Taxable Income

According to the Canada Revenue Agency, employers must deduct income tax at source from the following types of remuneration:

  • Salary, wages, bonus, commissions, taxable stock option benefit or other remuneration (including payroll advances or earnings advances), overtime, and wages in lieu of termination notice.
  • Most cash/non cash taxable benefits and allowances including certain rent-free and low-rent housing, the value of board and lodging (other than an exempt allowance paid to an employee at a special work site or remote work location), interest-free and low-interest loans, personal use of a motor vehicle that you as the employer own or lease; allowances you pay to employees to use his or her own vehicle, holiday trips, gifts, subsidized meals or any other taxable benefit you pay for or provide to your employee.
  • Honorariums from employment or office, a share of profit that an employer paid, incentive payments, director's fees, management fees, fees paid to board or committee members, and executor's, liquidator's, or administrator's fees earned to administer an estate (as long as the executor, liquidator, or administrator does not act in this capacity in the regular course of business).Certain tips and gratuities received for services performed.
  • Remuneration received while on vacation, furlough, sabbatical, or sick leave, or for lost-time pay from a union, vacation pay, payments received under a supplementary unemployment benefit plan (SUBP) that does not qualify as a SUBP under the Income Tax Act (for example, employer paid maternity and parental top-up amounts), and payments for sick leave credits and accrued vacation.
  • Wage-loss benefits that an employee receives from a wage-loss replacement plan (these benefits are taxable but you may not have to deduct tax).
  • Pensions, retiring allowances (also called severance pay), certain amounts received for wrongful dismissal, and death benefits.
  • Distribution from a retirement compensation arrangement (RCA).
  • Additional amounts that you as an employer pay while participating in a job creation project that HRSDC has approved.
  • Benefits under the Employment Insurance Act.

                Note: Salary or wages include payroll advances and any other benefits and allowances you should add to the pay periods in which it is received or enjoyed.