The pandemic popularized remote working, and many companies adopted this culture. Some companies have full-time remote workers, while some have a hybrid working culture. And let us not forget the field jobs like sales, consultancy, and construction, where employees may or may not come to the office. With so many variations around the place of work, it has become essential to establish a common ground on what constitutes a place of employment (POE). 

As per the Canada Revenue Agency (CRA) website, the POE is determined by:

• the type of income
• the residency status of the employee
• the establishment of the employer where the employee reports for work

The Importance of Place of Employment

In Canada, employees and employers are subject to federal and provincial taxes and deductions. Each province has different tax benefits and payroll deductions. Hence, the employer will deduct income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums according to the province of employment.

Previously, the place of employment for payroll deduction was the employer’s owned, leased, or rented place where employees report to work or are paid their salaries. As remote working became more prevalent, the CRA introduced a new administrative policy, effective January 1, 2024, on determining an employee’s place of employment.

New Policy Guidelines on Place of Employment   

Under the new policy, the CRA will determine the POE based on two things.

1. The employer and employee should have a “full-time remote work agreement”.

• A temporary or permanent agreement where the employer directs or allows the employee to perform their employment duties remotely full-time.
• The employee may perform employment duties from one or more locations that are not the employer’s establishments.
• The employee physically reports for work at an establishment other than his/her home office. This establishment could be temporary, such as a construction site. There is no minimum reporting time criteria to be engaged.

2. Once it is established that a full-time remote work agreement exists, the next step is to determine reasonable “attachment to an establishment of the employer”.

• The primary determinant of attachment is the employer’s establishment, where the employee would have physically reported to perform employment duties if there was no full-time remote work agreement. Suppose the employee physically reported to the establishment before the remote work agreement. In that case, that place can reasonably be considered attached, provided the employee’s circumstances or the nature of duties remain the same.

For instance, Mary used to work from the city office until 2023 but has now signed a full-time remote work agreement and performs the same duty from her home. In this case, her POE will continue to be the city office.

• For situations where an employer has multiple locations of employment, the new policy will consider employees’ attachment to an area:
• Where they attend or would attend in-person meetings, irrespective of the communication method.
• Where they receive or would receive work-related materials, equipment, or related instructions and support.
• Overseeing or supervising them, as specified in the employer and employee agreements.
• Where they come or would come in person to receive guidance from an employer about their employment duties, irrespective of the communication method.
• Where they would report based on the nature of their job responsibilities.

For instance, Tanya is a full-time remote oil company employee with factories in five provinces. She gets her instructions and work material from Province 1, but her salary is processed from Province 2. Per the new policy, Tanya’s attachment is strong with Province 1, making that her POE. Under the previous rules, Province 2 would have been her POE as she received her salary there.

Exceptions to Place of Employment

The POE rule only applies to Canadian residents working as employees. If the company hires non-resident employees, it has to withhold a 25% tax on the gross payment. The employee can apply to the CRA for a waiver from the 25% withholding tax.

The POE rules do not apply to independent contractors or freelancers who may be working with a company but not on payroll. Contractors file their taxes based on their tax residence and not on the employer’s location.

How Home Office Expenses Work for Remote Employees 

A full-time remote employee can deduct home office expenses from their taxable income if they are required by the employer to maintain a home office and are not reimbursed for it. There is also a condition of minimum time: the employee should use the home office for over 50% of the time and work for at least four consecutive weeks from there, conducting work-related meetings.

Such employees can deduct eligible expenses – such as maintenance, broadband, and rent – up to the portion of the home they converted into an office. To claim deductions, they must get a Form T2200 signed by the employer and save all the bills’ receipts.

Contact Ford Keast LLP in London to Help You Determine Your Place of Employment for Tax Purposes

While remote working is cost-efficient for employers, it adds a layer of complexity to the payroll. Accountants at Ford Keast LLP are updated with policy changes and can help you process payrolls with the correct deductions. To learn more about how Ford Keast LLP can provide you with the best accounting and tax expertise, contact us online or at 519-679-9330.