Income Tax Regulations

102 (1) Except as otherwise provided in this Part, the amount to be deducted or withheld by an employer

• (a) from any payment of remuneration (in this subsection referred to as the payment) made to an employee in his taxation year where he reports for work at an establishment of the employer in a province, in Canada beyond the limits of any province or outside Canada, and

• (b) for any pay period in which the payment is made by the employer

shall be determined for each payment in accordance with the following rules:

• (c) an amount that is a notional remuneration for the year in respect of

  • (i) a payment to the employee, and

  • (ii) the amount, if any, of gratuities referred to in paragraph (a.1) of the definition remuneration in subsection 100(1)

  is deemed to be the amount determined by the formula

  A × B

  where

  A

  is the amount that is deemed for the purpose of this paragraph to be the mid-point of the applicable range of remuneration for the pay period, as provided in Schedule I, in which falls the total of

  • (A) the payment referred to in subparagraph (i) made in the pay period, and

  • (B) the amount of gratuities referred to in subparagraph (ii) declared by the employee for the pay period, and

  B

  is the maximum number of such pay periods in that year;

• (d) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purposes of this subsection and, if the employee is resident in Canada at the time of the payment, the employee’s personal credits for the year are deemed to be the mid-point of the range of amounts of personal credits for a taxation year as provided for in section 2 of Schedule I;

• (e) an amount (in this subsection referred to as the notional tax for the year) shall be computed in respect of that employee by

  • (i) calculating the amount of tax payable for the year, as if that amount were calculated under subsection 117(2) of the Act and adjusted annually pursuant to section 117.1 of the Act, on the amount determined in accordance with paragraph (c) as if that amount represented the employee’s amount taxable for that year,

  and deducting the aggregate of

  • (ii) the amount determined in accordance with paragraph (d) multiplied by the appropriate percentage for the year,

  • (iii) an amount equal to

    • (A) the amount determined in accordance with paragraph (c) multiplied by the employee’s premium rate for the year under the Employment Insurance Act, not exceeding the maximum amount of the premiums payable by the employee for the year under that Act,

    multiplied by

    • (B) the appropriate percentage for the year, and

  • (iv) an amount equal to

    • (A) the product obtained when the difference between the amount determined in accordance with paragraph (c) and the amount determined under section 20 of the Canada Pension Plan for the year is multiplied by the employee’s contribution rate for the year under the Canada Pension Plan or under a provincial pension plan as defined in subsection 3(1) of that Act, not exceeding the maximum amount of such contributions payable by the employee for the year under the plan,

    multiplied by

    • (B) the appropriate percentage for the year;

• (f) the amount determined in accordance with paragraph (e) shall be increased by, where applicable, the tax as determined under subsection 120(1) of the Act;

• (g) where the amount of notional remuneration for the year is income earned in the Province of Quebec, the amount determined in accordance with paragraph (e) shall be reduced by an amount that is the aggregate of

  • (i) the amount that is deemed to be paid under subsection 120(2) of the Act as if there were no other source of income or loss for the year, and

  • (ii) the amount by which the amount referred to in subparagraph (i) is increased by virtue of section 27 of the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act; and

• (h) [Repealed, SOR/92-667, s. 1]

• (i) the amount to be deducted or withheld shall be computed by

  • (i) dividing the amount of the notional tax for the year by the maximum number of pay periods for the year in respect of the appropriate pay period, and

  • (ii) rounding the amount determined under subparagraph (i) to the nearest multiple of five cents or, if such amount is equidistant from two such multiples, to the higher multiple.

(2) Where an employee has elected pursuant to subsection 107(2) and has not revoked such election, the amount to be deducted or withheld by the employer from any payment of remuneration (in this subsection referred to as the payment) that is

• (a) a payment in respect of commissions or is a combined payment of commissions and salary or wages, or

• (b) a payment in respect of salary or wages where that employee receives a combined payment of commissions and salary or wages,

made to that employee in his taxation year where he reports for work at an establishment of the employer in a province, in Canada beyond the limits of any province or outside Canada, shall be determined for each payment in accordance with the following rules:

• (c) an employee’s estimated annual taxable income shall be determined by using the formula

  A - B

  where

  A

  is the amount of that employee’s total remuneration in respect of the year as recorded by the employee on the form referred to in subsection 107(2), and

  B

  is the amount of that employee’s expenses in respect of the year as recorded by that employee on that form;

• (d) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purposes of this subsection and if the employee is resident in Canada at the time of the payment, the employee’s personal credits for the year shall be the total claim amount as recorded by that employee on the return for the year referred to in subsection 107(1);

• (e) an amount (in this subsection referred to as the notional tax for the year) shall be calculated in respect of that employee by using the formula

  C - [(D + E + F) × G] + H - I

  where

  C

  is the amount of tax payable for the year, calculated as if that amount of tax were computed under subsection 117(2) of the Act and adjusted annually pursuant to section 117.1 of the Act, on the amount determined under paragraph (c) as if that amount represented the employee’s amount taxable for that year,

  D

  is the amount determined in accordance with paragraph (d),

  E

  is the amount determined in the description of A in paragraph (c) multiplied by the employee’s premium rate for the year under the Employment Insurance Act, not exceeding the maximum amount of the premiums payable by the employee for the year under that Act,

  F

  is the amount determined in the description of A in paragraph (c) less the amount for the year determined under section 20 of the Canada Pension Plan multiplied by the employee’s contribution rate for the year under that Act or under a provincial pension plan as defined in section 3 of that Act, not exceeding the maximum amount of such contributions payable by the employee for the year under the plan,

  G

  is the appropriate percentage for the year,

  H

  is, where applicable, the tax as determined under subsection 120(1) of the Act,

  I

  is, where the amount of total remuneration for the year is income earned in the Province of Quebec, an amount equal to the aggregate of

  • (i) the amount that would be deemed to have been paid under subsection 120(2) of the Act with respect to the employee if the notional tax for the year for the employee were determined without reference to the elements H, I and J in this formula and if that tax were that employee’s tax payable under Part I of the Act for that year, as if there were no other source of income or loss for the year, and

  • (ii) the amount by which the amount referred to in subparagraph (i) is increased by virtue of section 27 of the Federal-Provincial Fiscal Arrangements Act;

• (f) the employee’s notional rate of tax for a year is calculated by dividing the amount determined under paragraph (e) by the amount referred to in the description of A in paragraph (c) in respect of that employee and expressed as a decimal fraction rounded to the nearest hundredth, or where the third digit is equidistant from two consecutive one-thousandths, to the higher thereof;

• (g) the amount to be deducted or withheld in respect of any payment made to that employee shall be determined by multiplying the payment by the appropriate decimal fraction determined pursuant to paragraph (f).

• (h) [Repealed, SOR/2001-221, s. 2]

(3) [Repealed, SOR/89-508, s. 2]

(4) [Repealed, SOR/81-471, s. 3]

(5) Notwithstanding subsections (1) and (2), no amount shall be deducted or withheld in the year by an employer from a payment of remuneration to an employee in respect of commissions earned by the employee in the immediately preceding year where those commissions were previously reported by the employer as remuneration of the employee in respect of that year on an information return.

(6) Despite subsection (1), no amount shall be deducted or withheld in the year by an employer from an amount determined in accordance with subparagraph 110(1)(f)(iii), (iv) or (v) of the Act.