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Small business job credit

NEW Small Business Job Credit

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Small business job credit

Last month, Minister of Finance Joe Oliver announced the introduction of  the new Small Business Job Credit, which is expected to save small businesses more than $550 million over the next two years

The Small Business Job Credit will apply to Employment Insurance (EI) premiums paid by small businesses in 2015 and 2016. The credit will be calculated as the difference between premiums paid at the legislated rate of $1.88 per $100 of insurable earnings and the reduced small business rate of $1.60 per $100 of insurable earnings in each of those years. Since employers pay 1.4 times the legislated rate, this 28-cent reduction in the legislated rate is equivalent to a reduction of 39 cents per $100 of insurable earnings in EI premiums paid by small employers. The 39-cent premium reduction will apply in addition to the premium reduction related to Quebec’s parental insurance plan, the Québec Parental Insurance Plan.

Any firm that pays employer EI premiums equal to or less than $15,000 in 2015 and/or 2016 will be eligible for the credit in those years.

As an example, a small business employing 14 employees, each earning $40,000, would ordinarily pay about $14,740 in EI premiums in 2015. However, since the total EI premiums paid by the employer are less than $15,000, it would be eligible under the Small Business Job Credit for a refund of about $2,200, which is the difference between employer premiums paid at the legislated rate versus the premiums calculated under the reduced small business rate ($12,540).

As another example, a small business employing 3 employees, each earning $25,000, would ordinarily pay about $1,975 in EI premiums in 2015. However, since the total EI premiums paid by the employer are less than $15,000, it would be eligible under the Small Business Job Credit for a refund of about $295, which is the difference between employer premiums paid at the legislated rate versus the premiums calculated under the reduced small business rate ($1,680).

Businesses will not have to apply. The Small Business Job Credit will be automatically administered by the Canada Revenue Agency, which will determine eligibility and calculate the amount of the credit. Once calculated, the credit will be applied against any outstanding debt and then the remaining amount, if any, will be refunded to the small business.

Background on the Small Business Job Credit:

The credit is effective for two years, beginning in 2015, and will be available to employers paying under $15,000 per year in EI premiums (or approximately $570,000 in EI assessable payroll). As examples, the credit would be available to firms with no more than 14 employees earning $40,000 or up to 22 employees earning $25,000 per year.

small business job credit

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office  for more information on this subject and how it pertains to your specific tax or financial situation.

Source: CRA website