As global mobility continues to rise, Canada has implemented important updates to its tax framework affecting internationally mobile employees. These changes, effective from 2025, aim to enhance compliance and transparency while aligning with global standards such as the OECD’s guidance on cross-border employment taxation.
Enhanced Employer Withholding Obligations
Employers are now required to withhold Canadian income tax on salaries paid to employees working temporarily in Canada, even if those employees remain on a foreign payroll. Exceptions may apply under tax treaties, but documentation and tracking requirements have increased significantly.
Stricter Reporting Requirements for Remote Work
With the rise of remote work across borders, the Canada Revenue Agency (CRA) is cracking down on employees performing duties for Canadian employers from foreign jurisdictions. Employers must now disclose the location and duration of remote work arrangements and assess whether permanent establishment risks or payroll obligations arise.
30-Day De Minimis Rule Clarified
The CRA clarified that employees physically present in Canada for less than 30 days in a calendar year may be exempt from certain tax obligations, provided no permanent establishment is triggered. However, documentation is critical to support this exemption.
Global Employment Income Disclosure
Canadian tax residents, including those newly arrived or on assignment, must disclose their worldwide employment income, even if paid by a non-Canadian entity. The CRA has enhanced its data sharing activities with foreign tax authorities, increasing audit risks for nondisclosure.
Digital Nomad & Short-Term Assignment Considerations
Canada is evaluating the possibility of granting special tax treatment for digital nomads and short-term assignees, including potential tax relief or modified filing obligations. While no formal regime has been enacted, updates are expected in future federal budgets.
Implications for Employers and Employees
Organisations with cross-border talent must reassess their mobility policies, payroll systems, and tax equalisation practices. Employees should seek personalised tax advice to ensure compliance and avoid unexpected liabilities.
In a globally connected workforce, staying ahead of tax changes is crucial. These new Canadian rules underscore the importance of proactive planning and accurate record-keeping for both employers and employees operating across borders.
For more information on the new rules, please consult your regular BDO contact or the author of this article.
Debra Moses
BDO in Canada
Key Highlights
Enhanced Employer Withholding ObligationsEmployers are now required to withhold Canadian income tax on salaries paid to employees working temporarily in Canada, even if those employees remain on a foreign payroll. Exceptions may apply under tax treaties, but documentation and tracking requirements have increased significantly.
Stricter Reporting Requirements for Remote Work
With the rise of remote work across borders, the Canada Revenue Agency (CRA) is cracking down on employees performing duties for Canadian employers from foreign jurisdictions. Employers must now disclose the location and duration of remote work arrangements and assess whether permanent establishment risks or payroll obligations arise.
30-Day De Minimis Rule Clarified
The CRA clarified that employees physically present in Canada for less than 30 days in a calendar year may be exempt from certain tax obligations, provided no permanent establishment is triggered. However, documentation is critical to support this exemption.
Global Employment Income Disclosure
Canadian tax residents, including those newly arrived or on assignment, must disclose their worldwide employment income, even if paid by a non-Canadian entity. The CRA has enhanced its data sharing activities with foreign tax authorities, increasing audit risks for nondisclosure.
Digital Nomad & Short-Term Assignment Considerations
Canada is evaluating the possibility of granting special tax treatment for digital nomads and short-term assignees, including potential tax relief or modified filing obligations. While no formal regime has been enacted, updates are expected in future federal budgets.
Implications for Employers and Employees
Organisations with cross-border talent must reassess their mobility policies, payroll systems, and tax equalisation practices. Employees should seek personalised tax advice to ensure compliance and avoid unexpected liabilities.
In a globally connected workforce, staying ahead of tax changes is crucial. These new Canadian rules underscore the importance of proactive planning and accurate record-keeping for both employers and employees operating across borders.
For more information on the new rules, please consult your regular BDO contact or the author of this article.
Debra Moses
BDO in Canada