Northwest Territories Payroll Tax

Effective January 1, 2005, the Northwest Territories Payroll Tax is 2%. 

All employers must register within 21 days after the employer first pays remuneration to an employee.

Eligibility Criteria

Every employer who pays an employee for work performed in the Northwest Territories.

Summary

Acknowledgement of the Application for Registration

Employers will be notified in writing of their assigned registration number, the effective date of their registration, and their reporting period requirement.

Remittance Returns

The Government of the Northwest Territories will send the required remittance return to every employer 30 days before the employer must remit the tax.  Employers are required to ensure that the tax is deducted, that a return is filed, and that the tax payable is remitted on or before the 20th day of the month following the end of the reporting period.

Reporting Periods

Reporting periods can be annually, semi-annually, quarterly,monthly or seasonally depending on the estimated total amount of the payroll.

Employer's Responsibility

All employers must meet the following requirements of the Northwest Territories Payroll Act:

• deduct, at source, the 2% payroll tax from every employee to whom the employer pays remuneration.  The deduction must be made at the time of payment.  No tax is payable by an employee who normally works outside the Northwest Territories and does not earn more than $5,000 in the Northwest Territories.  If the employee earns more than $5,000 in a calendar year in the Northwest Territories, tax is payable on the full amount of remuneration earned while in the Northwest Territories. If an employee normally works in the INWT (50% of the time), then all remuneration is taxable regardless of where it is earned with the exception of earnings in Nunavut.

• remit the amounts deducted to the Government of the Northwest Territories as required by the regulations.  A reporting period will be determined for each employer at the time of registration.

• report annually the name and social insurance number of each employee paid during the year, the total amount of remuneration paid to each employee and the amount of payroll tax withheld from each employee, for all employees to whom the payroll tax applies.  This return must be completed and filed on or before February 28th of the year following the year in which the remuneration was paid.

Employers or collectors of payroll tax, who withhold deductions are considered to hold these deductions in trust for the Government of the Northwest Territories.

How will the Tax be Calculated

The payroll tax is 2% of gross remuneration for each employee.  "Remuneration" is defined in the Payroll Tax Act, 1993, includes all payments and the value of all benefits and allowances received by an individual from an office or from employment.  Payments or benefits which are not related to an office or employment (such as dividends, students or government grant) are not taxable.

Specifically, the tax is applied to any amount referred to in subsection 5(1) or sections 6 and 7 of the Income Tax Act (Canada), as follows:

Subsection 5(1) includes salary, wages, bonuses, commissions and honoraria.

Section 6 includes the value of board and lodging, northern allowances, vacation travel assistance, personal or living expenses, gifts in cash or kind, interest free or low interest loans, products provided free or at any unreasonable low cost, tuition fees, management fees, profit sharing plans, employer supplied automobile, employment insurance benefits (excluding Unemployment Insurance benefits), employee benefit plan and deferred salary plans.

Section 7 includes employee stock options.

Penalties and Interest

Employers who do not register, deduct or remit as required may be assessed a penalty and interest or be prosecuted.

Registration packages and additional information can be obtained by contacting the Department of Finance.