Directors' Fees

Source deductions of income tax

You pay directors' fees and a salary or wages

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 and calculate the source deduction of income tax using the usual method.

You pay only directors' fees

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 withhold an amount calculated using the method given below. You must also withhold an amount calculated using this method if the director entered the deduction code “O” on 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 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.
  • In the section of the Source Deduction Table for Québec Income Tax (document TP-1015.TI-V) marked “12 pay periods per year,” 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 or January 1 of the year. The result is the amount of income tax to withhold from the directors' fees.
Note
You cannot use the formulas in the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) with the above method. You must do the calculation yourself.

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 and make 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.

Example – Calculation for the director of a corporation
Anita is a director of XYZ corporation. She receives $1,000 in directors' fees each quarter, but no other remuneration. The exemption for each quarter is $875 (that is, $3,500 divided by four fee payments). The quarterly amount to be withheld each quarter is $6.75, or 5.40% × ($1,000 − $875).

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 employee and employer Québec parental insurance plan (QPIP) premiums, and to the employer contribution to the health services fund if one of the basic conditions for making source deductions and paying employer contributions is met.

Similarly, you must include this amount 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).

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

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