As of January 1, 2024, the Canada Revenue Agency (CRA) has introduced a new administrative policy aimed at providing clarity on determining the province of employment (POE) for remote workers concerning tax matters. This development is crucial for employers, as it affects various aspects such as CPP/QPP, EI, QPIP, and income tax deductions.
Who is Affected by the Policy Changes?
The policy specifically addresses employees operating under a "full-time remote work agreement" where physical presence at the employer's establishment is not required. The CRA defines such an agreement as one where the employer and employee can justify its existence, the employee is directed or allowed to work remotely full-time, and the duties are not performed at the employer's establishment. This arrangement can be either temporary or permanent.
Determining Province of Employment
For employees under a full-time remote work agreement, determining the POE involves assessing if the employee is reasonably considered "attached to the establishment of the employer." The CRA provides "primary indicators" and "secondary indicators" to aid in this evaluation.
Primary Indicator
The primary indicator is the province where the employee would physically conduct their employment duties if not for the remote work agreement. This is determined based on their past physical presence for work-related duties. For example, if an employee worked at the BC office before the remote work agreement, their POE remains BC.
Secondary Indicators
Secondary indicators include factors like where the employee attends in-person meetings, receives work-related material, or reports based on contractual agreements. These indicators collectively contribute to assessing the employee's attachment to the employer's establishment:
- The establishment where the employee attends or would attend in-person meetings, through any type of communication;
- The establishment where the employee receives or would receive work-related material or equipment or associated instructions and assistance;
- The establishment where the employee comes or would come in-person to receive instructions from their employer regarding their duties, through any type of communication;
- The establishment that is responsible for or supervises the employee, as indicated in the contractual agreements between the employer and the employee; and
- The establishment to which the employee would report based on the nature of the duties performed by the employee.
Multiple Employer Locations
In cases where an employer has multiple locations, they must consider which establishment the employee is more closely attached to based on the provided indicators.
Employer Action Steps
In response to this new policy, employers are required to review both new and existing full-time remote work agreements to determine their employees' POE. Importantly, employers should be vigilant, ensuring that any POE determination is not exploited to evade or reduce source deductions or employer contributions. To facilitate this assessment, the CRA has developed auser-friendly interactive guide, providing relevant tax forms and payroll deduction tables for employers. Stay informed and compliant with the latest CRA policies to effectively navigate the landscape of remote work taxation.