CANADIAN TAXATION#
The pay components used to store taxation and government calculation results are defined on the Define Pay Components (IPPC) form, using a Canadian pay component usage defined on the IPCU form.Pay elements (IPPE) are used to define which pay components are subject to each different tax.
Default tax calculation methods are found on the pay rule for each employee.
The Pay category (IPPGC) can override default tax information.
Canadian taxation is calculated during the UPCALC process (payroll calculation) using the Annualization Method, Overridden Flat Amount, Percentage Method, Lump Sum Method or other available methods.
UPCALC uses several provided files to calculate Canadian Taxation.
The following scenario describes the set up required when an organization has more than one Entity and have separate registration numbers, so payroll and remittances can be processed for two entities.
For this example there are two entities; Organization A and Organization B. In addition, there are three registration numbers associated with these entities, because Organization A has two different EI rates. The first registration number is used for employees with benefit packages that entitle the organization to a reduced employer EI rate; the second number is used for employees without the reduced rate.
To set up multiple BN numbers at the federal registration level:
- On IDGV, define the Registration Type field as ‘Cdn Fed Registration’.
- On IDGV, define the Country Name field as ‘Canada’.
- Define each BN number for the entity where employees are remitted.
- On IDGR, Registration tab, enter the proper Federal and State/Prov registration for the group.
- When RPYEC (Canada Year End Summary Report) is run for T4/T4A/Releve1, etc. form, users will select the BN number, then all the group level BN numbers will be automatically populated and will be reported by each BN number.
If an employee has ONE employment and then moves between groups that have different BN numbers, the CPP/EI will not start over, because during UPCALC, the YTD retrieval will not differentiate between groups.
If an employee has MULTIPLE employments within an entity, the CPP/EI will start over, regardless of whether the employee moves between groups that have a different BN number, because during UPCALC, the YTD retrieval is by employment.
Personality uses the “more accurate calculation” from the MC Guide for the K2 factor for CPP and EI tax credit:
(P x C) is changed to the lesser of:
CPP Max or YTD C + (PR x C)
(P x E) is changed to the lesser of:
EI Max or YTD EI + (PR x EI)
Where PR = number of pay periods remaining in the years.
When an employee is hired during the year and the CPP/EI tax credit does not reach the annual maximum, the PC and PE factor will be:
(P x C) and (P x E)
Where P = number of pay periods in the year.
This is because the employee does not have full YTD values to use the more accurate formula.
