Home Blog

Blog

Employing Canadian Workers? Our Business Taxes Can Be Quite the Pain!

Posted by Stacey Duggan

|

Aug 7, 2014 8:35:00 AM

Business and Payroll taxes can be a pain for U.S. based companiesEmploying Canadian workers and deducting the correct Canadian payroll taxes from their paycheques can be difficult if you’re an American or foreign company outside of North America. We’ve compiled a list of Canadian taxes a company employing Canadian workers should be aware of, if they are not engaging with an Employer of Record service.

Canadian Business Taxes

All Canadian businesses must file a corporate tax return with the Canadian government. This corporate tax return is due within the six months after the end of the company’s fiscal year.

If you are engaging with Canadian companies for the sale of your product or service you need to be aware of the sales tax for the province you are doing business in. For goods and services sold in Canada, every company must charge the applicable provincial sales tax. The same is true in the reverse, if you purchase goods and services in Canada, you will be charged the sales tax. You are then required to reconcile these debits and credits to pay or report to the Canada Revenue Agency. Every province has a different rate and the remittance schedule can vary as well based on company size. In Ontario, it is called the HST (Harmonized Sales Tax) and the rate charged is currently 13%, in Alberta that rate is 5% for their GST (Goods and Services Tax). For a full list of HST/GST rates by province, please visit the Canada Revenue Agency’s website.

Another tax to be aware of as a foreign company is the possibility of the 15% withholding tax. If a U.S. or foreign company chooses not to register a Canadian business presence but does engage in a sales transaction with a company in Canada, that company must withhold and remit 15% of any payments for services rendered in Canada.

Canadian Payroll Taxes

Some taxes are consistent for all employers across Canada such as the Canada Pension Plan (CPP), Employment Insurance (EI) and Worker’s Compensation.  These taxes may be consistently seen across all provinces and territories but the rate that they are charged can vary.

Other taxes are province or territory specific. For example, in Ontario employers must pay the Employer Health Tax (EHT) and in Quebec there are three additional taxes over and above the federal ones. Please visit the Canada Revenue Agency’s website for further information on provincial payroll taxes and rates.

If you have not engaged an Employer of Record here in Canada and have successfully registered your business, enrolled for the various government accounts and are up to date on your taxation responsibilities, you may be ready to hire your first employee.

If you’d prefer to have an Employer of Record handle the complexities of Canadian employment law, contact The Payroll Edge today and we’ll take care of the workforce compliance issues for you! 

7 Signs It's Time to Outsource Payroll

Topics: Payroll Tax, Payroll Tax in Canada, Employee Payroll Deductions, CRA Payroll Tax, Payroll Deductions, Calculating Taxes in Canada, Employee Payroll Tax, Small Businesses Payroll

5 Reasons Businesses Dread Processing Payroll

Posted by Stacey Duggan

|

Aug 27, 2013 10:00:00 AM

Reasons Businesses Dread Processing PayrollIt's no surprise that processing payroll is toward the bottom of the list of tasks that business owners like to do. In fact, it wouldn't be a stretch to say that most business owners dread processing payroll. On the surface, processing payroll seems like a fairly simple and straightforward business responsibility, but anyone with payroll experience knows that there are reasons to dread it. Here are five.

1. Paperwork.

There might be a few people out there who enjoy paperwork, but if you feel that there are never enough hours in the day, paperwork can be a real thorn in your side. And with payroll processing, the paperwork is endless.

From the moment you hire an employee, you have to start keeping track of paperwork for that person. Not only do you have to stay on top of deductions, taxes, and contributions for each employee every pay period, but you also need to keep accurate enough records to complete end-of-year reports for the CRA. It takes an organized person with solid systems to keep all of this paperwork straight.

2. Deductions.

It's the employer's responsibility to deduct Employment Insurance premiums, Canada Pension Plan contributions, and income taxes from the employees' paycheques. Each of these deductions has its own formula and its own rules, and the employer is responsible for correctly figuring out each amount.

The CRA has an online calculator to help employers with these calculations, but pay close attention to the disclaimers: "You assume the risk associated with using this calculator," and "The reliability of the calculations produced depends on the accuracy of the information you provide." Therefore, you can't use the online calculator as an excuse if you end up with mistakes in your deductions.

3. Remitting.

Once you've finally figured out how much to deduct from each of your employees' paycheques, it's time to face the next dreaded task: remitting the deductions to the CRA. Monthly payroll deductions are due the 15th of each month, and your remittance needs to arrive on time. If it's just a day late, you'll face a fine, which we'll talk about next.

4. Fines.

If the CRA finds that your business is not properly remitting CPP contributions, EI premiums, and income tax, your business will be fined. If this happens more than once in a calendar year, the CRA will levy an additional fine. These fines can be a huge hit to your company's bottom line as well as to your morale as an employer.

5. Changing laws and regulations.

Many small business owners find that over time they can get the hang of payroll processing. It can become part of their daily, weekly, and monthly routines. But then, as new laws are passed, the rules change, and they find themselves back at square one. Laws related to payroll processing change frequently, and it can be quite difficult for harried business owners to keep on top of all the changes.

One solution to handling these dreaded payroll processing tasks is to turn your payroll tasks over to a third-party payroll service provider like The Payroll Edge. These services are experts in the details. They know the laws and rules, and they have systems in place to keep your business running smoothly.

7 Signs It's Time to Outsource Payroll

Topics: Payroll, Employee Payroll Deductions, hire payroll service, Payroll Calculator, CRA, Payroll Deductions, Great Payroll Service Provider, CPP, EI, Employee Payroll Tax, Small Business Payroll

3 Common CRA Remittance Pitfalls

Posted by Stacey Duggan

|

Jul 24, 2013 9:00:00 AM

3 Common CRA Remittance PitfallsIt seems that remitting your payroll deductions to the CRA should be a simple, straightforward process, and yet, Canadian businesses run into problems time and again. Part of this has to do with legislative and bureaucratic changes that catch people unawares. Sometimes small business owners just have too many things on their minds; it's hard to keep up with everything, especially with things like CRA remittances which don't help your business to stay afloat or improve your bottom line. Let's take a look at three common CRA remittance pitfalls and how to avoid them.

1. Not sending in your remittance on time

This is probably the biggest mistake that employers make, and it's no surprise. The money collected from payroll may sit in your business account for weeks or even months before it's due to the CRA, so it's easy to forget about remitting. Do your best to stay on schedule, however, because the penalties for failing to remit are stiff and increase the more time you take. Not only the fee but the whole amount is subject to interest making a late payment much more costly than the timely payment would have been.

Companies with a 12-month history of remitting compliance and who have a monthly withholding amount of less than $3,000 may be eligible to remit quarterly instead of monthly. You will be notified by the CRA if your business qualifies for quarterly remittance. Otherwise, you'll be expected to remit monthly, and it's important that you keep up with your deadlines.

2. Remitting less because you're treating some employees as independent contractors

A worker engaged with your company who has a registered business, doesn’t always qualify to be paid as an independent contractor in the eyes of the CRA. As a business owner, you need to be aware of how to properly classify independent contractors in order to be compliant. A finding of misclassification can lead to the payment of both the employee and employer portion of the remittances going back as far as the initial engagement. If the CRA finds that you have violated the law, you will also be charged interest and penalties, which can add up very quickly.

3. Calculating remittances incorrectly

It's a lot to keep track of, but you need to remit CPP contributions, income taxes, and EI premiums from your employees' earnings, along with your share of EI premiums and CPP contributions for each employee. Recognizing taxable benefits and calculating then remitting them correctly is another area that is often misunderstood by business owners. Your employee is considered to have received a benefit if you pay or provide to him or her something that is personal in nature such as free use of property, goods or services. If the benefit is deemed taxable you must add the fair market value of the benefit to the employee’s income and tax accordingly.

One thing you can do to help with calculating payroll deductions is to use the CRA's Payroll Deductions Online Calculator. Instead of looking up deduction amounts on the provincial and territorial tables, you can simply enter your data into the calculator. Remember, though, that you assume the risk associated with using the CRA's calculator. If you end up remitting the wrong amount, you can't use the calculator as your excuse.

By taking care with these three CRA remittance pitfalls, you can avoid most of the headaches and frustrations encountered by business owners in the reporting area. Another alternative is to outsource payroll processing and let someone else take care of CRA remittance for you. When you're sure that your CRA remittance is handled correctly, you can face the details of your business confidently and irreproachably.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Service Provider, Canadian Payroll Deductions, Payroll Tax Calculations, Employee Payroll Deductions, Employment Standards Act, Best Payroll Calculator, MOL, ESA, ESA Compliant, Employee Payroll Tax

How Payroll Service Providers Remit Taxes

Posted by Ray Gonder

|

Jun 7, 2013 1:22:00 PM

How Payroll Service Providers Remit TaxesRemitting taxes. It's about the last detail you want to worry about as a small business owner. Remitting taxes doesn't advertise your goods and services, it doesn't help you to work more efficiently, and it doesn't train or find new employees for you. It just takes up your precious time that could be better spent in other ways.

That's where payroll service providers can help you. With expertise in every aspect of tax law and logistics, a good payroll service can strike tax remittance from your to-do list, leaving you with time for the tasks that actually help to improve and grow your business.  Ensure that when you are choosing a payroll provider you make sure they remit all of your government taxes as some only remit the general payroll taxes but not worker’s compensation or Ontario EHT. A provider that only does half the job can cause more confusion to an already frustrating process.

There’s more to paying your staff than just using a payroll calculator. If you've been unsure about how tax remittance works or you're wondering what's involved, here's a primer based on common questions from Canadian employers.

What do I have to remit?

As an employer of Canadian workers, you're required to remit employee payroll tax, Canadian Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, your employer's percentage of EI and CPP, workers’ compensation, and (in Ontario) Employee Health Tax (EHT). Each of these remittances must be individually calculated for each of your employees, and the calculations depend on the province or territory where your employees report for work. Each of these contributions must be calculated and remitted correctly if you wish to avoid paying fines.

Where do I send payroll remittances?

Most Canadian employers remit to at least three different government agencies each time they calculate payroll. Depending on which provincial and territorial agencies are involved, you may have many different offices to remit to. Follow the instructions on the remittance tables published by the various provinces and territories where you must remit taxes, and send your funds to the appropriate offices.

When do I remit payroll taxes?

This is an important question to answer because you'll be faced with fines if you fail to make your remittances on time. Each governmental agency has a different remittance schedule, and unfortunately, this variation of remittance schedules consumes a lot of time for the average Canadian business. Most agencies have monthly remittance schedules, but your due dates will probably land on different days of the month, causing issues with cash flow and time management.

How can I streamline my payroll duties?

Clearly, staying on top of Canadian payroll is a time-consuming and headache-inducing affair. If you're tired of managing all of these administrative details, turn payroll over to the pros. Instead of looking through tax schedules and charts, get out from behind your desk and meet with customers and clients. Instead of cutting checks and making phone calls to government agencies, pursue your dreams of expansion.

At The Payroll Edge, we have more than 25 years of tax remittance experience. Recognized as a payroll authority even among administrators at the CRA, we are always on top of changing tax laws and regulations. It's our job, and we do it well. We can save you an immense amount of time and frustration when we assume the payroll responsibilities at your company. You'll be amazed at the reduction in stress when you don't have to worry that you've remitted the wrong amounts at the wrong time. You'll have confidence that the job is being carried out by professionals who guarantee their work.

For more information about what The Payroll Edge can do for your company, contact us. We'll be happy to discuss your company's payroll and tax remittance needs.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Tax, Payroll Service Provider, Payroll Tax Calculations, Payroll Tax in Canada, Payroll Service, Payroll, Payroll Calculator, Payroll Deductions, Payroll Tax Tips, Remitting Taxes, Employee Payroll Tax

Subscribe to Email Updates

Recent Posts

Posts by Topic

see all