Source deductions of income tax
Employees who take vacation
Where vacation pay is calculated on a percentage basis and paid to an employee who is taking holidays, you must use the applicable schedule of the Source Deduction Table for Québec Income Tax (document TP-1015.TI-V), as indicated below:
- 2% – Use Schedule A (53 pay periods) or Schedule B (52 pay periods).
- 4% – Use Schedule C (27 pay periods) or Schedule D (26 pay periods).
- 6% – Divide the vacation pay by 3. Use Schedule B (52 pay periods) and multiply the weekly source deduction by 3.
- 8% – Divide the vacation pay by 4. Use Schedule B (52 pay periods) 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 holidays, use the method applicable to gratuities to calculate the source deductions and employer contributions on the amount.
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;
- Québec Pension Plan (QPP) contributions;
- Québec parental insurance plan (QPIP) premiums;
- the contribution to the health services fund;
- the contribution related to labour standards.
Similarly, you must 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).