DAVID WILKENFELD, CPA, CA, canadian tax CONSULTANT

What’s Your Tax Issue? Inter-Provincial Employment

In Canadian Income Tax, Personal Tax on January 10, 2011 at 4:11 pm

“We’re workin’ our jobs, collect our pay, believe we’re gliding down the highway, when in fact…..”

The Tax Issue:

I have recently been hired as an employee by a firm from Ontario. I live in Quebec and I will be working exclusively from my home. My employer’s accountant tells me I am subject to Ontario payroll deductions. Is this correct?

The Answer:

The short answer is, yes.

Generally, it is not the province where the employee is resident that determines the jurisdiction for payroll deductions at source, but rather, the place of employment.

The place of employment is the employer’s place of business where the employee is required to report to work. This is true, regardless of where the employee lives or where the employer’s head office is.

If, as in your case, an employee does not report to work at the employer’s place of business, the CRA says that the province of employment is determined to be the place where the employer’s business is located and from where he pays the salary.

Based on the above, you will be subject to Ontario deductions at source. When you file your tax returns, however, you will still file as a Quebec resident taxpayer. As a result, you will probably have a large refund for federal purposes and taxes due on your Quebec return.

In this case, when you file your tax returns, you may apply a portion of your total tax withheld against your Quebec tax liability. The rules allow for you to transfer to Quebec any amount up to a maximum of 45% of the total tax withheld in another province. Simply slip the amount you wish to transfer on to the appropriate lines on both your federal and Quebec tax returns.

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