Source deductions of income tax

If, for a pay period, you pay directors' fees to a director who also receives a salary or wages for the same period, add the amount of the fees to the salary or wages to calculate the source deduction of income tax.

If you pay only directors' fees to a director who is resident in Canada and you estimate that the value of the fees for the year will not exceed the total of the amounts entered by the director on lines 10 and 19 of the Source Deductions Return (form TP-1015.3-V), you are not required to withhold income tax.

Otherwise, you must calculate the source deduction of income tax using the method given below, even if the director entered “0” on line 10 of form TP-1015.3-V.

You are not required to withhold income tax if you pay only directors' fees to a director who is not resident in Canada and who does not attend meetings in Québec or perform any duties there. An example is a director who is outside Canada and who attends a meeting in Québec by teleconferencing (conference call, video conferencing, etc.). However, you are required to withhold income tax if the director attends meetings in Québec or performs any duties there. The tax is withheld from the value of the directors' fees paid for the portion of the services performed for you by the director in Québec that is attributable to the director's presence at meetings in Québec or the director's performance of any duties there.

Calculation method

Calculate the income tax you have to withhold as shown in the example below.

1. Calculate the monthly amount of directors' fees by dividing the value of the fees paid by the number of months that have elapsed since the later of the following dates: the date of the last payment and January 1 of the year.
2. In Schedule F (12 pay periods) of the Source Deduction Table for Québec Income Tax (document TP-1015.TI-V), locate the monthly source deduction for the amount determined in the point above, and multiply it by the number of months that have elapsed since the later of the following dates: the date of the last payment and January 1 of the year. The result is the amount of income tax to withhold from the directors' fees.

Québec Pension Plan (QPP) contributions

If, for a pay period, you pay directors' fees to a director who also receives a salary or wages for the same period, add the amount of the fees to the salary or wages to calculate the Québec Pension Plan (QPP) contribution using the usual method.

If you pay only directors' fees to a director who is resident in Canada, divide the annual QPP exemption of $3,500 by the number of fee payments made during the year.

Director who is not resident in Canada

If you pay only directors' fees to a director who is not resident in Canada, you are not required to withhold or pay QPP contributions if the director holds office partly or entirely outside Canada.

Québec parental insurance plan (QPIP) premiums and other employer contributions

If, for a pay period, you pay directors' fees to a director who also receives a salary or wages for the same period, or if you pay only directors' fees to a director, the payment is subject to:

• Québec parental insurance plan (QPIP) premiums
• the contribution to the health services fund
• the contribution to the Workforce Skills Development and Recognition Fund (WSDRF) (if applicable)

You must include this amount in your total payroll used to calculate your health services fund contribution rate and your participation in workforce skills development.

The amount is not subject to the contribution related to labour standards.