Do Canadian Small Businesses Have to Pay CPP?
If you’re a business owner or self-employed, you may wonder, “Do I have to pay CPP? “
That answer is yes. If your business’ net income is more than $3,500, you will have to start paying CPP at double the rate you would if you were an employee.
According to Service Canada:
“The amount you pay is based on your salary. If you are self-employed, it is based on your net business income (after expenses). You do not contribute on any other source of income, such as investment earnings.
If, during a year, you contributed too much or earned less than a set minimum amount, you will receive a refund of contributions when you complete your income tax return.
You only pay contributions on your annual earnings between the minimum and a set maximum level (these are called your “pensionable” earnings).
The minimum level is frozen at $3,500. The maximum level is adjusted each January, based on increases in the average wage.”
However, you can claim the additional amount as well as a non-refundable tax credit for the regular contribution.
So whether or not your business is incorporated is not a factor. Nor is whether or not you pay yourself a “salary.” For tax purposes, Canada Revenue Agency (CRA) considers you and your business a single entity, and you will be treated like one.
Hogg, Shain and Scheck specializes in accounting for entrepreneurs. If you have any questions about this or any other business accounting matter, please contact us.