Frequently Asked Questions

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The Quebec Taxation Act considers employer-paid medical and dental group insurance premiums paid on behalf of employees as a taxable benefit subject to QPP and Quebec provincial income tax and must be reported on the Quebec tax form relevé-1 (RL-1) using boxes A and J.

However, as per the federal Income Tax Act, employer-paid medical and dental group insurance premiums are not a taxable benefit and therefore not reported on the T4 slip.  

Under Revenu Québec’s legislation, an employee’s public transit pass is not a taxable benefit in the following cases:

  • the employer reimburses or partially reimburses the employee, upon presentation of supporting documents, for an eligible public transit pass that is valid for at least one month or an eligible paratransit pass that the employee acquired to commute between their usual place of residence and the workplace; or
  • the employer purchases on behalf of their employee an eligible transit pass or an eligible paratransit pass that is provided to the employee for the primary purpose to commute between their usual place of residence and the workplace.

As per the Canada Revenue Agency (CRA), if you pay for or provide your employee with a public transit pass, it is generally considered a taxable benefit and must be reported on the T4 in box 14 as employment income and code 40 (Other Information).

If an employer pays for the transportation pass (fully or partially) on behalf of the employee and the conditions are fulfilled as required by Revenu Québec, then the amount is not subject to QPP contributions, Quebec provincial income tax or QPIP premiums. The value of the pass is subject to federal income tax as it is considered a taxable benefit federally by the CRA. If an employer reimburses an employee, either fully or partially (with receipts), then the amount is subject to QPIP (even though the amount is not taxable provincially). The amount is also subject to federal income tax and EI.

Since the value of the benefit is not taxable in Quebec, there is no requirement to report the benefit on the RL-1 slip. Any amounts that the employer reimburses to the employee for the pass are subject to QPIP premiums, and the reimbursement is reported on the RL-1 in Box I (insurable earnings for QPIP). If the non-taxable conditions are not met, the value of the taxable benefit must be reported in boxes A and L of the RL-1 slip.  If the value of the employer-paid pass is taxable federally; it is reported on the T4 slip in box 14 and in the “Other information” area in code 40.

Under the Quebec Taxation Act, gifts and awards follow similar principles to the federal requirements with two main differences:

The first difference is that under Revenu Québec’s legislation, there are two separate $500 annual exemptions that can be used, one for gifts and a second for awards. However, the CRA allows for one $500 annual exemption for both gifts and awards.

Secondly, an employee in Quebec who is given a gift card specifying the name of the merchant, provided in recognition of a special occasion or as an award for an accomplishment such as meeting safety standards, will not be taxed on amounts of $500 or less. On the other hand, the CRA does not accept the gift card under their annual exemption policy and is therefore fully taxable.

Both Revenu Québec and the Canada Revenue Agency (CRA) consider gifts and awards to be employment income except when non-cash gifts under $500 are provided to recognize an occasion or accomplishment.

Gifts that fall outside of Revenu Québec and CRA’s gift and award policy are taxable and subject to Q/CPP and Income taxes. If the gift or award is provided in cash, it is subject to Q/CPP, EI, QPIP, and Income taxes.

Taxable gifts and awards are reported on the RL-1 in boxes A and L and on the T4 in box 14 and code 40.

Revenu Québec (RQ) and the Canada Revenue Agency (CRA) have different requirements in relation to the calculation of statutory deductions and the reporting of pay in lieu of notice.

RQ considers the pay in lieu of notice as a retiring allowance. However, the CRA considers pay in lieu of notice as employment income.

Pay in lieu of notice paid to a Quebec employee is subject to EI premiums, QPIP premiums, and Income taxes (not subject to QPP contributions). The Quebec lump-sum tax rates are used to calculate the Quebec provincial income tax. The Quebec provincial lump-sum tax rates are:

  • 15% for amounts up to and including $5,000.00
  • 20% for amounts over $5,000.00

The federal portion of income tax is calculated using the bonus method of taxation. If the employer is unable to use the two separate methods of income tax calculation for the federal and Quebec provincial tax due, then the employer may use the bonus tax method for both.

Pay in lieu of notice paid to a Quebec employee is reported in box O (code RJ) of the RL-1 and in box 14 of the T4.

Pay in lieu of notice paid outside of Quebec is subject to CPP contributions, EI premiums, and income taxes (using the bonus tax method). Since the CRA considers pay in lieu of notice as employment income, it is reported on the T4 in box 14

In Québec, if the professional membership dues are required by a professional association for the purpose of maintaining a professional status, then any employer-paid or reimbursed dues are deemed a taxable benefit to the employee. For example, an employee who is the controller of the finance department of a company is reimbursed for their professional membership dues to a professional order of accountants; the employee is deemed to have received a taxable benefit.  On the contrary, RQ may consider that such a payment or reimbursement is not a taxable benefit if the dues are being paid for or reimbursed for the employer’s benefit. For example, if an employer hires a chartered accountant who works as a receptionist and does not perform any duties at their employment that pertain to their profession of accountancy but is obliged by the employer, simply for prestige, to maintain a professional status recognized by law, then any employer-paid or reimbursed dues are non-taxable.  This is because the employee is not hired to practice their profession and does not perform any act pertaining to the profession, rather the employer required the membership for their own prestige.

Federally, however, if the employer can validate they are the primary beneficiary from the employee's membership in a professional association, any employer-paid or reimbursed fees are non-taxable. Employer-paid fees are non-taxable if the employer requires membership as a condition of employment. For example, a company that sells chemicals requires its Chemical Engineer to maintain a professional status through an engineering association and would therefore be non-taxable.   On the other hand, in situations where the employee is the primary beneficiary, employer-paid or reimbursed professional membership dues constitute a taxable benefit.

When professional membership dues are considered taxable, the benefit is subject to:

  • Q/CPP
  • EI, and QPIP (if paid in cash)
  • Federal and provincial income taxes

The taxable benefit is reported on the RL-1 slip in boxes A and L and on the T4 slip in box 14 and code 40.

Code G-1 is indicated at the bottom of the RL-1 by using one of the blank boxes available beneath the pre-printed boxes, followed by the applicable value. All amounts indicated in code G-1 are excluded from box G of the RL-1. The employer is not required to withhold or make QPP contributions on the value indicated in code G-1. For an employee who did not reach the maximum QPP contribution for the year, upon filing their personal income tax return they may voluntarily contribute to QPP based on the value indicated in code G-1 until they’ve reached the annual maximum contribution. Even when the employee chooses to voluntarily contribute on the amounts reported in code G-1, the employer is still not required to remit a matching employer contribution.

Below is a list of when code G-1 on the RL-1 must be used:

  • The employer contributes to acquire, on behalf of their employee, a share or fraction of a share issued by the Fonds de solidarité FTQ or by Fondaction.
  • If during a given pay period no remuneration was paid to an employee for the pay period during which a taxable benefit in kind (non-cash taxable benefit) was granted.
  • If the employee receives remuneration in a given pay period where a benefit was granted but the amount paid did not fulfill the required QPP contribution, the employer must enter the portion of the pensionable earnings (including the amount of the exemption) that is related to the amount withheld in box G of the RL-1. The employer must also use code G-1 followed by the portion of the value of the benefit that the employer was unable to withhold the QPP contribution.

There is no requirement by Revenu Québec (RQ) to separate the eligible and non-eligible portion of the retiring allowance on the RL-1 slip. The total amount of the retiring allowance is reported on the RL-1 slip in box O (code RJ).

The Canada Revenue Agency (CRA) requires the reporting of eligible and non-eligible retiring allowances separately on the T4 slip.

For employees who receive a retiring allowance upon or after termination who have years of service prior to 1996, the employer is required to calculate the eligible portion of the retiring allowance. The eligible amount is determined by using the following calculation:

  • $2,000 for each year, or part year, prior to 1996
  • $1,500 for each year or part year prior to 1989 that employee was not vested in a pension plan or DPSP.

The eligible portion is reported in code 66 of the T4 slip and the non-eligible portion is reported in code 67.

Revenu Québec (RQ) and the Canada Revenue Agency (CRA) have different requirements regarding health spending accounts.

Since RQ considers health insurance plans to be a taxable benefit, it does not make an exception when it comes to the health spending account. To determine the value of the taxable benefit throughout the year, the following calculation must be performed:

[(A x B) /C] + [D x E) / F]

Where:

A: The total of all benefit reimbursements paid to all employees who have the same type of coverage (e.g. single or family)

B: Number of days during the year the employee has coverage under the plan

C: The total number of employee coverage days for all employees (total of column B)

D: Total of all administrative or management fees paid to a third party

E: Number of days during the year the employee has coverage under the plan

F: The total number of employee coverage days for all employees (total of column E)

At the end of the year, the employer will have to adjust the value of the taxable benefit based on the real amounts that were used by the group of employees covered under the same plan if estimations were initially used.

The taxable benefit is subject to QPP contributions and Quebec income tax and must be reported on the RL-1 in boxes A and J.

The CRA considers that if the majority of the reimbursement is for health expenses, it is not a taxable benefit and there is no T4 reporting requirement.

An amount paid by the employer to acquire, on behalf of their employee, a share or fraction of a share issued by the Fonds de solidarité FTQ or by Fondaction is subject to income tax at source. This taxable benefit is not subject to QPP, EI (no EI if contributions locked-in. If not locked in, then EI is deducted), QPIP, nor the employer contribution to the health services fund (QHSF), the contribution related to the CNESST labour standards, the premium related to the CNESST Health and Safety, nor the contribution to the Workforce Skills Development and Recognition Fund (WSDRF).  The amount of the benefit must be reported on the RL-1 in boxes A, L and in code G-1 (but not in box G), and on the T4 in boxes 14, 26, and code 40.

Employers may provide a non-accountable allowance to employees who are moving. When the employer provides a cash allowance with no documented receipts, amounts may be treated as non-taxable in the following circumstances:

  • RQ – the equivalent of two weeks’ salary
  • CRA - $650.00 (employee must provide a written statement declaring this amount was used to pay for moving expenses)

Any amount in excess of the prescribed exemptions must be included as income subject to Q/CPP contributions, EI and QPIP premiums, and federal and provincial income tax, reported in box A and L of the RL-1 slip and box 14 and code 40 of the T4 slip.