Canada Revenue Agency introduces new policy on January 1 2024 for remote work arrangement in relation to province of residence (POS) and province of employment (POE)
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Canada Revenue Agency introduces new policy on January 1 2024 for remote work arrangement in relation to province of residence (POS) and province of employment (POE).
The Canada Revenue Agency has issued a new administrative policy, effective January 1, 2024, that provides guidance on determining the province of employment (“POE”) for remote workers for tax purposes. Employers need to know an employee’s POE for the purpose of CPP/QPP, EI, QPIP and income tax deductions.
Who do the Policy Changes Impact?
The policy gives a new method for determining an employee’s POE where an employee does not physically report for work at their employer’s establishment. It applies to employees who are deemed to be under a “full-time remote work agreement”. The CRA generally considers there to be a “full-time remote work agreement” where:
the employer and employee can justify that such an agreement was made;
the employer directs or allows the employee to perform their employment duties full-time (100%) remotely; and
the employment duties are to be performed at one or more locations that are not an “establishment of the employer”.
- The agreement can be either temporary or permanent. For example, where a BC employer allows an employee to work from their family home in Ontario full-time for 18 months, the arrangement would be a full-time remote work agreement even though it is for a limited time.
- How to Determine Province of Employment?
- Where there is a full-time remote work agreement, the employer must then determine if the employee is reasonably considered to be “attached to the establishment of the employer.” The POE will be the province or territory of that establishment.
The CRA has provided “primary indicators” and “secondary indicators” to help with this assessment.
The primary indicator of reasonable attachment is whether the employee would physically attend at that establishment to carry out their duties if they were not under a full-time remote work agreement. If an employee physically reported to a particular establishment before entering remote work, this will be a strong indicator of attachment to that establishment (unless their circumstances or the nature of their duties has changed). Other secondary indicators include:
- whether the employee would report to the establishment for in-person meetings; to pick up materials or equipment; or to receive instructions;
- whether the establishment is referenced in their employment agreement as being their supervising establishment; and
- the establishment the employee would report to, based on the nature of the duties performed.
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