Tax Forms for Remote Workers

[Kailyn Mayer]

#92368

Forum: Community

Hi Team,
I would like to know which tax form a fully remote worker would fill out when they live in a different province than where the company is located. For instance, Company ABC is located in British Columbia, John Smith lives in Ontario and was hired as a full remote worker. Would John fill out the BC TD1 or the ON TD1?
Thank you,
Kailyn Mayer

[vickyp]

#92370

Employees are governed by the jurisdiction where the work is done, not where the corporate offices are. This can become a bit of an issue if employees are abroad or in jurisdictions where insurance and other entitlements can vary, you may have foreign tax and payroll implications that can and will get very complicated.

In your example, the employee would need to fill out the Ontario TD1. As the employer, you also need to pay Ontario payroll taxes and other costs like worker’s compensation as if you were operating in Ontario, because, in effect, you are with this single employee.

A lot of companies fly under the radar as jurisdictions have been slow to catch up with remote work arrangements, but there are plenty of cases to highlight that Revenue Canada and local governments are taking notice and fining employees and employers.

HR Insider Staff

[Kailyn Mayer]

#94649

Does the new CRA administrative rule apply? i.e. “If the employee is NOT considered “attached to an establishment of the employer”, the new CRA administrative policy does not apply?”

Thank you,
Kailyn

[Haley O’Halloran]

#94653

Great catch – we are currently working on some pieces regarding this new CRA policy. To answer your question now, employees who physically report for work at an establishment of their employer are subject to the payroll deduction rates of the province in which such establishment is located. Based on the CRA’s new policy that you mentioned, employees working remotely on a full-time basis will now be subject to the payroll deduction rates of the province in which their employer has an establishment that the remote employee could reasonably be considered attached to. But what does it mean to be attached to an work location as a remote employee?

The Policy sets out primary and secondary indicators to consider when you have a full-time remote employee and are trying to figure out which tax forms to file for them:

Primary indicator:‎ whether the employee would physically attend at that establishment to carry out employment duties and functions, were it not for the full-time remote work agreement. If an employee used to physically report to an establishment of the employer for work immediately before entering into a full-time remote work agreement, that establishment is generally the one that the employee is considered to be attached to, unless the employee’s circumstances or the nature of their duties have changed.

Secondary indicators include:
-The establishment where the employee receives work-related materials or instructions;
-The establishment where the employee obtains instructions regarding their duties;
-The establishment responsible for supervising the employee; and
-The establishment aligned with the nature of the employee’s duties‎.

Employers should examine their fully remote work arrangements to ensure that the payroll deductions align with the province or territory of employment of the establishment in which the remote employee is reasonably attached to. For example, I work fully remote in Ontario, but HRInsider is based in British Columbia. The company sent office supplies to my address, and I take all work direction from my home in Ontario. Therefore, they will still file taxes based on the province wherein my work is done – Ontario.

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