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3 Things South African Companies Should Know About Canadian Tax Withholding

Posted by Karen McMullen


Apr 10, 2015 9:00:00 AM

3-Things-South-African-Companies-Should-Know-About-Canadian-Tax-WithholdingCanadian tax withholding can be complex to manage effectively, especially for South African companies that aren’t familiar with the foreign tax code. South African companies may simply try to take the easy way out and not withhold Canadian taxes for their employees—but this can lead to a wealth of trouble. Canada is strict about its taxes and will penalize foreign companies that do not comply with the laws. If you’re operating in Canada or you employ Canadian workers, you must understand Canadian tax withholding and take the appropriate steps to ensuring that your workers are paid correctly and legally. To help you, here are three things South African companies should know about Canadian tax withholding.

It’s Not Just about the Income Tax

What must be deducted from your employees’ pay cheques every pay period isn’t just federal and provincial income tax. Canadian Pension Plan (CPP) and Employment Insurance (EI) deductions must also be withheld. Although there is no limit to the amount you withhold for income taxes—it depends on the total amount earned per employee—there are maximums for CPP and EI, both for each pay period and for the full year.

As the employer, it is your responsibility to keep track of the contributions, as well as to know the exceptions and the maximums to ensure you’re withholding the correct amounts. If you withhold too much, you must refund it to the employee. If you underpay to the government, you are the one who must take responsibility for the amount owed. Therefore, it’s clear that South African companies must know the rules and regulations that come with Canadian withholding, not only when it comes to income taxes, but also to Canadian Pension Plan and Employment Insurance contributions as well.

The Government Is Stringent about Deadlines

When it comes to Canadian tax withholding there’s no question about it: the government is stringent. You must make your payments to the Canada Revenue Agency by the required deadlines or face interest penalties and other costs. What’s more, these deadlines can change every year and they’re not the same for every company—they depend on the nature of your business and your average withholding amounts for the year. And the CRA won’t take any excuses as to why your payment is late. It’s as simple as that. It’s your responsibility to know the deadlines and send your payments in a timely manner.

There’s Help If You Need It

Getting to know the ins and outs of Canadian tax withholding takes time, effort, resources, and dedication. To ensure you’re paying your Canadian employees legally, you must fully understand the tax code and your obligations as an employer, which includes understanding the nuances of CPP and EI and keeping up to date on the Canada Revenue Agency’s strict deadlines. But you don’t have to do it alone—you can ask for help.

When you employ the services of an Employer of Record, the EOR legally takes over as the employer of your workers, pays them directly, and manages all of the Canadian tax withholding work so you can avoid the hassle. With an EOR, you eliminate the risk of being non-compliant so you can avoid paying hefty fines and penalties that come with tax and payroll errors. Employers of Record help international businesses, including South African companies, stay in compliance so they can rest easy.

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

Topics: South African Companies, Canadian Tax Withholding

How South African Companies Pay Canadian Employees

Posted by Karen McMullen


Jan 30, 2015 1:47:17 PM

How_South_African_Companies_Pay_Canadian_EmployeesHiring Canadian employees either because you’re expanding business operations into Canada or because you just want the skills that Canadian workers have can seem like a great idea for South African companies. However, when it comes time to pay them for their work, there’s a lot of red tape and bureaucracy to deal with.

Processing payroll for Canadian employees isn’t as simple as converting funds into the right currency and mailing out the cheques. There are government officials that need to be in the loop, accounts that need to be created, remittances that need to be paid, and laws that need to be followed. Audits, legal entanglements, labour issues, and heavy fines can occur if you try to bypass the Canadian government by taking shortcuts with your payroll processing.

In order to be legally compliant, here are some of the ways that South African companies can pay their Canadian employees.

Doing It Yourself

Some South African companies decide to try processing Canadian payroll on their own. Though this is certainly ambitious, it can be done. Here’s how.

First, you’ll need to have a physical administrative address in Canada, have a business number, and open the right accounts with the Canada Revenue Agency.

Next, you’ll need to learn about payroll tax deductions, premiums, and contributions. These can vary based on your location as well as your employee classification, so it will take some time to learn. Once you’ve effectively calculated the right federal and provincial taxes as well as the premiums and contributions to deduct, you’ll need to maintain your payroll accounts and file your remittances on time. You’ll need to use proper Canadian software to get you going—using the same payroll software you use in South Africa won’t cut it.

Finally, you’ll need to learn the intricacies and complexities of Canadian payroll legislature and employment regulations, and stay up to date on changing laws. The more employees that get on board, the more time you’ll have to spend on your payroll process—you’ll have to answer questions, appease concerns, deal with HR issues, and keep up to date with procedures. Unfortunately, this will give you less time to concentrate on your other business responsibilities. 


Owners of South African companies often find that the time and effort they are spending on payroll processing simply isn’t worth their time—their other tasks are getting neglected. So, they delegate the responsibility to the HR department. Regrettably, the HR manager who is now in charge won’t have the experience and expertise needed to continue on with the complex task. More time will be spent on learning the ropes, training on the new software, and keeping up with Canadian legislature. While all this extra time is spent on learning Canadian payroll, deadlines can be missed, other HR responsibilities can be ignored, and most importantly, costly mistakes can occur—and as the owner of the company, you’ll be liable for all of it.

You’re Not Alone

If you’re stressed out just reading about the issues above, you’re not alone. That’s why many South African companies choose to pay their Canadian employees through an Employer of Record. When you engage an Employer of Record, your Canadian employees become the employees of the EOR, so all the administrative tasks associated with payroll and HR become the responsibility of your partner. Employers of Record are experts when it comes to all things legislature and payroll. They’ll ensure that your Canadian employees are always paid correctly and on time, that your payroll accounts are always maintained, and that you’re always working in compliance with Canadian law.

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

Topics: Pay Canadian Employees, South African Companies

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