Tag Archive: Remote working

1. San Francisco Proposes Business Tax Reform on Remote Work Trends

   9 March 2024 10:57 am Leave a Comment

   San Francisco Proposes Business Tax Reform on Remote Work Trends – Intro

   In the wake of the remote and hybrid work revolution, San Francisco is taking proactive steps to adapt its tax structure to the changing economic landscape.

   The Offices of Treasury and Controller have drafted a proposal aimed at mitigating risks posed by the current tax system.

   This initiative, potentially shaping a ballot measure for November 2024, seeks to address the fallout of the shifting work environment on the city’s tax revenue.

   Overview of the Proposed Reforms

   The proposed reforms are the culmination of extensive dialogue with community members and stakeholders, reflecting around 30 meetings.

   The primary objectives are to tackle the risk of lost tax revenue, streamline the tax compliance process, and alleviate the tax burdens faced by small businesses.

   Key features of the proposal include transitioning away from the payroll factor and Commercial Rents Tax, broadening the Gross Receipts Tax structure, reducing taxes and fees for small enterprises, and enhancing the Small Business Exemption.

   A critical aspect of these reforms is their focus on enhancing predictability for both the city and taxpayers.

   For the city, the reforms aim to simplify the tax system to foster increased voluntary compliance, thereby making revenue projections more reliable.

   Taxpayers, on the other hand, would benefit from clearer guidelines for future tax liabilities, supported by the proposal’s insistence on specific criteria for any forthcoming tax reforms.

   Procedural Changes and Implications

   The reform package also suggests several procedural adjustments to improve the tax system’s administration and taxpayer compliance.

   These include consolidating tax schedules, codifying a voluntary disclosure program, and allocating more resources for administrative guidance.

   Furthermore, the proposal advocates for a modification in the process of qualifying tax measures for ballot inclusion, proposing to remove the direct placement of tax measures by a minority of the Board of Supervisors or the mayor.

   This change would bring San Francisco’s procedure in line with practices observed in other Californian cities.

   Potential Impact and Stakeholder Reaction

   Should the proposal be adopted, it promises to significantly streamline San Francisco’s business tax framework by consolidating various taxes into a singular tax system and moving away from a combined payroll and sales factor apportionment model.

   Although the proposal is designed to be revenue neutral and does not directly reduce the overall tax burden for businesses in San Francisco, it represents a significant step towards simplifying tax compliance and administration.

   The initiative has sparked discussions among taxpayers and business groups, who may advocate for further reductions in the overall tax burden in addition to the simplification measures.

   As the proposal moves toward potentially becoming a ballot measure, its development and impact will be closely watched by businesses, policymakers, and the wider San Francisco community.

   This tax reform effort underscores San Francisco’s commitment to adapting its economic policies to reflect the evolving nature of work and maintain its status as a vibrant hub for businesses and professionals.

   Final thoughts – San Francisco Proposes Business Tax Reform in Response to Remote Work Trends

   If you have any queries on this article, or US tax matters in general, then please get in touch.

2. Employers and Remote Work in Canada

   18 July 2023 11:01 am Leave a Comment

   Introduction

   As remote work becomes the new norm in many industries, employers face a maze of tax obligations when their employees operate from Canada. 

   Whether intentional or a result of Covid-19 travel restrictions, these arrangements can spark a range of tax issues for non-Canadian employers. 

   In this blog, we shed light on some key considerations and obligations that employers must navigate when their employees work remotely in Canada.

   Payroll Tax Obligations

   Having an employee in Canada triggers payroll tax obligations for the employer.

   These include deductions for income tax, Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, and any applicable provincial payroll taxes. 

   While resident and non-resident employers share similar obligations, non-resident employers without a presence in Canada may not be required to withhold CPP contributions. 

   Similarly, they may not withhold EI premiums if they are payable under the employment insurance laws of the employee’s home country. 

   However, when CPP contributions and/or EI premiums are due, the employer becomes liable for these on its own account.

   Non-Resident Employer Certification

   Under a non-resident employer certificate regime, certified employers resident in a treaty country may be exempt from deducting and remitting Canadian income tax on remuneration paid to qualified non-resident employees. 

   To qualify, employees must be residents of a country with which Canada has a tax treaty, and they must be exempt from Canadian income tax on the remuneration due to the treaty. 

   Additionally, the employees must not be present in Canada for 90 or more days in any 12-month period, or not in Canada for 45 or more days in the calendar year that includes the payment time. 

   While this certification offers relief, employers should ensure ongoing reporting and compliance to maintain eligibility.

   Regulation 102 Waiver

   For employers without non-resident certification or non-qualifying employees, a Regulation 102 waiver may be sought if the remuneration is exempt from Canadian income tax due to a tax treaty.

   Income Tax Obligations

   Having an employee in Canada may expose the employer to the risk of being considered to be “carrying on business” in Canada. 

   A non-resident carrying on business in Canada is generally liable for tax on profits from such activities, subject to any treaty exemptions. 

   Certain activities of the employee, such as soliciting orders or offering sales in Canada, may cause the employer to be deemed to be carrying on business in the country. 

   Employers entitled to treaty benefits are exempt from Canadian income tax on business profits if they do not have a permanent establishment (PE) in Canada. 

   However, certain scenarios, like employees having the authority to conclude contracts, may trigger PE status and tax obligations.

   Regulation 105 Obligations and Waiver

   When employees provide services in Canada, the employer’s customer may need to deduct and remit 15% of the payment for those services to the CRA unless a waiver is obtained. 

   Employers can apply for waivers to reduce or eliminate withholding taxes, depending on treaty provisions and income projections.

   Indirect Value-Added Taxes

   Value-added taxes (GST/HST) apply on the supply of goods and services in Canada, requiring non-resident employers to register and comply with the GST/HST regime if they make taxable supplies in the country.

   Conclusion

   In sum, remote work arrangements in Canada can create complex tax implications for non-Canadian employers. 

   Understanding and fulfilling these obligations is essential to avoid potential pitfalls and ensure compliance with Canadian tax laws. 

   Seeking professional advice can illuminate the path forward and help employers navigate the tax terrain with confidence.

   If you have any queries about this or other Canadian tax matters then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.