Withholding rates for lump-sum payments
Combine all lump-sum payments that have been or are expected to be paid in the calendar year when determining the composite rate to use.
Use the following lump-sum withholding rates to deduct income tax:
- 10% (5% for Quebec) on amounts up to and including $5,000;
- 20% (10% for Quebec) on amounts over $5,000 up to and including $15,000; and
- 30% (15% for Quebec) on amounts over $15,000.
Do not deduct CPP contributions or EI premiums from retiring allowances.
Recipients may have to pay extra tax on these amounts when they file their income tax and benefit returns. To avoid this situation, if a recipient requests it, you can:
- calculate the annual tax to deduct from the recipient's yearly remuneration, including the lump-sum payment. For more information see "Step-by-step calculation of tax deductions" of Guide T4032, Payroll Deductions Tables of your province or territory;
- calculate the annual tax to deduct from the recipient's yearly remuneration, not including the lump-sum payment; and
- subtract the second amount from the first amount.
The result is the amount you deduct from the lump-sum payment, if the recipient requests it.
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