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Q & A: Taxation for Employees

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Q. I’m currently a french resident, I’m considering applying for permanent resident status under the skilled worker program. My question is about the company => employee => taxes cash flow. To make my question clear, let me expose how this works in Europe:

One negotiates a gross salary. From this amount the company automatically pays a certain amount to different governmental organizations in the employee’s behalf. This is what they call “charge social” and it corresponds to social insurance, basic and extra medical insurance, unemployment funds, etc. This is about 22% of one’s gross income. What rests, is your taxable income, for which one pays fiscal taxes.

My question is, what is the money flow in Canada? Does the employee get the gross amount s/he negotiated, does the company pay certain taxes in the employee’s behalf?

Answer: You have asked as to how source deductions are handled in Canada.

In Canada, employers are required to withhold federal and Provincial income taxes based on your annual salary net of certain estimated credits and tax deductions. To the extent withholdings made by the employer exceed your income tax liability for the year, you may be entitled to a refund when you file your annual income tax return. On the other hand if your tax for the year exceeds the amounts withheld at source, you may owe tax for the year when you file your annual income tax return.

Employers must also withhold other non-tax amounts as follows:

– Canada (or Quebec) Pension Plan

– Employment Insurance Contributions:

Besides the employee contributions, the employer contributes to the Canada Pension Plan, Employment Insurance Contributions and Health Services Fund.

The nature of this facility is to provide a general response to a general question. Under no circumstances should anyone act on this information without obtaining analysis and counsel from a qualified advisor with respect to the specific situation.

Phillip Nadler, CA
Richter Usher & Vineberg