Canada payroll and tax overview.

Your guide to doing business in Canada

Doing Business in Canada

Canada is the largest country in North America with borders stretching from the Atlantic Ocean in the east to the Pacific Ocean in the west. As one of the world’s wealthiest nations, and its 11th largest economy, Canada’s financial landscape is diverse: natural resources, including oil and timber, play a significant part in the country’s profile but the manufacturing, automotive and aerospace industries are also important. Canada is a hub for technological innovation: it is a net exporter of energy and hosts some the world’s leading software entertainment production centres. Canada is closely integrated with the United States economically, with relatively open borders allowing tariff-free trade between the two countries.

Why invest in Canada?

Canada is experiencing a period of economic growth. The diversity of its industrial landscape is reflected in the opportunities it offers investors:

  • A range of government grants and tax credits, such as the Industrial Research Assistance Program, are available to business start-ups in Canada - they offer entrepreneurs access to financing, advice and support. Tax incentives also exist for start-ups - especially in research fields where relief of up to 50% may be available.
  • The relatively low value of the Canadian dollar offers additional value on top of any investment schemes businesses may be able to take advantage of. Target markets like Toronto, Montreal and Vancouver offer low cost start-up opportunities.
  • Canada offers its businesses a wealth of talent and innovation, with an education system ranked 7th in the world and a tertiary education attainment rate ranked 2nd in the world. The Bloomberg Innovation Index places Canada as the 12th most innovative country in the world, with the 5th largest high-technology sector.
  • The oil and gas industry continues to be a valuable part of Canada’s economic prosperity. Holding as much oil as the Middle East, Alberta’s oil sands offer opportunities for companies to extract and deliver oil to Canada and the rest of the world. While other global markets tend to be dominated by large companies, the Canadian energy sector is competitively diversified.
  • Canada’s low cost access to US markets means a huge consumer base is available to its businesses. With a global reach - and a recently-agreed trade deal with the European Union - Canada promises its businesses connections to lucrative consumer markets around the world.

Foreign Direct Investment in Canada

The Canadian Government welcomes inward investment in Canada with attractive incentives available for foreign investors. Canada’s political stability and highly skilled workforce provide many investment opportunities for companies considering expanding their operations in the country. Both Forbes and Bloomberg rated Canada as the best place to do business in the G20 while, from 2006-2015, Canada led the G7 in terms of economic growth. Canada also has the lowest tax rates, and the lowest cost of doing business (for R&D based organisations) of the G7 countries. With the Comprehensive Economic Trade Agreement coming into effect in 2016, Canada now enjoys access to the diverse markets of both Europe and North America (through NAFTA).

Registrations and Establishing an Entity in Canada

Any company wishing to operate in Canada must decide whether operations will occur within a single province or throughout Canada. If business will be conducted all over the country the corporation must register both federally and within the individual provinces that the business will be conducted in. Please note it is recommended that a lawyer or an accountant evaluate all considerations. All businesses operating in Canada are required to register with the Canadian Revenue Agency to receive a business number. This number will allow the business to pay or claim Sales Tax, Income Taxes and Payroll Taxes. In addition to registering a business number, some entities may be required to register with provincial Workers Compensation boards, provincial health tax boards or other applicable provincial agencies. Please refer the provincial government requirements for specific details.

Banking for Business in Canada

It is mandatory to make payments to both employees and the authorities from a Canadian bank account. Core banking hours for the public are from 9.00 am to 5.00 pm. Working Days and Working Hours in Canada Working Week in Canada The Standard Business Week in Canada is Monday to Friday, generally working 40 hours per week (8 hours per day).

Statutory Holidays in Canada

There are multiple Statutory Holiday schedules within Canada. The appropriate schedule is determined by the employment legislation which governs your employees.

Basic Facts about Canada

Canada stretches from the Atlantic Ocean on its eastern coast, to the shores of the Pacific Ocean in the west, and shares the world’s longest land border with the United States to the south. Second only to Russia in terms of landmass, Canada is vast - covering almost 4 million square miles - and is made up of ten provinces and three territories. Despite its size, Canada is relatively sparsely populated - with dense concentrations of inhabitants occupying its major urban centres like Montreal, Ottawa, Toronto, Edmonton and Vancouver. Since achieving full autonomy from Britain in 1982, Canada has become one of the world’s leading economic powers, with a transparent democratic and parliamentary government system and impressive growth. Canada’s climate varies dramatically: the Rocky Mountains and western provinces experience extremely harsh winters, while its eastern and western-most regions are wetter and milder.

Full Name: Canada Population: 35.87 Million Capital: Ottawa Largest City: Toronto Major Languages: English, French (Both Official) Major Religion: Christianity Monetary Unit: 1 Canadian Dollar = 100 Cents Main Exports: Machinery and Equipment, Automotive Products, Metals and Plastics, Forestry Products, Agricultural and Fishing Products, Energy Products GNI Per Capita: US $42,610 (World Bank, 2013) Internet Domain: .ca International Dialling Code: +1


Hello Bonjour

Good Morning Bonjour

Good Evening Bonsoir

Do You Speak English? Parlez-Vous Anglais

Good Bye Au Revoir

Thank You Merci

See You Later à plus tard


Dates can be written in the day, month and year sequence, or the month day and year sequence.

For Example:

  • 1 July 2012 or 1/7/12
  • July 1 2012 or 7/1/12

Quebec - Year/Month/Date, For Example 2012/01/01

Numbers are written with a comma to denote thousands and a period to denote fractions, for example, $ 3,000.50 (three thousand Canadian dollars and fifty cents).

Agency Requirements In Canada

The Tax Year runs from the 1st of January to the 31st December.

There is no requirement for a third party to be licensed in order to make any tax filings on the behalf of a client. Although a license is not required, a Power of Attorney or Government Authorization form for the business is required. The penalty for failing to distribute T4 slips to a recipient is $25.00 per day for each failure with a minimum penalty of $100.00 and a maximum penalty of $2,500.00. Canada has multiple remittance frequencies for a variety of Federal and Provincial statutory tax deductions that will be outlined in this document. Remittance frequencies and rates are generally provided by the Ministries based on company’s gross payroll earnings.

Income Tax in Canada

Canadian employers are responsible for calculating, withholding, reporting, and remitting all employee and employer tax deductions based on their employees’ gross payroll to all applicable government parties. Canada’s tax year runs from January 1st to December 31st, and tax returns are filed with the Canada Revenue Agency (CRA) by the 30th of April. Tax rates in Canada are progressive, with brackets for a range of earnings levels, from low to high. Tax reports may be completed online with the CRA’s Netfile portal (or ‘autofill’ option’), or by post. Various tax relief options are available to taxpayers in Canada, including a tax-free allowance, child support, retirement savings plans and charitable donations.

Federal Remittance Types in Canada

Federal Tax: based on employees’ taxable gross calculated on the employees’ earnings tax bracket Provincial tax (excluding Quebec): based on employees’ taxable gross calculated on the employees’ earnings tax bracket Quebec Remittance Types

Provincial tax: based on employees’ taxable gross calculated on the employees’ earnings tax bracket Canadian Pension Plan & Quebec Pension Plan

Remittances to the Canadian Pension Plan (CPP) are remitted based on the remittance frequency. Employers must also contribute the same amount of CPP or QPP (if in Quebec) that you deduct from your employee’s remuneration. This is contributed until the salary or wages paid to the employee for the year reach the maximum pensionable salary or wages for the year.

New Employees in Canada

Before hiring new employees in Canada, employers must go through a process which includes registering with the Canada Revenue Agency, and setting up a payroll deductions account. The hiring process itself involves several steps:

  • Employee accepts job offer: Job offers to prospective new employees must meet provincial employment standards and ideally set out associated duties, hours of work, salary, and other benefits.
  • Social Insurance Number (SIN): Employers should record all new employees’ SIN within three days of the employment start date. SIN ensure employees have been granted authorisation to work by Citizenship and Immigration, Canada.
  • Personal Tax Credits Returns: To determine how much tax should be deducted from a new employee’s income, the Personal Tax Credits Returns (Form TD1) should be completed. Employees who claim more than a basic personal amount should fill in both a federal TD1 and a provincial TD1 form.
  • Determine Start Date: Ensure new employees’ start dates do not disrupt general business operations. An employee orientation and any supplementary information should also be arranged if necessary.
  • Employee Record: Employers’ duties to employees include collecting personal information, logging timesheets, and handling payroll related documents, such as T4 slips. Establishing an employee record for new-starters will help ensure on-going compliance with Employment Law and payroll regulations.

Employee Benefits in Canada

In addition to wages and salaries, employers in Canada may offer their employees optional benefits as compensation. Benefits for employees in Canada include:

  • Health & Dental: The Canadian government provides almost 70% of healthcare costs, but employee health insurance plans can cover the shortfall or act as an alternative. Health and dental plans are a foundational employee benefit, and can be tailored, through coverage options, to meet the needs of small and bigger businesses.
  • Life Insurance/Accidental Death or Dismemberment: Designed to protect employee’s families in the event of death or accident in the workplace. Coverage amounts may reflect employee salaries, and include options to purchase more should employees choose to increase their premiums.
  • Illness & Long-term Disability: Should an employee in Canada be unable to fulfil their role (or some part of it) as a result of illness or disability, insurance plans may be available to replace the resulting loss in income. Disability and illness benefits may also take the form of counselling or therapeutic support.
  • Retirement: Employers in Canada can offer a range of retirement benefit plans to their employees, including pensions, savings plans, and phased retirement plans. Most retirement plans involve contributions from employer and employee, and may even represent a way to save on taxes.
  • Non-financial: Employee benefits in Canada may include professional development, job sharing plans, flexible work hours or work-from-home options.

Leavers in Canada

Employee terminations in Canada must follow a process outlined by legislation. Final payment of wage or salary must be made within a a number of days - the final date varies by provincial legislation. Employers must provide employees with an effective date for the termination, and a clarification of the reasons behind it. Payment of outstanding finances (bonuses, holiday pay) should also be made, along with severance pay if necessary. Employers must issue a Record of Employment to the terminated employee within a provincially mandated time limit. Failure to do so could result in a fine of up to C$2,000.

Payroll in Canada

Employers in Canada are responsible for operating payroll for their employees: payroll may be processed in-house by a payroll department, or outsourced to a third party organisation. Employers must decide the frequency of their payroll operation - weekly, bi-weekly, monthly or bi-monthly - and decide if their employees will receive pay to-date, or be paid in arrears. However an employer chooses to process payroll, they will be responsible for the appropriate deductions, which include:

  • Canada Pension Plan (CPP) contributions
  • Employment Insurance premiums
  • Health Insurance premiums
  • Income tax

Employers must issue payslips to employees - payslips can be issued online with the employee's’ agreement. Payroll reports must be kept for a minimum of 7 years.