• Principal changes for 2006
• General information – Source deductions and contributions
• How to obtain an identification number
• Québec Source Deductions
• Source deductions of support
• Contributions
• Remittances of source deductions and contributions
• Remittance schedules
• Payment methods
• Direct deposit of refunds
• Filing the Summary of Source Deductions and Employer ...
• Filing RL slips
• Documents

Principal changes for 2006

Source Deductions Return (form TP-1015.3-V)

Changes have been made on form TP-1015.3-V with respect to the following amounts:

• amount for a dependant with a physical or mental infirmity; 
• amount respecting dependent children engaged in full-time studies; 
• amount for a severe and prolonged impairment in mental or physical functions (formerly the amount respecting a severe and prolonged mental or physical impairment).

Amount for a dependant with a physical or mental infirmity

A new refundable tax credit for caregivers of adults comes into effect in 2006. The new credit replaces, among other things, the amount of $3,780 that was granted respecting a dependant of full age with a physical or mental infirmity. Consequently, the amount for a dependant with a physical or mental infirmity does not appear on version 2006-01 of form TP-1015.3-V because this amount is no longer taken into account in determining an individual's deduction code. If you pay remuneration as an employer or a payer, it is important to notify all your employees and beneficiaries of these changes.

They can then complete version 2006-01 of form TP-1015.3-V if they claimed an amount for a dependant with a physical or mental infirmity on the last TP-1015.3-V form they completed for you.

Amount respecting dependent children engaged in full-time studies

The tax system provides a non-refundable tax credit for individuals with one or more dependent children engaged in vocational training at the secondary level or studies at the post-secondary level. An amount of $1,780 is granted to the individual for each term completed by the child, subject to a maximum of two terms per year.

The individual may claim the amount if the child pursues studies on a full-time basis, that is, if the child devotes at least nine hours a week to courses or work required by his or her educational program.

Please note, however, that this measure has been relaxed for 2005 and subsequent years regarding a child with a major functional deficiency within the meaning of the Regulation respecting financial assistance for educational expenses.

The child is considered to be engaged in full-time studies if

• he or she is pursuing studies on a part-time basis because of the deficiency (that is, the child would be engaged in full-time studies were it not for the deficiency); and
• he or she receives at least 20 hours of instruction per month in his or her educational program.

If these conditions are met, the individual may enter an amount on form TP-1015.3-V respecting dependent children engaged in full-time studies. Individuals who wish to take advantage of these new measures are required to complete version 2006-01 of form TP-1015.3-V.

Consequently, it is important to notify all your employees and beneficiaries of these measures. The individuals concerned can then complete version 2006-01 of form TP-1015.3-V to claim the amount respecting dependent children engaged in full-time studies.

Amount for a severe and prolonged impairment in mental or physical functions (formerly the amount respecting a severe and prolonged mental or physical impairment)

The amount for a severe and prolonged impairment in mental or physical functions has been increased from $2,200 to $2,250 for 2006. Individuals who entered an amount on the last TP-1015.3-V form they completed for you can claim the increase if you follow the instructions below.

If you can identify the individuals concerned, it is not necessary for them to complete version 2006-01 of form TP-1015.3-V to claim the $50 increase. Simply make the following adjustments when using the mathematical formulas or table TP-1015.TI-V.

If you use the mathematical formulas, you must add $50 to variable E2 to calculate the individual's income tax withholdings.

If you use table TP-1015.TI-V, you have no adjustment to make if the last TP-1015.3-V form that the individual completed for you was for 2003 or a subsequent year. If this is the case, the amount for a severe and prolonged impairment in mental or physical functions (and the $50 increase) is taken into account in the amounts used to determine the deduction codes. However, if the last TP-1015.3-V form that the individual completed for you dates from before 2003, the amount for a severe and prolonged impairment in mental or physical functions reduces the remuneration subject to income tax; in this case, you must use $2,250 for your calculation rather than $2,200.

If you cannot identify the individuals concerned, notify all your employees and beneficiaries of these changes. Individuals who wish to claim the increase can then complete version 2006-01 of form TP-1015.3-V. You will not have to make the adjustments described in the three previous paragraphs.

The new amounts, shown on form TP-1015.3-V, used to determine deduction codes for 2006 are shown in the table below. The figures for 2005 are provided for information purposes.

Indexation of thresholds for the three income tax brackets

For 2006, the income tax rates applicable to the three income tax brackets remain at 16%, 20% and 24%. However, the thresholds that determine the bracket in which an individual's taxable income is situated have been indexed as follows:

• The 16% rate applies to taxable income of up to $28,710 (the threshold was previously $28,030). 
• The 20% rate applies to taxable income over $28,710 but not over $57,430 (the threshold was previously $56,070). 
• The 24% rate applies to taxable income over $57,430.

Bonuses and retroactive pay

You are required to withhold income tax from an amount you pay as a bonus or retroactive pay. For amounts paid in 2006, the threshold that determines the method to be used to calculate the income tax withholding has been raised from $11,650 to $11,950.

RRSPs and RRIFs

Since 2005, the following single payments have been subject to an income tax withholding of 16%, regardless of the amount of the payment:

• a payment from an RRSP; 
• the portion of a payment from a RRIF that exceeds the minimum amount.

However, the following types of payment are still not subject to income tax withholdings:

• a single payment that is transferred directly to another registered plan; 
• a withdrawal of up to $20,000 under the HBP; 
• a withdrawal of up to $10,000 per year (to a maximum of $20,000) under the LLP; 
• an amount that can reasonably be deducted as a refund of undeducted RRSP contributions.

New indemnities paid to Canadian Forces members and veterans

The Canadian Forces Members and Veterans Re-Establishment and Compensation Act (Statutes of Canada) provides for the payment of various indemnities to Canadian Forces members, veterans and their families. Certain of these indemnities are to be treated as employment income:

• earnings loss benefits; 
• supplementary retirement benefits; 
• permanent impairment allowances.

Please note that these indemnities are not subject to

• employee and employer QPP contributions; 
• employee and employer Québec parental insurance plan premiums.

New 6% deduction for employment income (maximum $500)

Effective 2006, an employee can claim a new deduction equal to the lower of the following amounts:

• 6% of the employee's employment income for the year; 
• $500.

If you use table TP-1015.TI-V, you do not have to take the new deduction into account in calculating remuneration subject to source deductions of income tax; it is already included in the table.

However, if you are paying remuneration as a payer, the beneficiary of the remuneration is not entitled to the 6% deduction for employment income. To ensure that the beneficiary's source deductions are not too low, add the additional income tax provided for in the adjustment column (column Y) of table TP-1015.TI-V to the income tax that you must withhold based on the beneficiary's deduction code.

If you use the mathematical formulas, see section 13.2.3 of the Guide for Employers: Source Deductions and Contributions (TP-1015.G-V). Changes have been made to the mathematical formulas to take into account the new 6% deduction for employment income.

Basic salary or wages used for calculating employer contributions and compensation tax

In the Budget Speech of April 21, 2005, the Minister of Finance announced the introduction into legislation of the concept "basic salary paid in regard to an individual." This amount serves as a starting point for calculating your employer contributions and compensation tax. Consequently, as of 2006, the following amounts will be subject to the contribution to the financing of the CNT:

• an amount paid to a trustee of an employee trust; 
• an amount paid to a custodian of an employee benefit plan; 
• an amount paid to a trustee of a profit-sharing plan.

You will not find the term "basic salary paid in regard to an individual" elsewhere in this guide because it corresponds to our term "salary or wages," together with the amount paid to a trustee of an employee trust, the amount paid to a custodian of an employee benefit plan and the amount paid to a trustee of a profit-sharing plan.

Maximum pensionable earnings (QPP)

Maximum pensionable earnings for the purposes of the Québec Pension Plan (QPP) have been increased from $41,100 to $42,100 for 2006. The maximum annual contribution has therefore been increased from $1,861.20 to $1,910.70.

Québec parental insurance plan premiums

On March 1, 2005, the Québec government and the federal government signed a final agreement with respect to the Québec parental insurance plan. The plan, which comes into effect on January 1, 2006, will be administered by the Ministère de l'Emploi et de la Solidarité sociale. Revenu Québec is responsible for collecting Québec parental insurance plan premiums.

Under this agreement, the federal government must reduce the amount of employment insurance premiums paid by Québec employers and workers so that the Québec government can collect premiums under the new Québec parental insurance plan.

Québec parental insurance plan premiums are payable both by the employer and the employee. The plan provides for the payment of benefits to an employee who takes a maternity, paternity, adoption or parental leave during which he or she sustains an interruption of earnings. You and the employee are required to pay premiums until the insurable salary or wages paid to the employee during the year reaches the maximum insurable earnings for the year, that is, $57,000 in 2006.

You must withhold employee premiums on the insurable salary or wages that you pay for each pay period using

• the Table for Québec Parental Insurance Plan Premiums (TP-1015.TA-V); or 
• the mathematical formula in section 13.5.1 of the Guide for Employers: Source Deductions and Contributions (TP-1015.G-V).

You can determine your employer premium for each pay period using

• the Table for Québec Parental Insurance Plan Premiums (TP-1015.TA-V); or 
• the mathematical formula in section 13.5.2 of the Guide for Employers: Source Deductions and Contributions (TP-1015.G-V).

You must remit employee and employer premiums to the Québec parental insurance plan along with your income tax withholdings, QPP contributions and contribution to the health services fund, using the remittance form for your source deductions and employer contributions.

Consult Chapter 7 of the guide for information on how to correctly meet your tax obligations with respect to Québec parental insurance plan premiums.

Québec parental insurance plan premiums, QPP contributions, employment insurance premiums and union dues are not to be subtracted from an employee's gross remuneration when calculating his or her remuneration subject to source deductions of income tax.

Contribution to the health services fund – Revocation of a certificate for a temporary exemption

To claim an exemption from the contribution to the health services fund, a corporation must obtain a certificate from a designated organization. This requirement also applies for the purposes of certain tax credits for businesses and other tax benefits.

If a certificate is revoked, Revenu Québec can in some cases levy a special tax in order to recover the amount unduly received by the business.

Since April 22, 2005, a special tax has applied in all cases in which a certificate is revoked on or after that date by a designated organization. Consequently, Revenu Québec can at any time and under any circumstances recover the income tax or contribution to the health services fund payable.

This measure also applies to foreign employees who are entitled to a five-year tax exemption. These employees must pay a special tax if the certificate granting the exemption is revoked. Revenu Québec can then recover, at any time, the income tax that was to have been paid by the employees.

Maximum remuneration subject to the contribution to the financing of the CNT

In 2005, the portion of the remuneration that exceeded $56,000 was not subject to the payment of a contribution to the financing of the CNT. This amount is increased to $57,000 for 2006.

Mathematical formulas

The new mathematical formulas for calculating Québec parental insurance plan premiums are provided in Chapter 13 of the Guide for Employers: Source Deductions and Contributions (TP-1015.G-V). Changes to the other mathematical formulas are also included in Chapter 13.