Tax Implications For Employers Whose Employees Work Remotely From A Different Province

Since the COVID-19 pandemic began, a growing number of Canadian companies have been asking their employees to work from home, and in some instances, these employees are working from homes located outside of the province where the employer typically operates or is located. This raises questions of whether such employee home offices could create a "permanent establishment" ("PE") 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 obligations.¹

Summary

1. 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.