Q: What are the tax implications for small businesses that have employees not based in their operating province?
A: It could change the withholding taxes required. Other than that, the employee’s home office would not be considered a permanent establishment for purposes of determining the residency of the corporation. So the corporation should not be taxable in more than one province unless it has a physical office that it operates out of.
The withholding taxes are based on the place of employment. If the employer has offices in more than one province, they have to consider if there is an office that the employee is tied to. If there is, withholding taxes are determined according to the rules in that province. If not, the place of employment is deemed to be the office that pays their salaries and withholding taxes are calculated based on that.
The employee withholdings may not be sufficient to cover the taxes when they file their return so they may wish to have extra tax withheld.
In summary, if an office that only operates out of Alberta has employees that work (In Canada) not in Alberta, they do not have to change their witholding.. The onus goes to the employee to ensure they are paying the correct amount of tax based on the province they file in.