When you are self-employed, you are essentially taking on the role of employer and employee. As such self-employed individuals are required to remit both portions of the CPP or QPP to Federal or Quebec respectively, which is calculated on your earnings for the year. This only applies to unincorporated business as if you are an incorporated business, you are an employee of the corporation regardless of whether or not you own the business.
The QPP rates for 2011 for self-employed persons is 9.90% of your net business/self-employed income for the year. The maximum amount payable for 2011 is $4.435.20, which means that if you earn more than $48,300 of net business income, your QPP will remain $4,435.20 and there is a basic exemption of $3,500 i.e. if you earn less than $3,500 you do not have to pay QPP.
EXAMPLE #1: Income is less than maximum