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 source deductions of income tax 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 source deductions of income tax 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 source deductions of income tax

Calculating source deductions of income tax for regular payments

Regular payments

Calculating the annual taxable income

I = annual taxable income

  = [P × (G − F − H − CSA)] − J − J₁ ► If the result is negative, enter 0.

New variable

CSA = additional employee QPP contributions on the employee's gross pensionable income for the pay period, excluding gratuities, retroactive pay or similar lump-sum payments

        = CS × [(S₃ − B₂) / S₃]

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

            B₂ = gratuities, retroactive pay or similar lump-sum payments made during the pay period

Gratuities, retroactive pay or similar lump-sum payments

First method

Calculating annual taxable income

I₁ = annual taxable income

   = (G₁ − F₁ − H₁ − CSA₁) + [Pr × (G − F − H₂ − CSA)] − J − J₁ ► If the result is negative, enter 0.

New variables

CSA₁ = total of the amounts included in variable CSA accrued before the start of the current pay period

CSA = additional employee QPP contributions on the employee's gross pensionable income for the pay period, excluding gratuities, retroactive pay or similar lump-sum payments

        = CS × [(S₃ − B₂) / S₃]

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

            B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

Calculating income tax for the year

Y₁ = income tax for the year taking into account variable B₁

     = [T × (I₁ + B₁ − CSB₁)] − K − K₁ − (0.15 × E) − (0.15 × P × Q) − (0.15 × P × Q₁) ► If the result is negative, enter 0.

Y₂ = income tax for the year taking into account variables B₁ and B₂

     = [T × (I₁ + B₁ + B₂ − CSB₁ − CSB)] − K − K₁ − (0.15 × E) − (0.15 × P × Q) − (0.15 × P × Q₁) ► If the result is negative, enter 0.

New variables

CSB₁ = total of the amounts in variable CSB accrued before the start of the current pay period 

CSB = additional employee QPP contributions on gratuities, retroactive pay or similar lump-sum payments during the pay period

       = CS × (B₂ / S₃)

           where

           CS = additional employee QPP contributions for the pay period

                 = C × (0.01 / 0.0640)

                     where

                     C = employee QPP contribution for the pay period

           B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

           S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

Second method

Calculating annual taxable income

I = annual taxable income

  = [P × (G − F − H − CSA)] + B₁ + B₂ − CSB₁ − CSB − J − J₁ ► If the result is negative, enter 0.

New variables

CSA = additional employee QPP contributions on the employee's gross pensionable income for the pay period, excluding gratuities, retroactive pay or similar lump-sum payments

         = CS × [(S₃ − B₂) / S₃]

             where

             CS = additional employee QPP contributions for the pay period

                   = C × (0.01 / 0.0640)

                       where

                       C = employee QPP contribution for the pay period

              S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

              B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

CSB₁ = total of the amounts included in variable CSB accrued before the start of the current pay period 

CSB = additional employee QPP contributions on gratuities, retroactive pay or similar lump-sum payments during the pay period

        = CS × (B₂ / S₃)

            where

            CS = additional employee QPP contributions for the pay period

                   = C × (0.01 / 0.0640)

                       where

                       C = employee QPP contribution for the pay period

           B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period 

           S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments 

Calculating source deductions of income tax for the pay period

A = source deductions of income tax on a gratuity, retroactive payment or similar lump-sum payment during the pay period 

    = T × (B₂ − CSB)

New variable

CSB = additional employee QPP contributions on gratuities, retroactive pay or similar lump-sum payments during the pay period 

         = CS × (B₂ / S₃)

             where

             CS = additional employee QPP contributions for the pay period

                   = C × (0.01 / 0.0640)

                       where

                       C = employee QPP contribution for the pay period

             B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period 

             S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments 

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

First method

Calculating annual taxable income

I = annual taxable income

    = [S₁ × (G − F − H − CSA₁ − CSA)] + B − CSB₁ − CSB − J − J₁ ► If the result is negative, enter 0.

New variables

CSA₁ = total of the amounts included in variable CSA accrued before the start of the current pay period

CSA = additional employee QPP contributions on the employee's gross pensionable income for the pay period, excluding gratuities, retroactive pay or similar lump-sum payments

        = CS × [(S₃ − B₂) / S₃]

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

            B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

CSB₁ = total of the amounts included in variable CSB accrued before the start of the current pay period 

CSB = additional employee QPP contributions on gratuities, retroactive pay or similar lump-sum payments during the pay period

        = CS × (B₂ / S₃)

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments 

Second method

Calculating annual taxable income

I₃ = annual taxable income taking into account variable B₃

    = [S₁ × (G − F − H₁ − CSA₁ − CSA)] + B₃ − CSB₁ − CSB − J − J₁ ► If the result is negative, enter 0.

I₄ = annual taxable income taking into account variable B₄

    = [S₁ × (G − F − H₂ − CSA₁ − CSA)] + B₄ − CSB₁ − J − J₁ ► If the result is negative, enter 0.

New variables

CSA₁ = total of the amounts included in variable CSA accrued before the start of the current pay period

CSA = additional employee QPP contributions on the employee's gross pensionable income for the pay period, excluding gratuities, retroactive pay or similar lump-sum payments

        = CS × [(S₃ − B₂) / S₃]

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments

            B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period

CSB₁ = total of the amounts included in variable CSB accrued before the start of the current pay period 

CSB = additional employee QPP contributions on gratuities, retroactive pay or similar lump-sum payments during the pay period

        = CS × (B₂ / S₃)

            where

            CS = additional employee QPP contributions for the pay period

                  = C × (0.01 / 0.0640)

                      where

                      C = employee QPP contribution for the pay period

            B₂ = gratuities, retroactive pay or similar lump-sum payments during the pay period 

            S₃ = employee's gross pensionable income for the pay period, including gratuities, retroactive pay or similar lump-sum payments