NLR 18/01 - Income Tax Deductions Regulations under the Income Tax Act, 2000

NEWFOUNDLAND AND LABRADOR REGULATION 18/01 Income Tax Deductions Regulations under the Income Tax Act, 2000 (O.C. 2001-017) (Filed February 13, 2001 ) Under the authority of section 68 of the Income Tax Act, 2000 the Lieutenant-Governor in Council makes the following regulations. Dated at St. Johns , February 6, 2001 . Gary Norris Clerk of the Executive Council REGULATIONS Analysis 1. Short title 2. Interpretation 3. Deductions and remittances 4. Periodic payments 5. Non-periodic payments 6. Deductions not required 7. Variations in deductions 8. Employee's returns 9. Remittance Schedule Short title 1. These regulations may be cited as the Income Tax Deductions Regulations . Back to Top Interpretation 2. (1) In these regulations (a) " employee " means a person receiving remuneration who reports for work at an establishment of an employer in the province; (b) "employer", "estimated deductions", "pay period", "remuneration", read without reference to paragraph (a.1), and "total remuneration", read without reference to paragraph (a.1), have the meaning given to those expressions in section 100 of the federal regulations; and (c) " personal credits" means, in respect of a particular taxation year, the greater of (i) the amount referred to in paragraph 9(1)(c) of the Act, and (ii) the aggregate of the credits which the employee would be entitled to claim for the year under (A) subsections 9 (1), (2) and (3) of the Act if the description of A in those subsections were read as "is equal to one", (B) section 12 of the Act if the description of A in subsection 13(1) of the Act were read as "is equal to one" and if subsection 118.3(1) of the federal Act were read without reference to paragraph (c) of it, (C) sections 13 and 14 of the Act if subsection 118.5(1) of the federal Act were read without reference to "the product obtained when the appropriate percentage for the year is multiplied by" and the description of A in subsection 14(1) of the Act were read as "is equal to one", and after deducting from the aggregate of the amounts determined under those subsections the excess over $3,000 of the aggregate of amounts that the employee claims to expect to receive in the year on account of a scholarship, fellowship or bursary, and (D) subsection 18(1) of the Act if the formula A + B – C in section 118.8 of the federal Act were read as A + B D where D is the appropriate percentage for the year, and (E) subsection 18(2) of the Act if the formula A - B in section 118.81 of the federal Act were read as A C where C is the appropriate percentage for the year. (2) Subsections 100 (3), (3.1), (3.2) and (4) of the federal regulations apply, with the necessary changes, for the purpose of these regulations. (3) For the purpose of these regulations, where an employer deducts or withholds from a payment of remuneration to an employee an amount in respect of the acquisition by the employee of a share which would entitle the employee to a labour sponsored venture capital tax credit under regulations to the Act, there shall be deducted from the amount determined under paragraph 4 (1 )( e) or (2)(f) in respect of that payment the lesser of (a) 15% of the amount deducted or withheld in respect of the acquisition of the share; and (b) the amount determined by the formula A - B where A is $750, and B is the aggregate of all deductions made in respect of prior pay periods in the taxation year under this subsection. Back to Top Deductions and remittances 3. Every person who makes a payment described in subsection 153(1) of the federal Act, as that subsection applies for the purpose of section 49 of the Act, in a taxation year shall deduct or withhold and remit to the Receiver General of Canada , the amount determined in accordance with rules prescribed in these regulations. Back to Top Periodic payments 4. (1) Except as otherwise provided in these regulations, the amount to be deducted or withheld by an employer (a) from a payment of remuneration, in this subsection referred to as the "payment", made to an employee in the employee's taxation year where the employee reports for work at an establishment of the employer in the province; and (b) for a pay period in which the payment is made by the employer, shall be determined for each payment in accordance with the following rules: (c) an amount that is a notional remuneration for the year in respect of a payment to the employee is considered to be the amount determined by the formula A X B where A is the amount that is considered for the purpose of this paragraph to be the mid-point of the applicable range of remuneration for the pay period, as provided in the Schedule, in which the payment falls, and B is the maximum number of such pay periods in that year ; (d) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purpose of this subsection and if the employee is resident in Canada at the time of the payment, the employee's personal credits for the year shall be established as, where they fall within a range of amounts provided for in section 3 of the Schedule, the mid-point of that range as provided for in that section; (e) an amount, in this subsection referred to as the "notional tax for the year", shall be computed in respect of that employee by (i) calculating the amount of tax payable for the year, as if that amount were calculated under section 7 of the Act on the amount determined in accordance with paragraph (c) as if that amount represented the employee's amount taxable for that year, and deducting the aggregate of (ii) the amount determined in accordance with paragraph (d) multiplied by the appropriate percentage for the year, (iii) an amount equal to (A) the amount determined in accordance with paragraph (c) multiplied by the employee's premium rate for the year under the Employment Insurance Act ( Canada ), not exceeding the maximum amount of the premiums payable by the employee for the year under that Act, multiplied by (B) the appropriate percentage for the year, and (iv) an amount equal to (A) the product obtained when the difference between the amount determined in accordance with paragraph (c) and the amount determined under section 20 of the Canada Pension Plan for the year is multiplied by the employee's contribution rate for the year under the Canada Pension Plan or under a provincial pension plan as defined in subsection 3 (1) of that Act, not exceeding the maximum amount of those contributions payable by the employee for the year under the plan, multiplied by (B) the appropriate percentage for the year; (f) an amount equal to the amount that would be determined under section 32 of the Act for the year in respect of the employee if the amount determined in accordance with paragraph (e) were that employee's tax payable under sections 5 to 31 of the Act for that year; and (g) the amount to be deducted or withheld shall be computed by (i) dividing the amount of the notional tax for the year by the maximum number of pay periods for the year in respect of the appropriate pay period, and (ii) rounding the amount determined under subparagraph (i) to the nearest multiple of $0.05 or, if the amount is equidistant from 2 such multiples, to the higher multiple. (2) Where an employee has elected under subsection 8 (2) and has not revoked the election, the amount to be deducted or withheld by the employer from a payment of remuneration, in this subsection referred to as the "payment", that is (a) a payment in respect of commissions or is a combined payment of commissions and salary or wages, or (b) a payment in respect of salary or wages where that employee receives a combined payment of commissions and salary or wages, made to that employee in the employee's taxation year where the employee reports for work at an establishment of the employer in the province, shall be determined for each payment in accordance with the following rules: (c) an employees "estimated annual taxable income" shall be determined by using the formula A - B where A is the amount of that employee's total remuneration in respect of the year as recorded by him or her on the form referred to in subsection 107 (2) , in this subsection referred to as "the form"; and B is the amount of that employee's expenses in respect of the year as recorded by that employee on the form; (d) an employees "notional taxable income" is considered, for the purpose of this subsection, to be the mid-point of the applicable range of remuneration for the year, as provided for in section 2 of the Schedule, in which falls the amount determined under paragraph (c); (e) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purpose of this subsection and if the employee is resident in Canada at the time of the payment, the employee's personal credits for the year shall be established as, where they fall within a range of amounts provided for in section 3 of the Schedule, the mid-point of that range as provided for in that section; (f) an amount, in this subsection referred to as the "notional tax for the year", shall be calculated in respect of that employee by using the formula C – [(D + E +F) x G] + H where C is the amount of tax payable for the year, calculated as if that amount of tax were computed under section 7 of the Act on the employees estimated annual taxable income as if that amount represented the employee's amount taxable for that year, D is the amount determined in accordance with paragraph (e), E is the amount determined in accordance with paragraph (d) multiplied by the employee's premium rate for the year under the Employment Insurance Act (Canada), not exceeding the maximum amount of the premiums payable by the employee for the year under that Act, F is the amount determined in accordance with paragraph (d) less the amount for the year determined under section 20 of the Canada Pension Plan multiplied by the employee's contribution rate for the year under that Act or under a provincial plan as defined in section 3 of that Act, not exceeding the maximum amount of those contributions payable by the employee for the year under the plan, G is the appropriate percentage for the year, and H is an amount equal to the amount that would be determined under section 32 of the Act with respect to the employee if the amount that would be the notional tax for the year for the employee were determined without reference to this element in this formula and that tax were that employee's tax payable under sections 5 to 31 of the Act; (g) the employee's notional rate of tax for a year shall be expressed as a decimal fraction and calculated by dividing the amount of the notional tax for the year by the mid-point of the range of remuneration referred to in paragraph (d) in respect of that employee and where the quotient results in more than 2 digits after the decimal in the decimal fraction (i) the second digit shall be rounded to the nearest multiple of one hundredth, and (ii) where the third digit is equidistant from 2 such multiples, the second digit shall be rounded to the higher of them; and (h) the amount to be deducted or withheld in respect of any payment made to that employee shall be determined by multiplying the payment by the appropriate decimal fraction determined under paragraph (g). (3) Notwithstanding subsections (1) and (2), an amount shall not be deducted or withheld in the year by an employer from a payment of remuneration to an employee in respect of commissions earned by the employee in the immediately preceding year where those commissions were previously reported by the employer as remuneration of the employee in respect of that year on an information return. Back to Top Non-periodic payments 5. (1) Where a payment in respect of a bonus or retroactive increase in remuneration is made by an employer to an employee whose total remuneration from the employer, including the bonus or retroactive increase, may reasonably be expected not to exceed $5,000 in the taxation year of the employee in which the payment is made, the employer shall deduct or withhold 5% of the payment instead of the amount determined under section 4 . (2) Where a payment in respect of a bonus is made by an employer to an employee whose total remuneration from the employer, including the bonus, may reasonably be expected to exceed $5,000 in the taxation year of the employee in which the payment is made, the amount to be deducted or withheld by the employer is (a) the amount determined under section 4 in respect of an assumed remuneration equal to the aggregate of (i) the amount of regular remuneration paid by the employer to the employee in the pay period in which the remuneration is paid, and (ii) an amount equal to the bonus payment divided by the number of pay periods in the taxation year of the employee in which the payment is made, minus (b) th e amount determined under section 4 in respect of the amount of regular remuneration paid by the employer to the employee in the pay period, multiplied by (c) the number of pay periods in the taxation year of the employee in which the payment is made. (3) Where a payment in respect of a retroactive increase in remuneration is made by an employer to an employee whose total remuneration from the employer, including the retroactive increase, may reasonably be expected to exceed $5,000 in the taxation year of the employee in which the payment is made, the amount to be deducted or withheld there from by the employer is (a) the amount determined under section 4 in respect of the new rate of remuneration minus (b) the amount determined under section 4 in respect of the previous rate of remuneration multiplied by (c) the number of pay periods in respect of which the increase in remuneration is retroactive. (4) Where a lump sum payment is made by an employer to an employee who is a resident of Canada , (a) if the payment does not exceed $5,000, the employer shall deduct or withhold there from 3% of the payment instead of the amount determined under section 4 ; (b) if the payment exceeds $5,000 but does not exceed $15,000, the employer shall deduct or withhold there from 7% of the payment instead of the amount determined under section 4 ; and (c) if the payment exceeds $15,000, the employer shall deduct or withhold 10% of the payment instead of the amount determined under section 4 . (5) Where the payment referred to in subsection (4) would be pension income or qualified pension income of the employee in respect of which subsection 118(3) of the federal Act would apply if the definition "pension income" in subsection 118(7) of the federal Act were read without reference to subparagraphs (a )( ii) and (iii) of that subsection, the payment is considered to be the amount of the payment minus (a) where the payment does not exceed the taxable income referred to in paragraph 7(a) of the Act, the lesser of $1,000 and the amount of the payment; (b) where the payment exceeds the amount referred to in paragraph (a) but does not exceed the taxable income referred to in paragraph 7(c) of the Act, $654; and (c) where the payment exceeds the taxable income referred to in paragraph 7(c) of the Act, $587. (6) For the purpose of subsection (4), a "lump sum payment" means a payment that is (a) a payment described in subparagraph 40 (1)(a)(i) or (iii) or paragraph 40(1)(c) of the federal ITAR, (b) a payment under a deferred profit sharing plan or a plan referred to in section 147 of the federal Act as a "revoked plan", except a payment referred to in subparagraph 147(2)(k)(v) of the federal Act, (c) a payment made during the lifetime of an annuitant referred to in the definition "annuitant" in subsection 146(1) of the federal Act out of or under a registered retirement savings plan of that annuitant, other than (i) a periodic annuity payment, or (ii) a payment made by a person who has reasonable grounds to believe that the payment may be deducted under subsection 146 (8.2) of the federal Act in computing the income of any taxpayer; (d) a payment out of or under a plan referred to in subsection 146(12) of the federal Act as an "amended plan" other than (i) a periodic annuity payment, or (ii) where paragraph 146(12)(a) of the federal Act applied to the plan after May 25, 1976, a payment made in a year subsequent to the year in which that paragraph applied to the plan, (e) a payment made during the lifetime of an annuitant referred to in the definition "annuitant" in subsection 146.3(1) of the federal Act under a registered retirement income fund of that annuitant, other than a payment to the extent that it is in respect of the minimum amount, within the meaning assigned by subsection 146.3(1) of the federal Act, under the fund for a year; (f) a retiring allowance; (g) a payment of an amount as, on account or instead of payment of, or in satisfaction of, proceeds of the surrender, cancellation or redemption of an income-averaging annuity contract; or (h) a payment described in paragraph (n) of the definition "remuneration" in subsection 100(1) of the federal regulations. Back to Top Deductions not required 6. (1) No amount shall be deducted or withheld from a payment in accordance with section 4 or 5 in respect of an employee who was neither employed nor resident in Canada at the time of payment except in respect of (a) remuneration described in subparagraph 115(2)(e)(i) of the federal Act that is paid to a non-resident person who has in the year, or had in any previous year, ceased to be resident in Canada ; or (b) remuneration reasonably attributable to the duties of any office or employment performed or to be performed in Canada by the non-resident person. (2) Subsections 104 (3), (3.01), (3.1) and (4) and sections 104.1 and 109 of the federal regulations apply for the purpose of these regulations with the necessary changes. Back to Top Variations in deductions 7. Where an employer makes a payment of remuneration to an employee in his or her taxation year (a) for a period for which no provision is made in the Schedule, (b) for a pay period referred to in the Schedule in an amount that is greater than any amount provided for, (c) whose total remuneration in respect of the year is greater than an amount of total remuneration provided for in the Schedule, or (d) whose personal credits in respect of the year are greater than an amount provided for in section 3 of the Schedule, the amount to be deducted or withheld by the employer from that payment is the proportion of the payment that the tax that may reasonably be expected to be payable under the Act by the employee with respect to the aggregate of all remuneration that may reasonably be expected to be paid by the employer to the employee in respect of that taxation year is of that aggregate. Back to Top Employee's returns 8. (1) The return required to be filed by an employee under subsection 227(2) of the federal Act, as that subsection applies for the purpose of subsection 76(1) of the Act, shall be filed by the employee with the employer when the employee commences employment with that employer and a new return shall be filed there under within 7 days after the date on which a change occurs that may reasonably be expected to result in a change in the employee's personal credits for the year. (2) Notwithstanding subsection (1), where, in a year, an employee receives payments in respect of commissions or in respect of commissions and salary or wages, and the employee elects to file a prescribed form for a year in addition to the return referred to in that subsection, that form shall be filed with the employee's continuing employer on or before January 31 of the year and, where applicable, within one month after the employee commences employment with a new employer or within one month of the date on which a change occurs that may reasonably be expected to result in a substantial change in the employee's estimated total remuneration for the year or estimated deductions for the year. (3) Where, in a taxation year, an employee has elected to file the prescribed form referred to in subsection (2) and has filed that form with the employee's employer, the employee may at any time afterward in the year revoke that election and that revocation is effective from the date that the employee notifies the employee's employer in writing of the employee's intention. Back to Top Remittance 9. Subject to subsections 108 (1.1), (1.11) and (1.12) of the federal regulations, amounts deducted or withheld in a month under subsection 153(l) of the federal Act, as it applies for the purpose of the Act, shall be remitted to the Receiver General not later than the fifteenth day of the following month. Back to Top Schedule 1. For the purpose of paragraphs 4 (1 )( d) and (2)(d), the mid-point of the range of amounts of personal credits for a taxation year shall be as follows: (a) from $0 to $7,410, the mid-point shall be $7,410; (b) from $7,410.01 to $9,010, the mid-point shall be $8,210; (c) from $9,010.01 to $10,610, the mid-point shall be $9,810; (d) from $10,610.01 to $12,210, the mid-point shall be $11,410; (e) from $12,210.01 to $13,810, the mid-point shall be $13,010; (f) from $13,810.01 to $15,410, the mid-point shall be $14,610; (g) from $15,410.01 to $17,010 the mid-point shall be $16,210; (h) from $17,010.01 to $18,610, the mid-point shall be $17,810; (i) from $18,610.01 to $20,210, the mid-point shall be $19,410; (j) from $20,210.01 to $21,810, the mid-point shall be $21,010; and (k) for amounts in excess of $21,810, the mid-point shall be the amount multiplied by the appropriate percentage. ©Earl G. Tucker, Queen's Printer