RL-1 Slip – Foreign Employees Who Are Entitled to a Five-Year Tax Exemption
As a rule, an individual who is not resident in Canada and who comes to Québec to work in certain specialized sectors of activity (hereinafter called an “employee”) is entitled to a full or partial tax exemption for a period of five years. The exemption covers the employee's salary or wages or the employee's income from all sources, as applicable, and consists of a deduction in the calculation of taxable income.
To be eligible for the deduction, the employee must meet several conditions. In particular, you must obtain a certificate or a qualification certificate for the employee from the Québec government. The certificate will be issued under certain conditions.
For more information, consult Foreign Employees Entitled to a Five-Year Tax Exemption.
You must complete an RL-1 slip (see courtesy translation RL-1-T) for such an employee in the usual way. You must enter one of the codes below in a blank box of the RL-1 slip, followed by the amount of the deduction (that is, the portion of the remuneration that you subtracted from the employee's gross remuneration in calculating the remuneration subject to source deductions of income tax).
- Enter “A-9” if the employee was a specialist who worked in a biotechnology development centre (BDC), in an international financial centre (IFC), or for a financial services corporation.
- Enter “A-10” if the employee was a researcher who worked for a business in Canada that carried out scientific research and experimental development (R&D) (or had R&D carried out on its behalf) in Québec.
- Enter “A-11” if the employee was a researcher on a postdoctoral internship and worked for an eligible university entity or for a public research centre.
- Enter “A-12” if the employee was an expert who worked for a business in Canada that carried out R&D (or had R&D carried out in its behalf) in Québec.
- Enter “A-13” if the employee was a professor who worked at a Québec university.
In addition, enter “A-14” in another blank box, followed by the exemption rate (see the note below). When two different exemption rates apply in the same year, enter only one exemption rate on the slip. This rate must correspond to the result of the following calculation: the total deduction for the year divided by the gross salary or wages paid to your employee for the year, multiplied by 100.
The exemption rate cannot be less than 25%.
In July, a foreign professor will start the last year of his or her five-year exemption period. A 50% exemption rate applies to the salary paid from January to June and a 25% exemption rate applies to the salary paid from July to December.
|January to June||$40,000|
|July to December||+||$60,000|
|January to June ($40,000 × 50%)||$20,000|
|July to December ($60,000 x 25%)||+||$15,000|
($35,000 ÷ $100,000) × 100 = 35
Enter the following information:
- “A-13” in a blank box of the RL-1 slip, followed by the amount of the deduction for the year, $35,000;
- “A-14” in another blank box, followed by the 35% exemption rate for the year.
You must provide the employee with a copy of the certificate or qualification certificate issued in his or her regard by the Québec government.
If the employee is entitled to an exemption on income from all sources, you must also provide the employee with a letter containing the following information:
- the period in the year during which he or she was your employee;
- the period in the year included in his or her exemption period and the gross remuneration paid during the period; and
- any other information related to the deduction to which the employee is entitled.
The employee needs these documents in order to claim a deduction in his or her income tax return.
A foreign specialist working for a corporation (or partnership) that operates an IFC is entitled to an exemption on income from all sources and not only on his or her salary or wages.