Principal Changes for 2020

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The calculation changes for source deductions and contributions for 2020 relating to tax changes announced before November 1, 2019, are listed below. For information about tax changes announced after October 31, 2019, read the Tax News articles published after that date.

Indexation

Every year, the personal income tax system is automatically indexed. For 2020, the indexation rate is 1.72%.

Amounts indexed at that rate include:

  • income thresholds;
  • personal tax credit amounts;
  • deduction code amounts;
  • the threshold for determining the method to be used to calculate the source deduction of income tax on a gratuity or retroactive pay;
  • the maximum deduction for employment income;
  • the maximum exemption that can be granted to an emergency services volunteer; and
  • the maximum tax-exempt amount of a disability assistance payment from a registered disability savings plan (RDSP).
Income tax rates and income thresholds

The taxable income thresholds have been indexed for 2020. The income tax rates have not changed.

Income tax rates and income thresholds for 2020
Taxable income Tax rate Constant
more than not more than
$0 $44,545 15% $0
$44,545 $89,080 20% $2,227
$89,080 $108,390 24% $5,790
$108,390 25.75% $7,687
Personal tax credit amounts

The personal tax credit amounts on the Source Deductions Return (TP-1015.3-V) are indexed for 2020.

The table below shows the personal tax credit amounts for 2020. The amounts for 2019 are provided for information purposes.

Personal tax credit amounts 2020 2019
Basic personal amount $15,532 $15,269
Amount transferred from one spouse to the other $15,532 $15,269
Amount for other dependants $4,348 $4,274
Amount for a child under 18 enrolled in post-secondary studies (per term) $2,983 $2,933
Additional amount for a person living alone (single-parent family) $2,197 $2,160
Amount for a severe and prolonged impairment in mental or physical functions $3,449 $3,391
Amount for a person living alone $1,780 $1,750
Age amount $3,267 $3,212
Amount for retirement income $2,902 $2,853
Reduction threshold of the age amount, the amount for a person living alone, the amount for retirement income and the amount for career extension  $35,205 $34,610
Changes to deduction codes

We are implementing a new method in 2020 for determining the deduction code amounts. Under the new method, the interval between the amounts (indexed for 2020) is reduced to $1,000. This means you may have to change an individual's deduction code for 2020, if the individual's deduction code in 2019 was a code other than A.

If the individual's deduction code in 2019 was a code other than A, you may have to change the code so that the total amount of the personal tax credits (indexed for 2020) claimed on the copy of the Source Deductions Return (form TP‑1015.3-V) the individual gave you corresponds to the code for 2020. You can also have the individual complete a new copy of form TP‑1015.3‑V for 2020.

The table below shows the deduction code amounts for 2020. The amounts for 2019 are provided for information purposes.

Code  Amount ($) for 2020 Amount ($) for 2019
O None None
A 1 – 15,532 1 – 15,269
B 15,533 – 16,532 15,270 – 18,000
C 16,533 – 17,532 18,001 – 20,000
D 17,533 – 18,532 20,001 – 24,000
E 18,533 – 19,532 24,001 – 25,500
F 19,533 – 20,532 25,501 – 27,000
G 20,533 – 21,532 27,001 – 29,000
H 21,533 – 22,532 29,001 – 31,500
I 22,533 – 23,532 31,501 – 34,500
J 23,533 – 24,532 34,501 – 38,000
K 24,533 – 25,532 38,001 – 40,000
L 25,533 – 26,532 40,001 – 42,500
M 26,533 – 27,532 42,501 – 44,000
N 27,533 – 28,532 44,001 – 46,500

The new method aims to reduce the gap between the source deductions of income tax based on the personal tax credits the individual entered on form TP-1015.3-V and the income tax payable based on the personal tax credits the individual reported in the income tax return.

Example

An employee receives a salary of $1,346.15 every two weeks. The total amount of the personal tax credits entered on form TP-1015.3-V is $25,503. The 2019 deduction code for that amount is F.

Under the new method, the 2020 deduction code for the total amount of the personal tax credits entered on form TP-1015.3-V (indexed for 2020), that is $25,942 ($25,503 X 1.0172), is L. In this case, you have to change the employee's deduction code to ensure that the income tax withheld is not more than should be based on the employee's deduction code for 2020.

2020 2019
Remuneration paid every two weeks (26 pay periods) $1,346.15 $1,346.15
Remuneration subject to source deductions of income tax = $1,346.15 $1,346.15
Source deduction of income tax per pay period (deduction code F) $82.15 $45.88
Source deduction of income tax per pay period (deduction code L) $46.89 N/A
Excess amount of income tax withheld per pay period1 = $35.26 N/A
  1. The employee can receive a refund of the excess amount when the employee files the income tax return.

For more information, see the Source Deduction Table for Québec Income Tax (TP-1015.TI-V). 

Gratuities and retroactive pay

For 2020, the threshold for determining the method to be used to calculate the source deduction of income tax on gratuities and retroactive pay has been increased from $15,269 to $15,532.

Deduction for employment income

For 2020, the maximum deduction for employment income has been increased from $1,170 to $1,190. The Source Deduction Table for Québec Income Tax (TP-1015.TI-V) takes the amount into account.

Emergency services volunteer

For 2020, the maximum exemption that can be granted to an emergency services volunteer has been increased from $1,170 to $1,190.

Disability assistance payments from an RDSP

For 2020, you must withhold income tax at a rate of 15% from the portion of a disability assistance payment from a registered disability savings plan (RDSP) that exceeds $18,981 (previously $18,660).

Increase in the withdrawal limit under the HBP

The total amount that an individual can withdraw from a registered retirement savings plan (RRSP) under the Home Buyers' Plan (HBP) has been increased from $25,000 to $35,000 for withdrawals made after March 19, 2019. Do not withhold income tax on such withdrawals if the amount withdrawn is $35,000 or less.

QPP contributions

The table below provides the Québec Pension Plan (QPP) data for 2020. The 2019 data are provided for information purposes.

2020 2019
Maximum pensionable earnings (pensionable salaries and wages) $58,700 $57,400
Basic exemption $3,500 $3,500
Maximum contributory earnings $55,200 $53,900
Contribution rate  5.70% 5.55%
Employee's maximum contribution $3,146.40 $2,991.45
Employer's maximum contribution (per employee) $3,146.40 $2,991.45
QPIP premiums

The table below provides the Québec parental insurance plan (QPIP) data for 2020. The 2019 data are provided for information purposes.

2020 2019
Maximum insurable earnings $78,500 $76,500
Employee's premium rate 0.494% 0.526%
Employee's maximum premium ($78,500 × 0.00494) $387.79 $402.39
Employer's premium rate 0.692% 0.736%
Employer's maximum premium (per employee) ($78,500 × 0.00692) $543.22 $563.04
Contribution to the health services fund

The table below shows the health services fund contribution rates for 2020. The total payroll threshold for the reduced contribution rate is $6,000,000 for 2020.

Health services fund contribution rates (%) for 2020
Total payroll (TP)
$1,000,000 or less $1,000,001 to $5,999,999 $6,000,000 or more
Employers whose total payroll is more than 50% attributable to activities in the primary and manufacturing sectors 1.25 0.6480 + (0.6020 × TP/1,000,000)1 4.26
All employers other than public sector employers and employers whose total payroll is more than 50% attributable to activities in the primary and manufacturing sectors 1.65 1.1280 + (0.5220 × TP/1,000,000)1 4.26
Public sector employers 4.26
  1. The contribution rate must be rounded off to two decimal places. If the number in the third decimal place is 5 or more, round up the number in the second decimal place.
Contribution related to labour standards

For 2020, the portion of an employee's remuneration in excess of $78,500 (previously $76,500) is not subject to the contribution related to labour standards.

Relief regarding remittances of source deductions and employer contributions

Under an administrative policy we implemented in 2019, you now have the possibility of making your remittances of source deductions and employer contributions for the last period of December before January 16 of the following year, without penalty, if you are an employer whose remittance frequency is weekly or twice-monthly. You will be charged interest as of the due date for your remittance frequency.

The first remittance covered by the policy is the remittance for the last period of December 2019.

More specifically, if you are an employer with a weekly remittance frequency and you make your remittance (or a partial remittance) of source deductions and employer contributions for the last period of December 2019:

  • before January 8, 2020, no penalties or interest will be charged on any amount not paid by that date;
  • in the period from January 8 to January 15, 2020, no penalties will be charged, but interest will be calculated as of January 8, 2020, on any unpaid amount;
  • after January 15, 2020, penalties and interest will be charged as of January 8, 2020, on any unpaid amount.

If you are an employer with a twice-monthly remittance frequency and you make your remittance (or a partial remittance) of source deductions and employer contributions for the last period of December 2019:

  • before January 11, 2020, no penalties or interest will be charged on any amount not paid by that date;
  • in the period from January 11 to January 15, 2020, no penalties will be charged, but interest will be calculated as of January 11, 2020, on any unpaid amount;
  • after January 15, 2020, penalties and interest will be charged as of January 11, 2020, on any unpaid amount.

Tax news

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You can also read all the Tax News articles about source deductions and employer contributions for the following years:

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