Non-Residents Working Remotely

Employee relocation has become an increasingly popular issue in Payroll and one of the primary inquiries received by NPI’s Payroll InfolineTM.

“As much as employers are focusing on building lucrative ‘relocation packages’ to attract and retain talent, both nationally and internationally, it is important that they carefully consider the tax obligations resulting from the relocation benefits that they may offer and remain compliant with Federal and Provincial payroll legislation,” according to Dialogue Magazine.

Knowing the process of reporting for non-residents operating remotely from their home country has become essential for payroll professionals. “As the employee is a non-resident performing services for the employer outside Canada, the situation would not generally give rise to Canadian withholding obligations,” states Dialogue Magazine.

However, there are some steps you need to follow when facing this situation, as the publication suggests:

  1. Issue a T4 Slip

    As reporting obligations are not subject to the residency requirement, the employer would still be required to issue a T4 slip.

  2. Apply Temporary Work Policies when Suitable

    If the employee physically reports to the employer’s Canadian establishment once per year, they would likely be performing work in Canada and possibly be subject to Canadian withholding obligations for the job done in our country. Depending on their country of origin, an administrative policy may govern Canada's temporary work. 

  3. Check if CPP Deductions are Applicable

    Depending on the particular country where the employee is a resident, it may apply or not. For example, if the employee is in a country that does not have a valid social security agreement with Canada, the employer is obligated to deduct CPP from the remuneration earned in Canada. On the other hand, when the home country does have a valid social security agreement with Canada, and they provide proof of coverage, no CPP deductions are required. 

  4. Check if EI Deductions are Applicable

    The employer is obligated to deduct Employment Insurance unless the unemployment insurance laws of the employee’s home country require premiums to be paid for that employment.

  5. Check if a Tax Treaty is Applicable

    “Canada has tax conventions or agreements with many countries, commonly known as tax treaties. A tax treaty between Canada and the country of residence of a non-resident employee providing services in Canada may relieve Canadian tax deductions,” according to Canada Revenue Agency. Click here to see Canada’s treaties list by country.

Have you ever handled non-resident employees’ tax reports? Share your experience in the comments section below.  

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