On March 16, 2022, the federal government published amendments to the Income Tax Regulations in the Canada Gazette. Under the amendments, which come into effect on January 1, 2023, additional employee contributions to the Québec Pension Plan (QPP) and the Canada Pension Plan (CPP) must be deducted from employment income when calculating the remuneration from which to withhold federal income tax.

In information bulletin 2022-3, published on April 29, 2022, the Ministère des Finances announced that the Regulation respecting the Taxation Act would be amended to include the changes to the Income Tax Regulations, with the necessary adjustments. These amendments also come into effect on January 1, 2023.

The formulas for calculating annual taxable income as of January 1, 2023, are shown below. The new formulas let you take into account employees' first additional QPP contribution when calculating the remuneration from which to withhold Québec income tax. 

Do not use these formulas for 2022. We are only publishing them so that employers can update their payroll systems for 2023.

The formulas for calculating annual taxable income and QPP contributions as of January 1, 2024, will be published at a later date so that you can take into account the second additional employee QPP contribution.

For more information, see guide TP-1015.F-V, Formulas to Calculate Source Deductions and Contributions.

FORMULAS FOR CALCULATING ANNUAL TAXABLE INCOME

Calculating source deductions of income tax for regular payments

Regular payments

Calculating the annual taxable income

I      =     annual taxable income 

       =     P × (G − F − H − CS) − J − J₁

New variable

CS  =   additional employee QPP contributions for the pay period

       =   C × (0.01/0.0640)

            where

            C  =   employee QPP contribution for the pay period

Gratuities, retroactive pay or similar lump-sum payments

First method

Calculating the annual taxable income

I₁     =     annual taxable income

        =     (G₁ − F₁ − H₁ − CS₁) + [Pr × (G − F − H₂ − CS)] − J − J₁

New variables

CS₁ =   total of the amounts included in variable CS accrued before the start of the current pay period  

CS  =   additional employee QPP contributions for the pay period

       =   C × (0.01/0.0640)

            where

            C  =   employee QPP contribution for the pay period

Second method

Calculating the annual taxable income

I      =     annual taxable income

       =     P × (G − F − H − CS) + B₁ + B₂ − J − J₁

New variable

CS  =   additional employee QPP contributions for the pay period

       =   C × (0.01/0.0640)

             where

             C  =   employee QPP contribution for the pay period

Calculating source deductions of income tax on a cumulative-averaging basis

First method

Calculating the annual taxable income

I      =     annual taxable income

       =     S₁ × [G − F − H − (CS₁ + CS)] + B − J − J₁

New variables

CS₁ =   total of the amounts included in variable CS accrued before the start of the current pay period

CS  =   additional employee QPP contributions for the pay period

       =   C × (0.01/0.0640)

             where

             C  =   employee QPP contribution for the pay period

Second method

Calculating the annual taxable income

I₃      =     annual taxable income taking into account variable B₃

         =     S₁ × [G − F − H₁ − (CS₁ + CS)] + B₃ − J − J₁

I₄      =     annual taxable income taking into account variable B₄

         =     S₁ × [G − F − H₂ − (CS₁ + CS)] + B₄ − J − J₁

New variables

CS₁ =   total of the amounts included in variable CS accrued before the start of the current pay period

CS  =   additional employee QPP contributions for the pay period

       =   C × (0.01/0.0640)

             where

              C  =   employee QPP contribution for the pay period