Withholding rates for lump-sum payments
Combine all lump-sum payments that you have paid or expect to pay 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
- 30% (15% for Quebec) on amounts over $15,000
The above rates are a blend of federal and provincial. The Quebec rates shown are only federal. For more information on Quebec’s rates, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions.
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 do all of the following:
- 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" section in PublicationT4032, 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.
- 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.
If you pay a retiring allowance to a non-resident of Canada, withhold 25% of the retiring allowance (the withholding rate may vary depending on the applicable tax convention or agreement). Send this amount to the Receiver General on the non-resident’s behalf. For more information, see Guide T4061, NR4 – Non Resident Tax Withholding, Remitting, and Reporting.
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