Canada Pension Plan (CPP) contributions

CPP contributions are a payroll item a buyer takes over or starts. A buyer meets them when setting up payroll after closing and when checking that the seller remitted what it withheld before the sale.

How the rules work

The Canada Pension Plan requires an employer paying remuneration in pensionable employment to deduct the employee’s contributions under prescribed rules and remit them (s. 21(1)). The CRA says the employer must also contribute an amount equal to what it deducts, and remit both. Except as provided in subsection 4(2), the Act’s employee and employer contribution provisions do not apply to employment in a province providing a comprehensive pension plan (s. 4(1)), and the CRA says an employer with employees whose province of employment is Quebec deducts Quebec Pension Plan contributions instead of CPP. For a successor employer after a restructuring, the CRA says the amounts the former employer deducted may, in certain situations, be considered for the year.

What to check or ask

• Whether CPP amounts withheld before closing were all remitted
• Whether any employees work in Quebec, which changes the plan and the agency involved
• Whether your deal treats you as a successor employer for the year

Closing-day mechanics are covered in how to handle payroll on closing day when you buy a business. Compare employment insurance premiums.