Tax implications for employers whose employees work remotely from a different province

Last updated on September 13, 2020

McCarthy’s published this article addressing the question of whether there are possible tax implications resulting from an employer’s employees working remotely in a different province from where the employer is located or typically operates. Specifically, these circumstances raise issues of whether employee home offices could create a permanent establishment of the employer in the other province for provincial income tax purposes, and whether the location of the employee’s home office affects the employer’s payroll withholding obligation.

McCarthy’s concludes that:

An employee’s home office is not normally considered to be a “fixed place of business” of the corporate employer, provided that the home office is not objectively identified with the business of the employer. Accordingly, a home office should generally not result in a fixed place of business PE of the employer.

An employee working from home in a province may cause the corporate employer to be deemed to have a PE in that province, if the employee has a general authority to contract on behalf of the corporation. General authority to contract is normally considered to exist if the employee in the ordinary course of business is able to bind the corporation, without prior approval.

A home office is generally not considered to be an “establishment” of the employer for payroll withholding purposes, such that an employee who works full-time from home in a particular province is generally not considered to report for work at an establishment of the employer in that province solely by virtue of the home office. Accordingly, the employee is generally deemed to report for work at the establishment of the employer from which his, her or their remuneration is paid.

Go here to read the full commentary and analysis from McCarthy’s.