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Canada Revenue Agency announces maximum pensionable earnings for 2016
The Canada Revenue Agency announced in November that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2016 will be $54,900—up from $53,600 in 2015.
The basic exemption amount for 2016 remains $3,500.The employee and employer contribution rates for 2016 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.
The maximum employer and employee contribution to the plan for 2016 will be $2,544.30 each and the maximum self-employed contribution will be $5,088.60. The maximums in 2015 were $2,479.95 and $4,959.90.
Quick facts
The CPP applies in every province and territory in Canada with the exception of Quebec, where the Quebec Pension Plan (QPP) provides similar pensions and benefits.
Every employed Canadian over the age of 18 must contribute to the CPP (QPP for those employed in Quebec) to qualify for a retirement pension.
Contributions to the CPP end when a contributor turns 70.
The CPP provides retirement, disability and survivor benefits and pensions to contributors and their families.
- 15% on the first $45,282 of taxable income, +
- 20.5% on the next $45,281 of taxable income (on the portion of taxable income over $45, 282 up to $90,563), +
- 26% on the next $49,825 of taxable income (on the portion of taxable income over $90,563 up to $140,388), +
- 29% on the next $59,612 of taxable income (on the portion of taxable income over $140,388 up to $200,000), +
- 33% of taxable income over $200,000
- 5.05% on the first $41,536 of taxable income, +
- 9.15% on the next $41,539, +
- 11.16% on the next $66,925, +
- 12.16% on the next $70,000, +
- 13.6% on the amount over $220,000.
| CPP contribution rates, maximums and exemptions | ||||||
| Year | Max. Annual Pensionable Earnings | Basic Exemption | Maximum Contributory Earnings | Employee Contribution Rate (%) | Max. Annual Employee Contribution | Max. Annual Self – Employed Contribution |
| 2016 | $54,900 | $3,500 | $51,400 | 4.95 | $2,544.30 | $5,088.60 |
| 2015 | $53,600 | $3,500 | $50,100 | 4.95 | $2,479.95 | $4,959.90 |
| EI premium rates and maximums | |||||||
| Year | Max. Annual Insurable Earnings | Rate (%) | Max. Annual Employee Premium | Max. Annual Employer Premium | |||
|
Federal |
Quebec |
Federal |
Quebec |
Federal |
Quebec |
||
| 2016 |
$50,800 |
1.88 |
1.52 |
$955.04 |
$772.16 |
$1,337.06 |
$1,081.02 |
| 2015 |
$49,500 |
1.88 |
1.54 |
$930.60 |
$762.30 |
$1,302.84 |
$1,067.22 |
Prescribed Interest Rates for 2016
- The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
- The interest rate paid to corporate taxpayers on overpayments will be 1%.
- The interest rate paid to non corporate taxpayers will be 3%.
- The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.
- The interest rate for corporate taxpayers’ pertinent loans or indebtedness will be 4.41%.
Other taxes
The interest rate on overdue and overpaid remittances for the following taxes will be:
| Tax and Duty | Overdue remittances | Overpaid remittances | |
| Corporate taxpayers | Non corporate taxpayers | ||
| Goods and Services Tax (GST) | 5% | 1% | 3% |
| Harmonized Sales Tax | 5% | 1% | 3% |
| Air Travellers Security Charge | 5% | 1% | 3% |
| Excise Tax (non GST) | 5% | 1% | 3% |
| Excise Duty (except Brewer Licensees) | 5% | 1% | 3% |
| Excise Duty (Brewer Licensees) | 3% | N/A | N/A |
| Softwood Lumber Products Export Charge | 5% | 1% | 3% |
Medical expenses
Budget 2012 will add blood coagulation monitors for use by individuals who require anti-coagulation therapy — including associated disposable peripherals such as pricking devices, lancets and test strips — to the list of expenses eligible for the Medical Expense Tax Credit in 2012 and subsequent years. The devices must be prescribed by a medical practitioner.
Mineral Exploration Tax Credit
The Mineral Exploration Tax Credit will be extended for one more year for flow-through agreements entered into before March 31, 2013. With the “look-back rule,” this means that the credits extend to agreements up to March 31, 2014.
Group Sickness and Accident Insurance Plans
Employer contributions made to a plan after March 28, 2012, that relate to coverage after 2012 and are not in respect of a wage-loss replacement benefit payable on a periodic basis (i.e. the benefits will not be taxable to the employee) will be a taxable benefit. Such contributions made in 2012 will be included in income in 2013.
Life insurance policy exemption test
The criteria for determining if a life insurance policy is an exempt policy will change for policies issued after 2013. The government has made several technical proposals and will consult with key stakeholders on these proposed changes over the coming months.
Gifts to foreign charitable organizations
For gifts to foreign charitable organizations to be eligible for the donation tax credit, the organization must be a “qualified donee.” Currently, the Canadian government must donate to these organizations for them to qualify. Beginning in 2013, foreign organizations that pursue activities:
may apply to receive “qualified donee” status, even if they do not receive a donation from the government of Canada. Canada Revenue Agency will develop guidelines for granting such status.