and amounts are used for illustrative purposes.
Note:
Rate ratios imbedded in the formulas are part of the calculation and should not be rounded. The results from formulas are rounded as each parenthesis is resolved (rounding rules for CPP exemption and CPP contribution apply).
Scenario 1
An employee is earning $3,000 per pay period. There are 26 pay periods in the year since this employee is getting paid biweekly.
C, C2, and F5 calculations for the 23rd pay period are as follows:
PI = $3,000.00
PIYTD = $66,000.00
PM = 12
P = 26
D = $3,750.78*
D2 = $0*
* Please see Table 1 for CPP contributions and year-to-date contributions for each pay period.
C = The lesser of:
(i) $3,754.45 × (PM/12) – D
= $3,754.45 × (12/12) – $3,750.78
= $3.67
(ii) 0.0595 × [PI – ($3,500.00/P)]
= 0.0595 × [$3,000.00 – ($3,500.00/26)]
= $170.49
C = $3.67
C2 = The lesser of:
(i) $184.00 × (PM/12) – D2
= $184.00 × (12/12) – 0
= $184.00
(ii) (PIYTD + PI – W) × 0.04
= ($66,000.00 + $3,000.00 – $66,600.00) × 0.04
= $96.00
C2 = $96.00
W = The greater of:
(i) PIYTD;
= $66,000.00
(ii) YMPE × (PM/12)
= $66,600.00 × (12/12)
= $66,600.00
W = $66,600.00
F5 = C × (0.0100/0.0595) + C2
= $3.67 × (0.0100/0.0595) + $96.00
= $96.62
| Month | Pay Period | D | C | D2 | C2 | F5 |
|---|---|---|---|---|---|---|
|
Jan. |
1 |
$ 170.49 |
$ 28.65 |
|||
| Jan. |
2 |
$ 170.49 |
$ 170.49 |
$ 28.65 |
||
|
Feb. |
3 |
$ 340.98 |
$ 170.49 |
$ 28.65 |
||
| Feb. |
4 |
$ 511.47 |
$ 170.49 |
$ 28.65 |
||
|
Mar. |
5 |
$ 681.96 |
$ 170.49 |
$ 28.65 |
||
| Mar. |
6 |
$ 852.45 |
$ 170.49 |
$ 28.65 |
||
|
Mar. |
7 |
$ 1,022.94 |
$ 170.49 |
$ 28.65 |
||
| Apr. |
8 |
$ 1,193.43 |
$ 170.49 |
$ 28.65 |
||
|
Apr. |
9 |
$ 1,363.92 |
$ 170.49 |
$ 28.65 |
||
| May |
10 |
$ 1,534.41 |
$ 170.49 |
$ 28.65 |
||
|
May |
11 |
$ 1,704.90 |
$ 170.49 |
$ 28.65 |
||
| Jun. |
12 |
$ 1,875.39 |
$ 170.49 |
$ 28.65 |
||
|
Jun. |
13 |
$ 2,045.88 |
$ 170.49 |
$ 28.65 |
||
| Jul. |
14 |
$ 2,216.37 |
$ 170.49 |
$ 28.65 |
||
|
Jul. |
15 |
$ 2,386.86 |
$ 170.49 |
$ 28.65 |
||
| Aug. |
16 |
$ 2,557.35 |
$ 170.49 |
$ 28.65 |
||
|
Aug. |
17 |
$ 2,727.84 |
$ 170.49 |
$ 28.65 |
||
| Aug. |
18 |
$ 2,898.33 |
$ 170.49 |
$ 28.65 |
||
|
Sept. |
19 |
$ 3,068.82 |
$ 170.49 |
$ 28.65 |
||
| Sept. |
20 |
$ 3,239.31 |
$ 170.49 |
$ 28.65 |
||
|
Oct. |
21 |
$ 3,409.80 |
$ 170.49 |
$ 28.65 |
||
| Oct. |
22 |
$ 3,580.29 |
$ 170.49 |
$ 28.65 |
||
|
Nov. |
23 |
$ 3,750.78 |
$ 3.67 |
$ 96.00 |
$ 96.62 |
|
| Nov. |
24 |
$ 3,754.45 |
$ 96.00 |
$ 88.00 |
$ 88.00 |
|
|
Dec. |
25 | $ 3,754.45 | $ 184.00 | |||
|
Dec. |
26 | $ 3,754.45 | $ 184.00 | |||
| Total Contributions | $ 3,754.45 |
$ 184.00 |
Scenario 2
An employee is earning $3,000 per pay period. There are 24 pay periods in the year since this employee is getting paid semimonthly. The province of employment is Ontario until the 12th pay period. From the 13th pay period, the province of employment is Quebec until the 23rd pay period. For the 24th pay period, the province of employment is Ontario.
C2, and F5 calculations for the 24th period are as follows:
PI = $3,000.00
PIYTD = $69,000.00
PM = 12
P = 24
DQ = $1,846.44*
D = $2,037.84*
D2Q = $96.00*
D2 = $0*
* Please see Table 2 for CPP and QPP contributions, and year-to-date contributions for each pay period.
C2 = The lesser of:
(i) $184.00 × (PM/12) – [(D2Q × (0.04/0.04)) + D2]
= $184.00 × (12/12) – [($96.00 × (0.04/0.04)) + $0]
= $88.00
(ii) (PIYTD + PI – W) × 0.04
= ($69,000.00 + $3,000.00 – $69,000.00) × 0.04
= $120.00
C2 = $88.00
W = The greater of:
(i) PIYTD;
= $69,000.00
(ii) YMPE × (PM/12)
= $66,600.00 × (12/12)
= $66,600.00
W = $69,000.00
F5 = C × (0.0100/0.0595) + C2
= $0 × (0.0100/0.0595) + $88.00
= $88.00
| Month | Province | Pay Period | D | DQ | C | D2 | D2Q | C2 | F5 |
|---|---|---|---|---|---|---|---|---|---|
| Jan. | ON | 1 | $ 169.82 | $ 28.54 | |||||
| Jan. | ON | 2 | $ 169.82 | $ 169.82 | $ 28.54 | ||||
| Feb. | ON | 3 | $ 339.64 | $ 169.82 | $ 28.54 | ||||
| Feb. | ON | 4 | $ 509.46 | $ 169.82 | $ 28.54 | ||||
| Mar. | ON | 5 | $ 679.28 | $ 169.82 | $ 28.54 | ||||
| Mar. | ON | 6 | $ 849.10 | $ 169.82 | $ 28.54 | ||||
| Apr. | ON | 7 | $ 1,018.92 | $ 169.82 | $ 28.54 | ||||
| Apr. | ON | 8 | $ 1,188.74 | $ 169.82 | $ 28.54 | ||||
| May | ON | 9 | $ 1,358.56 | $ 169.82 | $ 28.54 | ||||
| May | ON | 10 | $ 1,528.38 | $ 169.82 | $ 28.54 | ||||
| Jun. | ON | 11 | $ 1,698.20 | $ 169.82 | $ 28.54 | ||||
| Jun. | ON | 12 | $ 1,868.02 | $ 169.82 | $ 28.54 | ||||
| Jul. | QC | 13 | $ 2,037.84 | $ 182.67 | $ 28.54 | ||||
| Jul. | QC | 14 | $ 2,037.84 | $ 182.67 | $ 182.67 | $ 28.54 | |||
| Aug. | QC | 15 | $ 2,037.84 | $ 365.34 | $ 182.67 | $ 28.54 | |||
| Aug. | QC | 16 | $ 2,037.84 | $ 548.01 | $ 182.67 | $ 28.54 | |||
| Sept. | QC | 17 | $ 2,037.84 | $ 730.68 | $ 182.67 | $ 28.54 | |||
| Sept. | QC | 18 | $ 2,037.84 | $ 913.35 | $ 182.67 | $ 28.54 | |||
| Oct. | QC | 19 | $ 2,037.84 | $ 1,096.02 | $ 182.67 | $ 28.54 | |||
| Oct. | QC | 20 | $ 2,037.84 | $ 1,278.69 | $ 182.67 | $ 28.54 | |||
| Nov. | QC | 21 | $ 2,037.84 | $ 1,461.36 | $ 182.67 | $ 28.54 | |||
| Nov. | QC | 22 | $ 2,037.84 | $ 1,644.03 | $ 182.67 | $ 28.54 | |||
| Dec. | QC | 23 | $ 2,037.84 | $ 1,826.70 | $ 19.74 | $ 96.00 | $ 99.08 | ||
| Dec. | ON | 24 | $ 2,037.84 | $ 1,846.44 | $ 96.00 | $ 88.00 | $ 88.00 | ||
|
Total Combined Contributions |
$ 3,884.28* | $ 184.00** |
* CPP contributions: $2,037.84, QPP contributions: $1,846.44
**Second additional CPP contributions: $88.00, Second additional QPP contributions: $96.00
Scenario 3
An employee is earning $4,000 per pay period and turns 18 in March. There are 24 pay periods in the year since these employees are getting paid semimonthly. The province of employment is Ontario.
C2 and F5 calculations for period 20 for the employees are as follows:
PI = $4,000.00
PIYTD = $52,000.00
PM = 9
P = 24
D2 = $82.00*
* Please see Table 3 for CPP contributions and year-to-date contributions for each pay period.
C2 = The lesser of:
(i) $184.00 × (PM/12) – D2;
= $184.00 × (9/12) – $82.00;
= $56.00
(ii) (PIYTD + PI – W) × 0.04
= ($52,000 +$4,000 – $52,000) × 0.04
= $160.00
C2 = $56.00
W = The greater of:
(i) PIYTD;
= $52,000.00
(ii) YMPE × (PM/12)
= $66,600.00 × (9/12)
= $49,950.00
W = $52,000.00
F5 = C × (0.0100/0.0595) + C2
= $0 × (0.0100/0.0595) + $56.00
= $56.00
| Month | Pay Period | D | C | D2 | C2 | F5 |
|---|---|---|---|---|---|---|
|
Jan. |
1 |
|||||
|
Jan. |
2 |
|||||
|
Feb. |
3 |
|||||
|
Feb. |
4 |
|||||
|
Mar. |
5 |
|||||
|
Mar. |
6 |
|||||
|
Apr. |
7 |
$ 229.32 |
$ 38.54 |
|||
|
Apr. |
8 |
$ 229.32 |
$ 229.32 |
$ 38.54 |
||
|
May |
9 |
$ 458.64 |
$ 229.32 |
$ 38.54 |
||
|
May |
10 |
$ 687.96 |
$ 229.32 |
$ 38.54 |
||
|
Jun. |
11 |
$ 917.28 |
$ 229.32 |
$ 38.54 |
||
|
Jun. |
12 |
$ 1,146.60 |
$ 229.32 |
$ 38.54 |
||
|
Jul. |
13 |
$ 1,375.92 |
$ 229.32 |
$ 38.54 |
||
|
Jul. |
14 |
$ 1,605.24 |
$ 229.32 |
$ 38.54 |
||
|
Aug. |
15 |
$ 1,834.56 |
$ 229.32 |
$ 38.54 |
||
|
Aug. |
16 |
$ 2,063.88 |
$ 229.32 |
$ 38.54 |
||
|
Sept. |
17 |
$ 2,293.20 |
$ 229.32 |
$ 38.54 |
||
|
Sept. |
18 |
$ 2,522.52 |
$ 229.32 |
$ 38.54 |
||
|
Oct. |
19 |
$ 2,751.84 |
$ 64.00 |
$ 82.00 |
$ 92.76 |
|
|
Oct. |
20 |
$ 2,815.84 |
$ 82.00 |
$ 56.00 |
$ 56.00 |
|
|
Nov. |
21 |
$ 2,815.84 |
$ 138.00 |
|||
|
Nov. |
22 |
$ 2,815.84 |
$ 138.00 |
|||
|
Dec. |
23 |
$ 2,815.84 |
$ 138.00 |
|||
|
Dec. |
24 |
$ 2,815.84 |
$ 138.00 |
|||
|
Total Contributions |
$ 2,815.84 |
$ 138.00 |
Page details
- Date modified:
- 2023-10-12