Canada

Registrations and Establishing an Entity

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 heath tax boards or other applicable provincial agencies.

Please refer the provincial government requirements for specific details.

Banking 

It is not 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 Week 

The standard business week in Canada is Monday to Friday, generally working 40 hours per week (8 hours per day). 

Basic Facts about Canada 

General Information: 

Full Name: Canada  

Population: 38.01 million (World Bank, 2020) 

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:  $ 47,500 (World Bank, 2020)  

Internet Domain: .ca 

International Dialing Code: +1 

How to say in French:  

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 

Employment Law

Maternity/Paternal Leave 

Every jurisdiction has legislation regarding maternity/pregnancy leaves.  

Some jurisdictions also legislate parental, paternal, adoption and child care leaves. Maternity leave, also called pregnancy leave in some jurisdictions, can only be taken by the birth mother. Parental, adoption and child care leaves can be taken by natural or adoptive mothers and fathers. 

Maternity (Pregnancy) leave ranges from 16-17 weeks based on jurisdiction.   

Paternal leave ranges from 35 - 77 weeks based on jurisdiction, and in some cases based on whether pregnancy leave was taken.  

Payments for this leave are issued by the Service Canada (Employment Insurance) office.  The employer has the option to top up the employee’s maternity leave but this is not an obligation. 

Some jurisdictions also allow paid or unpaid pregnancy leave in the case of a stillbirth or miscarriage. 

Vacation/Holiday Accrual

Vacation/Holiday entitlement varies by province, but paid vacation is typically accrued based on a percentage of earnings.

Provincial Standards:

Tax & Social Security

The tax year runs from 1 January to 31 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.

The key payroll submission dates are as follows:

Description

Deadline
Federal tax slip summary
End of February of the following year
Quebec tax slip summary
End of February of the following year
Workers Compensation
Various date between end of February and end of March of the following year
EHT
On or before March 15 of the following year
QHSF & CNT & WSDRF
End of February of the following year
HET
Ministry may request annual filing
Federal Remittance Types

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. CPP (excluding Quebec) is based on employees’ pensionable earnings.

Employee and employer premiums required.

Description
Cpp 1 Maximum 2024
Total Maximum Pensionable Earnings
$81,200
Annual Basic Exemption
$3500
CPP 1 Contribution Rate (%)
5.95 %
CPP 1 Max. Contribution
$4,034.10
CPP 2 Contribution Rate (%)
4.00 %
CPP 2 Max. Contribution
$396.00

QPP is based on employees’ pensionable earnings. Employee and employer premiums required.

Description
Qpp Maximum 2024
Total Maximum Pensionable Earnings
$81,200
Annual Basic Exemption
$3,500
QPP 1 Contribution Rate (%)
6.40%
QPP 1 Max. Contribution
$4339.20
QPP 2 Contribution Rate (%)
4.00%
QPP 2 Max. Contribution
$396.00

Employment Insurance

EI (excluding Quebec) is based on employees’ insurable earnings. Employee and employer premiums required

Description
Ei Employee Maximum 2024
Ei Maximum Employer 2024
EI Maximum Earnings
$65,700
$65,700
EI Contribution Rate (%)
1.64%/QC is 1.31%
2.30%/QC is 1.83%
Max. EI Contribution
$1,077.48/QC is $860.67
$1,508.47/ QC is $1204.94

Reporting & Remittance Frequency

The Workers’ Compensation Board is funded solely by employers. The board’s responsibility is preventing disability. They do that by providing compensation, service and support to workers injured on the job. They also promote workplace safety through training, inspection and compliance and investigations. Rates below are for 2025.

Payroll

It is legally acceptable in Canada to provide employees with online pay slips providing acceptance received from the employee. You are required to provide the pay slips in the employee’s language of choice (English or French).

Payslip Example

Reports

Payroll and other employment records must be kept for at least 36 months.

New Employees

Employees must be eligible to work in Canada and are required to have a valid Social Insurance Number. Employees must be registered on the payroll upon receipt of their Social Insurance Number (SIN).

The information required for setting up a new employee is as follows:

• Name
• Date of Birth
• Citizenship/Legal Status
• Residential Address
• Telephone Number
• SIN Number
• Bank Account Details (Void Cheque/Direct Deposit slip)
• Employee’s employment contract information
• Collective Agreement information (If applicable)
• Employee Tax Details (TD1/TP-1015.3-V forms)
• Benefit/Pension Enrolment or Waiver forms (If applicable)
• Electronic Pay Statement, T4/RL1 Authorization form
• Work Location/Province of Employment
  
  

Employers are required to ensure new employees are aware that they have to complete a TD1.

Leavers

Employees whose employment is terminated must be paid within a certain number of days from their last day worked, particularly if their employment was terminated by the employer. Final payment date will be driven by provincial legislation. Most companies simply pay at the next pay date.

For terminated employees the requirements are to detail the reason for termination, the effective date and provide clarification and payment if there are any outstanding items such as bonuses or days due for vacation.

The employer must issue a Record of Employment (ROE) within provincially driven calendar days after the end of the pay period that the interruption of earnings occurred. Failure to do so could result in a fine of up to $2,000.00 and / or imprisonment of up to six months.

Employee Benefits

Typical benefits provided in Canada include the following:

• Health Care Plans – Taxable Benefit in Quebec
• Dental Care Plans – Taxable Benefit in Quebec
• Disability Coverage – Can be taxable (depends on the coverage)
• Life Insurance – Taxable Benefit in Canada
• Accidental Death & Dismemberment – Taxable Benefit in Canada
• Registered Retirement Savings Plan – Pension Adjustment
• Tax free Savings Account
• Pension (Defined Contribution or Defined Benefit) – Pension Adjustment
  
  

Employers generally contribute a portion of the premiums (usually at least 50%). Certain employer paid benefits are considered a taxable benefit to the employee and statutory and source deductions must be calculated on the benefit cost. The taxable benefits must be reported on the Canadian tax slips (T4, T4A, RL1, RL2…) in the applicable boxes.

Visas & Work Permits

Depending upon the foreign worker’s country of citizenship, a Temporary Resident Visa may also be required in order to enter Canada.

Before a Canadian Work Permit request will be considered or processed a written job offer from an employer to the potential future employee is required to be submitted.

Once a potential future employee receives a written job offer in most cases it is then subject to confirmation by Human Resources and Skills Development Canada (HRSDC) who will assess the likely impact of employing a foreign national in the position in question, to ensure that the employment is genuine and that it will not impact negatively on the domestic labour market.

With the exception of persons who have been granted protected person status and of those who are applying for refugee status, all applicants must meet the following requirements:

• Have a valid passport or other travel document issued by their country of residence
• Be in good health (a medical exam may be required)
• Provide proof that they have sufficient funds to support their stay in Canada
• Demonstrate that their stay in Canada is temporary
• Not have a criminal record, nor be considered a security risk
  
  

In addition, other employer specific criteria may apply.

In most cases, foreign workers must have obtained a labor market opinion from their potential employer before applying for a Work Permit.

• Employers must register with both federal and provincial authorities, depending on the scope of operations.
• Core banking hours for the public are from 9:00 AM to 5:00 PM.
• Canadian payroll systems must accommodate both English and French languages for pay slips.
• Most tax documentation (e.g. TD1, T4, RL1, etc.) is bilingual.
• Recordkeeping for payroll must be maintained for 36 months.
• Vacation policies, minimum notice periods, and employment standards vary by province (e.g. Ontario vs. Quebec).
• Remittance schedules for taxes and social contributions vary by province and company size.
• Some jurisdictions (like Quebec) have unique deductions and requirements separate from federal standards.
• Penalties for late ROE submission include possible fines or imprisonment.
  
  

Further Information

For more information, or assistance with Canada Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.