With the increasing use of teleworking and the gradual return to the office, managers often have to put in place a clear policy. This specifies in particular the mandatory days in person, the number of people present on the premises at the same time, the application of a rotation between employees or the rules allowing interaction between them to maintain cohesion and team spirit.

This human resources policy must be written taking into account the tax consequences depending on the employees' place of work. For example, if they settle in a country other than Canada or outside the province where the employer is present.

In any case, it is important that employees inform their employer of their plan in order to analyze the consequences of their decision.

Teleworking abroad

There are several questions that need to be addressed to avoid surprises for employers:

• The existence of a tax treaty in the host country;

• The rules governing the employee-employer relationship;

• The legal and tax framework of this third country: whether it is the application of deductions at source, sales taxes, corporate or branch taxes;

• The obligation to provide medical or disability insurance.

The employee could also find themselves with new tax obligations as a result of their decision. It is therefore essential that these discussions and exchanges are done jointly.

Telework from Canada

Even if employees continue to work from Canada, there may be a tax impact. Depending on the employee's role and responsibility, it is important to ensure that the employer does not have a new establishment as a result of their employee's decision.

Teleworking from Quebec

Furthermore, if the workplace is in the same province as the employer, certain expenses reimbursed by the latter (parking, internet, telephone) must be analyzed to ensure that they represent a taxable benefit for the employee and deductibility for the employer.

For the period from March 15, 2020 to December 31, 2022, the Canada Revenue Agency (CRA) has implemented reliefs to avoid a taxable benefit, under certain conditions:

Reimbursement by the employer of a maximum amount of $500 per employee if:

• The presentation of supporting documentation regarding expenses incurred and reimbursed is necessary to allow working from home;

• The expenses are related to computer equipment (screen, printer);

• The expenses are related to office equipment (chair, work table);

• The amount is for the full period and not an annual cap.

Parking provided by employer if:

• The employer provides parking at the usual place of work and this place is closed due to COVID-19;

• The employer requires teleworking;

• Employer allows working from home due to COVID-19.

It should also be noted that Revenu Québec has announced harmonization with the CRA relief measures for the period from March 15, 2020 to December 31, 2021 only for the moment, and this, for the two measures mentioned above.

Tax forms

In addition, tax forms (T2200S and TP64.3) are still available for employment expenses related to working from home due to COVID-19 in 2021. Employees can choose between the temporary flat rate method and the detailed method. The employer, for their part, will have to provide the latter upon request by the employee.

Please note that these expenses are only eligible if employees worked more than 50% of the time from home, for a period of four consecutive weeks without interruption in 2021.

Impacts for employees:

On the employee side, a maximum deduction of $500 is maintained for the temporary fixed rate method.

The detailed method, for its part, will be calculated based on eligible expenses not reimbursed by the employer (rent, electricity, internet, telephone).

As you can see, there are many details. Don't hesitate to consult a CPA to see more clearly.