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Increase in the Compensation Tax for Financial Institutions

In the 2010-2011 Budget Speech, Finance Minister Raymond Bachand announced a temporary increase in the compensation tax for financial institutions.

Financial institutions that are corporations

For a taxation year that ends after March 30, 2010, and begins before April 1, 2014, the rate of the compensation tax has increased as follows:

  • for salaries and wages paid, it increases:
    • from 2% to 3.9% for a bank, a loan company, trust company or securities trading company
    • from 2.5% to 3.8% for a savings and credit union
    • from 1% to 1.5% for any other person
  • for insurance premiums and amounts established for an insurance fund, the rate has increased from 0.35% to 0.55%.

Consequently, the first instalment of the compensation tax that the corporation has to pay after March 31, 2010, must be calculated using a rate that is weighted to reflect the number of days in the taxation year before March 31, 2010 and the number of days in the taxation year after March 30, 2010.   

The financial institution can then calculate instalments of compensation tax using the form CO-1027, Calcul des acomptes provisionnels des sociétés and keep it in its files.

Financial institutions that are not corporations

The rate of the compensation tax applicable to salaries and wages paid by a financial institution that is not a corporation increases from 1% to 1.5% for salaries and wages paid from March 31, 2010, to March 31, 2014.

The compensation tax is remitted at the same time as the source deductions and employer contributions. The financial institution must complete the Remittance of Source Deductions and Employer Contributions form provided by Revenu Québec.

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