Is Company A required to pay Employer Health Tax on remuneration paid to an employee working from a home office in British Columbia?
Information and Disclaimer
This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter 07-0262, September 2007
We refer to your letter to our XXXXXX Tax Office, and our recent telephone discussion, regarding whether Company A is required to pay Employer Health Tax (EHT) on the remuneration amount paid to Company A’s bookkeeper who works from her home office, located in the province of British Columbia (BC).
Employers are required to pay EHT on the remuneration paid to employees who report for work at a permanent establishment (PE) of the employer in Ontario. Remuneration paid to employees who report for work at a PE of the employer outside Ontario is not subject to EHT.
An employee is considered to be reporting for work at a PE of the employer if the employee comes to the PE in person to work. If the employee does not come to the PE in person to work, the employee is considered to be reporting for work at a PE if he or she may reasonably be regarded as attached to the PE.
A PE includes any fixed place of business, where it consists of a physical structure or building where employees work such as an agency, a branch, a factory, a farm, a gas well, a mine, an office, an oil well, timberland, a warehouse and a workshop. A PE may also exist or be deemed to exist where the employee:
- has general authority to contract on behalf of the employer
- conducts day to day business of the employer at an office in his/her home, or
- fills orders from stock of merchandise owned by the employer.
From your letter and our discussion, we understand the following information:
- Company A is a Canadian company, based in XXXXXX, Ontario
- An employee, who recently moved to BC, continues to work for Company A, as bookkeeper, from her home
- The BC bookkeeper administrates accounts receivable and employee benefits
- The BC bookkeeper maintains a full office in her home as provided by Company A and receives a monthly rent from Company A
- The BC bookkeeper’s home address is advertised on Company A’s website
- The BC bookkeeper does have authority to contract, as it relates to the benefits administration.
Based on the information provided, it is our opinion that Company A did not have a PE in BC. In general, an office that is maintained for the purpose of fulfilling functions which are accessory to the business of the employer is not considered to be a permanent establishment. Therefore, the remuneration paid to the BC bookkeeper is subject to EHT.
