ARCHIVED CD 2009-013: Information Notice to Employees

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Multiple Tax Adjustment Factors

The purpose of this notice is to provide you with information concerning a change in the way income tax is calculated when an employee works in Quebec and resides in Ontario, Nova Scotia or New Brunswick.

The calculation of income tax withheld at source is based on the taxable income earned by the employee and the income tax rates in effect for the province of employment at the time the payment is issued.

The only exception to the above is for employees who work in the province of Quebec and reside in a different province. For these specific employees, a special tax arrangement was agreed upon by the Ministère du Revenu du Québec (MRQ) and the Canada Revenue Agency (CRA). This arrangement ensured, to the greatest extent possible, that the total amount of tax withheld would approximate the amount that would have been withheld had the employee worked in his province of residence. As a result, the "Tax Adjustment Factor" formula is an averaged provincial tax rate provided by CRA which is used to calculate income tax at source on all taxable income levels.

Effective January 1, 2009, the Tax Adjustment Factors, which are single tax rates for each province regardless of income tax bracket, are as follows:

  • Nova Scotia - 102%
  • New Brunswick - 104%
  • Ontario - 76%

In order to make the calculation of federal and provincial income tax more precise, effective July 1, 2009, the Regional Pay System (RPS) will apply the Multiple Tax Adjustment Factors, which will be based on the current Federal Tax Brackets, for each province as provided by CRA , instead of calculating income tax using one single factor for each province.

The Multiple Tax Adjustment Factors effective July 1, 2009, will be as follows:

Federal tax brackets
Tax brackets and rates effective July 1, 2009
More than - Not more than Tax
$0 to $41,200 15% 90% 93% 69%
$41,200 to $82,399 22% 103% 96% 77%
$82,399 to $126,264 26% 106% 95% 89%
Over $126,264 29% 107% 94% 91%

Effective July 1, 2009, these new Multiple Tax Adjustment Factors will be included in the regular pay tax calculation as well as the supplementary pay tax calculation.

In the past it was recommended that some employees, particularly high income earners, have additional tax deducted from their salary to offset insufficient tax being deducted at source. Employees in this situation may want to determine whether or not they still need the additional tax deduction with the implementation of these new Multiple Tax Adjustment Factors.

Any request for information regarding the foregoing should be addressed to your compensation advisor.