Special payments chart

This chart will help you determine whether or not to deduct Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, and income tax on the special payments you make to your employees or recipients. If the payment you are looking for is not in this chart, go to the Determine the tax treatment of payments other than regular employment income.

^Note 1 If you have already deducted the total yearly maximum contributions from the employee's income, do not deduct more contributions. Do not consider amounts deducted by previous employers during the same year unless there was a restructure or reorganization.

^Note 2 Do not deduct EI premiums if the following two conditions are met:

• the total amount of your payment and the EI weekly benefits combined do not exceed the employee's normal weekly gross salary
• your payment does not reduce any other accumulated employment benefits such as banked sick leave, vacation leave credits, or retiring allowance

^Note 3 Do not deduct CPP contributions when the employment is performed totally or partly outside Canada.

^Note 4 Do not deduct income tax if you estimate that the total fee paid in the year is less than the total claim amount on Form TD1.

^Note 5 The issue of whether to deduct CPP, EI or both depends on the status of the resident director's employment. See Directors' fees.

^Note 6 Deduct CPP contributions when the international organization or the foreign government agrees to cover their employees. A list of the international organizations and foreign countries can be found under schedules [V] and [VII] of the Canada Pension Plan Regulations (except for employment listed in schedules [VI] and VIII). 

^Note 7 Deduct EI premiums when the foreign government or international organization agrees to cover its Canadian employees under Canada's EI legislation (in this case, the employment is insurable if Employment and Social Development Canada agrees). 

^Note 8  For more information on non-resident employees, see Rendering services in Canada.

^Note 9 Deduct CPP contributions unless the worker has a certificate of coverage from the competent authority of their country confirming that the worker is contributing to a pension plan in their country. Do not deduct CPP contributions if the employer is not residing in Canada and does not have an establishment in Canada, unless the employer has filed a Form CPT13, Application for an Employer Resident Outside Canada to Cover Employment in Canada Under the Canada Pension.

^Note 10 Do not deduct CPP contributions unless the employer has filed a Form CPT13, Application for an Employer Resident Outside Canada to Cover Employment in Canada Under the Canada Pension.

^Note 11 Deduct CPP contributions, unless the employment does not require CPP deductions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

^Note 12 For more information about bartering, see archived Interpretation Bulletin IT-490, Barter Transactions. Do not deduct income tax unless the taxpayer is an employee and makes a regular habit of providing services for cash. 

^Note 13 Do not deduct CPP contributions on benefits paid by Employment and Social Development Canada or a provincial government. Deduct CPP contributions on payments made by an employer unless the individual is working as a self-employed individual or the employment does not require CPP contributions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

^Note 14 Deduct income tax if the payment is considered government financial assistance. But if the payment is considered an inducement to earn business income, do not deduct income tax.

^Note 15 To determine if you have to deduct CPP, EI, or both for individuals who hold an office, see Elected or appointed officials.

^Note 16 Deduct CPP contributions on payments made by an employer unless the individual is working as a self-employed individual or the employment does not require CPP contributions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

^Note 17 To determine if you have to deduct CPP, EI or both, see Prescribed salary deferral plans or arrangements.

^Note 18 Qualifying retroactive lump-sum payments may require CPP or EI deductions in addition to income tax.

^Note 19 Do not deduct income tax on the amount of retiring allowance that is transferred directly to the recipient's RPP or RRSP (up to the amount of the employee's available RRSP deduction limit). See Retiring allowances for details.

^{Note 20} Deduct EI premiums if you would have negotiated a similar contract with a person that you deal with at arm's length.

^Note 21 Deduct EI premiums, unless the worker is remunerated by an employer residing outside Canada.

^Note 22 You have to deduct income tax on Canadian earnings, unless provisions of an income tax convention or treaty say otherwise.

^Note 23 For more information on determining if the tips and gratuities are controlled or direct, see Tips and gratuities.

^Note 24 Deduct income tax, unless the employer pays the remuneration directly to the order or the employee provides the employer with a letter of authority approved by a tax services office.

^Note 25 An amount you pay in addition to an advance or loan is not a top-up amount if you pay it while waiting for a decision on a workers' compensation board claim. This amount is considered as employment income.