R. B. Day (613) 957-2136
JUN - 9 1987
We are writing in reply to your letter of March 25, 1987, concerning what you perceive as an inconsistency in the income tax treatment of Provincial medicare premiums paid by your company on behalf of your employees in Quebec and Ontario.
At present, it is our understanding that there are only three Provinces in Canada that charge medicare premiums, they are Ontario, Alberta and British Columbia. Quebec, and the other six provinces fund their medicare plans through provincial income tax revenues. Quebec has not charged medicare premiums to its residents since 1978.
Quebec, however, evidently requires all employers to make contributions to the Provincial medicare plan based on a percentage of their payroll either paid to employees reporting to an establishment in Quebec or on payrolls paid from such an establishment. As of April 1, 1981, we understand that the contribution was 3% of the amount of such payroll costs. As of May 1, 1985, we further understand this payroll contribution was increased to 3.2175%.
In Ontario, Alberta and British Columbia, medicare premiums are the responsibility of the individual participants in the plan and not the employers. If, by virtue of a contract of employment or a union agreement, an employer pays any portion of the premium required to be made by an employee, that employee is in receipt of a benefit that is taxable under paragraph 6(1)(a) of the Income Tax Act.
In the circumstances described in your letter, it would appear that you may have perceived the payroll contribution which is, by provincial law, required to be paid by employers in the Province of Quebec as being similar to premium payments made on behalf of your Ontario employees.
Since the contribution paid by an employer in Quebec is the direct responsibility of the employer and is not attributable to any particular employee and does not relate to any type of employee premium, there is no taxable benefit to any of your Quebec employees in respect of the payment. The 1986 Employer's and Trustee's Guide sets out the T4 reporting requirements for those employers who make medicare premium contributions on behalf of their employees. In those Provinces where employee premiums are still payable and where the employer has agreed to make such payments on their employee's behalf, the guide would be followed. In those Provinces where no employee premiums are required, the reporting requirements in the guide would, of course, have no application.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
cc Carole Gouin-Toussaint Provincial and International Relations Division