The Canada Revenue Agency (CRA) in September 2023 introduced a new administrative policy regarding fully remote workers. The new policy, effective 1 January 2024, will provide more certainty in determining the province of employment of employees that enter into remote work arrangements in one province and are “attached” to an establishment of the employer in a different province.
Under the new policy, an employee will be considered to report for work at an establishment of the employer (for purposes of determining the location the employer’s establishment) if:
- The employee can be reasonably considered “attached to an establishment of the employer” (when a “full-time remote work agreement” is in place); or
- The employee physically reports for work at the establishment, which can include a temporary establishment such as a construction site, but which does not generally include an employee’s home office. and with there now being no minimum amount of time for this test to be engaged.
Full-time remote work agreement
The new administrative policy applies only to “full-time remote work arrangements.” Thus, the first step under the new analysis is to determine if a full-time remote work agreement exists. Generally, the CRA considers a full-time remote work agreement to exist between the employer and the employee when the following arrangements are made:- The agreement is either temporary or permanent;
- The employer directs or allows employees 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 establishments of the employer.
Attached to an establishment of the employer
If there is a full-time remote work arrangement in place, the next step is to evaluate whether the employee can reasonably be considered “attached to an establishment of the employer.” The primary indicator of such an attachment is whether the employee would physically come to work to carry out the functions related to their employment duties at that establishment if it were not for the full-time remote work agreement.For employees who physically reported to an establishment of the employer immediately before entering a full-time remote work agreement, that establishment is the one to which they would be reasonably considered to be attached, unless the employee's circumstances or the nature of their duties have changed.
Secondary indicators
The following secondary indicators can assist in determining the establishment of the employer where the employee, if it were not for the full-time remote work agreement, would physically come to work to carry out the functions related to their employment duties:- 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.
The above indicators should be considered collectively to assess whether the employee is reasonably considered to be “attached to an establishment of the employer.”
If an employee can reasonably be attached to more than one establishment of the employer, the same indicators can be used to determine which establishment the employee is more closely attached to.
BDO commentary
The new policy provides welcome certainty and predictability in determining the province of employment for remote workers. It is likely helpful for employees that previously reported for work at an establishment but have transitioned to a remote work arrangement.
Employers that hire new employees for remote work in another province or transition existing employees to a remote work arrangement — particularly when the employees are paid from another province — should consider the impact of the new policy.
Debra Moses
Christopher Ng
BDO in Canada