Employers in all provinces except Québec are responsible for deducting CPP contributions from employees
who are 18 to 69 years old, unless the employee is collecting a CPP retirement
or disability pension. The employer pays the same premium as the
employee. Self-employed people must pay both the employee and employer
portions of CPP premiums. The amount payable is calculated on the
self-employed person's personal income tax return. See our article
regarding the changes that
have been proposed for rules on when CPP contributions must be
deducted.
The rules for employers in Québec, who must deduct
Québec Pension Plan (QPP) contributions instead of CPP contributions, are
generally the same, except that QPP contributions must be withheld from
employees even if the employee is 70 or over, or receives a retirement
pension under the CPP or the QPP.
There are some types of employment and other payments from which CPP
or QPP contributions do not have to be deducted. Canada Revenue Agency
(CRA) information on employment income not subject to CPP:
CRA also has a section titled CPP/EI
Explained, which talks about different types of earnings and how
they are treated for CPP and EI purposes. It includes
information on
tips and gratuities
status of workers placed by employment agencies
real estate agents
Heavy machinery operators
workers engaged in construction
workers engaged in fishing
Revenu Québec information re employment not subject to
QPP:
When a person has both employment and
self-employment earnings, the total CPP or QPP contribution paid
will be based on total employment plus self-employment
earnings. See the following example of the
calculation, for 2008, as it would be calculated on
Schedule 8 of the personal tax return.
Pensionable net
self-employment earnings
$20,000
Employment earnings
not shown on a T4 slip on which you elect to pay
additional CPP contributions
Subtotal (zero if
negative)
$20,000
Pensionable
employment earnings from T4
35,000
Total pensionable
earnings
$55,000
Less basic
exemption
-3,500
Earnings subject to
contribution (maximum $44,900 - 3,500 = $41,400)
$41,400
CPP contributions
@9.9%
4,098.60
Less contributions paid through
employment (from T4)
$1,559.25
x2 =
-3,118.50
Contributions
payable on self-employment and other earnings
(zero if negative)
$980.10
The taxpayer would have to remit $980.10 of CPP
contributions along with taxes payable. In
calculating taxes payable, a non-refundable tax credit
would be allowed based on
CPP of $1,559.25 paid on employment earnings,
plus
50% of the $908.10 CPP on self-employment
earnings, or $454.05
The other 50% of CPP on self-employment earnings,
or $454.05, is allowed as a deduction from
income. This deduction is the employer portion
of the CPP contribution.
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
a professional advisor can assist you in using the information on this web
site to your best advantage.
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