Source deductions of income tax
Employees who take vacations
Where vacation pay is calculated on a percentage basis and paid to an employee who is taking a vacation, you must use the applicable section of the Source Deduction Table for Québec Income Tax (document TP-1015.TI-V), as indicated below:
- 2% – Use the section marked “53 pay periods per year” or “52 pay periods per year.”
- 4% – Use the section marked “27 pay periods per year” or “26 pay periods per year.”
- 6% – Divide the vacation pay by 3. Use the section marked “52 pay periods per year,” and multiply the weekly source deduction by 3.
- 8% – Divide the vacation pay by 4. Use the section marked “52 pay periods per year,” and multiply the weekly source deduction by 4.
Employees who do not take vacation
If you give vacation pay to an employee who is not taking vacation, use the method applicable to gratuities to calculate the remuneration subject to source deductions of income tax and employer contributions.
Payments made to a trust as credits for accumulated vacation
Payments that you make to a trust as credits for vacation accumulated by an employee must be included in the employee's income for the year in which the payments are made. The payments are subject to:
- source deductions of income tax
- employee and employer Québec Pension Plan (QPP) contributions
- employee and employer Québec parental insurance plan (QPIP) premiums
- the employer contribution to the health services fund
- the contribution related to labour standards
You must also include these amounts in your total payroll used to calculate your health services fund contribution rate, your participation in workforce skills development and, if applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF).