Canada's tax system is administered by the Canada Revenue Agency (CRA) at the federal level, with provincial and territorial governments also levying their own taxes. Understanding both employer obligations and employee entitlements is crucial for businesses operating in Canada to ensure compliance and maintain accurate payroll practices. This guide provides an overview of employer tax responsibilities and employee tax deductions in Canada for 2025, covering key areas such as social security contributions, income tax withholding, eligible deductions, compliance deadlines, and considerations for foreign workers and companies.
Employer Social Security and Payroll Tax Obligations
Employers in Canada have several obligations related to social security and payroll taxes. These include contributions to the Canada Pension Plan (CPP), Employment Insurance (EI), and provincial or territorial payroll taxes, such as the Employer Health Tax (EHT) in Ontario.
- Canada Pension Plan (CPP): Employers must match employee contributions to the CPP. For 2025, the contribution rate is expected to be around 5.95% of pensionable earnings, up to a maximum annual contribution. The maximum pensionable earnings are projected to increase slightly each year.
- Employment Insurance (EI): Employers also contribute to EI, with a rate of approximately 1.4 times the employee's EI premium. The EI rate is subject to annual adjustments.
- Employer Health Tax (EHT): Several provinces, including Ontario, levy an EHT on employers based on their payroll. The EHT rates and exemption thresholds vary by province. In Ontario, employers with annual payrolls below a certain threshold are exempt, while those above pay a percentage of their total payroll.
| Contribution | Rate (Approximate) | Notes
