Small Business Job Credit

On September 11, 2014, the Honourable Joe Oliver, Minister of Finance, announced the introduction of the new Small Business Job Credit. The Canada Revenue Agency (CRA) has some information related to this measure. The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available.

What is the Small Business Job Credit?

The Small Business Job Credit is a two-year measure that will help small businesses by lowering their Employment Insurance (EI) premiums from the legislated rate in 2015 and 2016. The savings small businesses will realize from this measure will help them create jobs and growth, and support Canada's sustained economic recovery in a time of ongoing global uncertainty.

How to tell if you are eligible

You are eligible for this credit if you meet all of the following conditions in 2015 and/or 2016:

• you deducted EI premiums from the remuneration you paid to your employees, or paid the worker's share of EI premiums for barbers, hairdressers, fishers, or drivers of taxis and other passenger-carrying vehicles, and you remitted these premiums (along with your businesses' share of EI premiums) to your payroll program (RP) account;
• you reported the income and deductions on a T4 slip and filed this information on your RP account for 2015 and/or 2016; and
• the total of employer EI premiums you paid for all of your RP accounts in 2015 and/or 2016 was $15,000 or less.

You don't have to apply for the credit. The CRA will automatically establish eligibility for 2015 and 2016 separately, based on the T4 information that you file for each of those years.

How the CRA will calculate the credit

If you are eligible, the CRA will automatically calculate the amount of your credit using the EI information from the T4 slips you filed with your 2015 and/or 2016 T4 information returns. There is no application form to complete.

The amount of the credit is calculated using a reduced premium rate for small business for the year in question. For example, if you operate a small business in Ontario and the total employer EI premiums you paid for 2015 and/or 2016 is $15,000 or less, the EI premium rate you will use to calculate what you pay during these years is $1.88 per $100 of insurable earnings. When your T4 information return is processed, the CRA will re-calculate your EI premiums at a reduced small business rate of $1.60 per $100 of insurable earnings and it will issue you a refund for the difference, as long as there is no outstanding balance on your account.

If you have more than one payroll program (RP) account under your business number (BN), the CRA will determine if you are eligible to receive a credit by adding the employer EI premiums for all RP accounts under that BN. The amount of credit that each RP account will receive is generally proportional to the amount of the employer's EI premiums that was paid into each RP account.

How you will receive the credit

Once we have calculated your credit, we will apply it to any outstanding balance on your payroll account(s), and then refund any amount remaining to you.

Amending, cancelling or adding T4 slips

Your eligibility to receive the credit and the refund amount you receive may be affected if you make changes to the 2015 and/or the 2016 T4 information on which your credit is calculated. Once we process amended, cancelled or additional T4 slips, we will recalculate your eligibility for the credit and adjust (increase or decrease) the refund amount you may have received.

Time limit for getting the credit

No credit will be allowed if we receive your original 2015 T4 return or any amended, cancelled or additional T4 slips for 2015 on or after January 1, 2019. Similarly, no EI premium reduction will be allowed if we receive your original 2016 T4 return or any amended, cancelled or additional T4 slips for 2016 on or after January 1, 2020.

How will the Small Business Job Credit be applied in the Province of Quebec?

Different EI rates apply for Quebec employers under the Quebec Parental Insurance Plan (QPIP).

An equivalent credit of $0.28 will be applied to the EI premium rate in Quebec.

Will the credit apply to employees?

The credit does not apply to premiums paid by employees.

The Small Business Job Credit is business income that must be reported

If you receive the credit, you have to report that amount as income or reduce your EI expense when you file your business return for the year in which you have received a credit, even if the CRA transferred some or all of this credit to pay off a debt.

Registered charities and non-profit organizations

If you are a registered charity or non-profit organization, you are eligible to receive the credit as long as your 2015 and/or 2016 employer EI premiums for all RP accounts under that BN were not more than $15,000 in each of those years.