Published | Category : Source deductions and employer contributions
Source Deductions of Income Tax to Change On July 1, 2023
In the Budget Speech of March 21, 2023, the Minister of Finance announced a general income tax cut for individuals as of the 2023 taxation year. Changes will be made to source deductions of income tax on remuneration paid after June 30, 2023.
Consequently, the Source Deduction Table for Québec Income Tax (TP-1015.TI-V), the Formulas to Calculate Source Deductions and Contributions (guide TP-1015.F-V), the Guide for Employers (TP-1015.G-V), the Source Deductions Return (TP-1015.3-V) and the WebRAS calculation tool will be updated for 2023. Since the changes will apply only as of July 1, 2023, the income tax reduction for the first part of 2023 will generally be calculated when individuals file their 2023 income tax return.
Reduction of the tax rates for the first two taxable income brackets for individuals
As of 2023, the tax rates for the first two taxable income brackets will drop from:
- 15% to 14% for taxable income up to $49,275;
- 20% to 19% for taxable income over $49,275 but not more than $98,540.
Changes to personal tax credits
Decrease in the conversion rate
As of 2023, the conversion rate for the amounts used to calculate personal tax credits will decrease from 15% to 14%.
Increase in the amounts used to calculate some personal tax credits
As of 2023, the amounts shown in form TP-1015.3-V that are used to calculate some personal tax credits will be increased. The amount for other dependants will increase from $4,810 to $5,154, and the amount for a child under 18 enrolled in vocational training or post-secondary studies (per term) will increase from $3,301 to $3,537. Source deductions of income tax on remuneration paid after June 30, 2023, must take these changes into account.
Reduction of the fixed rates for some payments
Since the rates for the first two taxable income brackets for individuals will be reduced, the fixed rates used to calculate source deductions on some payments and remuneration will be changed as well. This includes the payments and remuneration listed below that are made after June 30, 2023.
Single payment under a registered retirement income fund (RRIF) or a registered retirement savings plan (RRSP)
The rate for the part of a single payment under a RRIF that exceeds the minimum amount or for a single payment under an RRSP will decrease from 15% to 14%.
Other single payments
The rate for a single payment not exceeding $5,000 that does not come from a RRIF or an RRSP will decrease from 15% to 14%. If the payment exceeds $5,000, the rate will drop from 20% to 19%.
The single payments covered by the rate reduction are as follows:
- retiring allowance payments;
- certain payments from a registered education savings plan (RESP);
- certain payments from a pension plan;
- a payment made under a deferred profit-sharing plan;
- a death benefit payment;
- an amount paid to an employee or a former employee pursuant to an order or judgment, where part of the amount paid relates to a previous year.
Payment under a government work-incentive project
The rate for an earnings supplement payment under some government work-incentive projects will decrease from 15% to 14%.
Assistance payment under a registered disability savings plan (RDSP)
The rate for the taxable portion of an assistance payment under an RDSP that exceeds $20,998 for 2023 will decrease from 15% to 14%.
Bonuses, retroactive payments and similar lump-sum payments
The rate for bonuses or retroactive payments paid to an employee whose estimated annual remuneration (including the bonus or payment) does not exceed $17,183 for 2023 will decrease from 8% to 7%.
Remuneration of self-employed fishers
The rate applied to the remuneration of individuals who fish otherwise than under an employment contract and who elected to have income tax deducted at source from their remuneration will decrease from 15% to 14%.
Payment under a program to obtain information relating to tax non-compliance
The rate for a payment under a federal or provincial program to obtain information relating to tax non-compliance will decrease from 20% to 19%.
Special tax on accumulated investment income from a registered education savings plan (RESP)
The special tax deduction rate of 8% in Québec on the accumulated investment income from an RESP is maintained so that the combined (federal and Québec) tax rate of 20% continues to apply to Québec residents.
For more information, see Budget 2023-2024: Additional Information (PDF – 1,418 KB) on the Ministère des Finances website.