Published | Category : Income tax - businesses
Changes to the Compensation Tax for Financial Institutions
The following changes have been made to the compensation tax:
- reduction of the tax rate applicable to salaries and wages paid during the period from April 1, 2018, to March 31, 2022;
- introduction of a maximum annual amount for salaries and wages paid by a financial institution after March 31, 2018, that are subject to the tax.
The tax rate applicable to salaries and wages paid by financial institutions during the period from April 1, 2022, to March 31, 2024, remains unchanged. The date on which the tax will be eliminated (March 31, 2024) also remains unchanged.
In addition, there have been no changes to the calculation of the compensation tax on insurance premiums or to the calculation of amounts determined with respect to an insurance fund. In these cases, the compensation tax rate is 0.48% until March 31, 2022, and 0.30% from April 1, 2022, to March 31, 2024.
Adjustment of the compensation tax rate on wages paid
The table below shows the adjusted compensation tax rates for financial institutions according to the period concerned.
|April 1, 2018, to March 31, 2019||April 1, 2019 to March 31, 2020||April 1, 2020, to March 31, 2022||April 1, 2022, to March 31, 2024|
|Bank, loan corporation, trust corporation or corporation trading in securities||4.29%||4.22%||4.14%||2.80%*|
|Savings and credit union||3.39%||3.30%||3.26%||2.20%*|
|Any other person||1.37%||1.34%||1.32%||0.90%*|
|* This rate has not been adjusted.|
Maximum amount of salaries and wages paid that are subject to the compensation tax
The maximum amount of salaries and wages paid after March 31, 2018, by a person that is a financial institution throughout a taxation year, and that are subject to the compensation tax for a given year, is as follows:
- in the case of a bank, a loan corporation, a trust corporation or a corporation trading in securities: $1.1 billion;
- in the case of a savings and credit union: $550 million;
- in the case of any other person: $275 million.
Terms of application
New rules specifying how to apply the maximum amount of salaries and wages subject to the compensation tax and the new tax rates have been introduced for financial institutions. These new rules apply to the following situations:
- a taxation year includes April 1, 2018 (the effective date of the changes);
- a taxation year includes March 31, 2024 (the date on which the compensation tax is to be eliminated);
- a taxation year has fewer than 365 days;
- a person subject to the tax is a financial institution for only a part of a taxation year.
For more information, see pages A.116 to A.124 of the Additional Information 2018-2019 (PDF – 3.73 MB) published by the Ministère des Finances.