Canadian Payroll Reporter

2 Canadian HR Reporter, a Thomson Reuters business 2015 News June 2015 | CPR Focus on smaller employers 'unbalanced': CPA Afterwards, they may be eligible for quarterly remitting if they have an average monthly with- holding amount of less than $3,000 and have shown a perfect compliance record over the pre- vious 12 months. The budget also proposes to exempt some non-resident em- ployers from withholding and remitting income tax source de- ductions from payments made to non-resident employees who are covered under a tax treaty. The proposed measure would apply to payments made in 2016 and later years. Currently, employers are re- quired to deduct income tax from non-resident employees and remit it to the CRA even if the employee is exempt from Canadian income tax under a tax treaty that Canada has signed with another country. Employ- ers may obtain a waiver from the CRA for a particular employee, but the government says the waiver system is inefficient as it only applies to a specific em- ployee for a specific time period. To qualify for the proposed exemption, a non-resident em- ployee would have to be exempt from Canadian income tax un- der a tax treaty and could not be in Canada for 90 or more days in any 12-month period that in- cludes the period in which the employer made the payment. For an employer to qualify, it would have to be resident in a country with which Canada has a tax treaty. The employer would also not be allowed to carry on business through a permanent establishment in Canada in the fiscal period in which it made the payment to the employee. In addition, at the time of the pay- ment, the employer would have to be certified as exempt by the minister of National Revenue. Exempt employers would still be responsible for reporting amounts paid to non-resident employees. They would also have to collect and remit income tax from non-resident employ- ees who did not qualify for the exemption, although they would not be penalized for failing to deduct income tax if they had no reason to think the employee did not qualify for the exemption when they made the payment. In the budget, Oliver reiter- ated a previous announcement that the government would in- troduce a new method for set- ting EI rates in 2017. The new seven-year break-even method would ensure EI premiums are no higher than necessary to pay for the EI program over time and would result in lower EI rates, Oliver said. The Finance Minis- try estimates rates would drop from 1.88 per cent in 2016 to 1.49 per cent in 2017. Other proposals in the budget that may affect payroll include: • The period in which eligible individuals may receive EI com- passionate care benefits would be extended from six weeks to six months, beginning next year. • The Canada Labour Code would be amended to increase the amount of bereavement leave federally regulated em- ployees could take and introduce new unpaid leaves for employ- ees with family responsibilities. Currently, employees covered by the code are entitled to three days of bereavement leave. The time off is with pay for employ- ees who have been continu- ously employed for at least three consecutive months. The code would also be amended to add protections for unpaid interns in federally regulated workplaces. • An EI Working While on Claim pilot project would be extended to August 2016. The project al- lows EI claimants to keep 50 cents of their EI benefits for ev- ery dollar they earn, up to 90 per cent of weekly insurable earn- ings used to calculate the ben- efits. • The annual contribution limit for tax-free savings accounts would increase from $5,500 to $10,000, beginning this year. • The disability and sick leave management system for federal public sector workers would be modernized, including replac- ing the current system of bank- ing sick days with a short-term disability plan. • The Business Number identi- fication program would be ex- tended beyond the CRA to other departments. • The government would create a Small Business Consultation Forum this year, involving the CRA and the Canadian Federa- tion of Independent Business (CFIB). It would meet twice a year and provide the CRA with feedback from small and mid- size businesses on tax adminis- tration issues. • The CRA would continue to implement measures to provide better service, including improv- ing the use of plain language in its communication, developing a plain-language guide to help businesses understand and pre- pare for CRA audits and work- ing to ensure taxpayers "can rely on written information" they receive in letters from the CRA and on its website. Reaction to budget Both the Canadian Chamber of Commerce and CFIB praised the budget for taking the needs of small businesses into con- sideration. CFIB president Dan Kelly called it "a terrific budget for small business." The Canadian Payroll Asso- ciation (CPA), however, said the budget should have had more in it for other employers. "The focus on micro and small employers with straight- forward payrolls seems unbal- anced when larger employers annually pay billions of dollars in undue administrative burden such as paper T4s and Requests for Payroll Information," CPA president Patrick Culhane said in a news release. He added that the association would have liked to see mea- sures to allow employers to issue electronic T4s to employees as a standard practice. "(This) would negate the need for distributing and storing mil- lions of paper T4 slips for em- ployees who do not require a paper copy and could provide employers annual savings of over $100 million — at no cost to government," Culhane said. "It is ridiculous that the gov- ernment is using eT4s as the standard for its 250,000 employ- ees, but not enabling employers to do the same." Provincial changes In addition, the Newfoundland and Labrador government re- cently tabled annual financial plans. The Newfoundland and Labrador budget included an announcement the govern- ment would create two new tax brackets and tax rates, effective for 2015 and later years. A new rate of 13.8 per cent would ap- ply to taxable income between $125,000 and $175,000 and a new rate of 14.3 per cent would apply to taxable income greater than $175,000. The rates for taxable income up to $125,000 would not change. For source deductions, the CRA says it will implement the changes on Jul. 1 and will pro- rate the two new rates for the rest of the year to take into account the mid-year rate change. The CRA will post updated payroll deductions tables and computer formulae with the changes on its website. The Newfoundland govern- ment also announced it would raise the provincial portion of the Harmonized Sales Tax (HST) from eight per cent to 10 per cent on Jan. 1, 2016. As a result, the HST rate would rise from 13 per cent to 15 per cent. In Manitoba, the provincial budget did not include any rate changes for personal income taxes or the Health and Post Sec- ondary Education Tax Levy. It did contain an announcement the government would raise the general minimum wage rate from $10.70 an hour to $11 on Oct. 1. The budget also included a new tax credit for volunteer firefighters and search and res- cue volunteers, beginning this year. In addition, it proposed enhancements to tax credits for employers that hire apprentices, co-op students and graduates. from BUDGETS on page 1 The Newfoundland and Labrador budget included an announcement the government would create two new tax brackets and tax rates, effective for 2015 and later years.

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