Employment in Canada

Information for employees

In general, Canadian residents are taxed on their worldwide income and non-residents of Canada are taxed on their Canadian-source income, including income from employment in Canada. Persons who are employed in Canada but who reside in a country with which Canada has a tax treaty may benefit from protections in the treaty. A complete list of Canada's tax treaties is available on the Department of Finance Web site.

Persons employed in Canada will generally have income tax withholdings, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums deducted by their employer from their gross pay. The deductions apply to both residents and non-residents of Canada.

Canada has social security agreements with many countries that address situations where social security payments would otherwise be made to both the Canada Pension Plan and to a foreign social security plan. More information on Canada's social security agreements is available on Social Development Canada's Web site.

An employee can request an official decision by the CRA on whether CPP contributions and EI premiums should be deducted from his or her pay.

The amount of income tax an employee has deducted from payroll does not necessarily reflect the final determination of income tax that person owes - instead these deductions are payments on account of potential tax owing. The final tax liability is generally determined once the employee files a Canadian tax return and it is assessed. The assessment may result in a refund or a further amount due.

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Information for employers

Vancouver's hosting of the 2010 Winter Games may encourage individuals from outside of Canada to take up employment in Canada. Employers, including those that reside outside of Canada that make payments to employees resident in Canada or that perform duties in Canada, should be aware of various employer obligations under Canadian law. If an employer provides benefits or allowances to its employees (such as automobile benefits, housing, and travel assistance), the employer may have to report the value of the benefit in the income of its employees. For more information, see Guide T4130, Employers' Guide - Taxable Benefits. Employers are also legally responsible for withholding certain amounts from the wages, salaries, and other remuneration of their employees. Amounts withheld are for income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.

If an employer is not sure whether to deduct CPP contributions or EI premiums from a worker's pay, the employer can request a ruling from the CRA.

More information about payroll is available on the payroll pages, which you can also use to access Guide T4001, Employer's Guide - Payroll Deductions, and other useful information.

Related link: HRSDC - Services for Business Gateway