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Challenges and risks for employees working remotely in operating tax compliance

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Employees are now expected to work without coming to the workplace from their homes and can operate operations from home efficiently and efficiently.

Challenges and risks for employees working remotely in operating tax compliance

Authored by Kapil Rana

Millions of individuals have been affected by COVID-19; it has taken almost half a million lives. The sudden stops in economic activity and jobs are much worse, in-depth and pace than anything on record. The spread of COVID-19 is slowing down the economic condition. To know how, where, and what a cure looks like, the world is still holding its breath.

Due to the effect of COVID-19, businesses and their employees are struggling to manage their work operations and taxes. The need to adopt new-age digital technologies is a major learning from lockdown for businesses. And the need to boost technology investment has become a dire need particularly in various areas of businesses, including the supply chain and finance.

Traditionally, businesses were organized on the assumption that employees would be expected to operate from an office. Therefore, with the office working environment in mind, all procedures, pay arrangements, and services for workers have been organized. This is valid for all labor legislation that has also evolved on this basis, including tax laws regulating employee taxes.

However, the old way has been replaced by a modern normal by the COVID-19 pandemic. Employees are now expected to work without coming to the workplace from their homes and can operate operations from home efficiently and efficiently. The very principle on which corporations were managed, employee salaries and benefits were organized and tax laws were written over the years, are therefore questioned.

Non-urgent allowances in the current circumstances

A range of perks provided in workplaces by the employer, such as free or discounted food, snacks and beverages, use of the workplace gym and sports facilities is not required to be relevant to workers. Along with that some employee also get the perks of transportation allowances which is not required as per the current situation as employee are not using public or office transportation facility.

These are completely taxable payments are separately conveyance allowance, leaving travel aid, dress maintenance allowance, vehicle fuel reimbursement, because the employee can either no longer incur the expense due to work from home conditions. However, as most employers have moved to their home cities, they do not incur living expenses incur leasing expenses which may have a tax effect on the take-home pay of the employees.

Offered financial support to employees

Not every home and employee is suitable properly as a home office. When jobs turn to work remotely, the allocation of an allowance or stipend may be considered for the staff to buy required office supplies. Companies may also opt to repay cash allowance, Staff for the expense of the acquisition of office equipment, such as a chair for monitors, desk, and workplace. Regularly, under the new CRA law, Employees are not allowed to subtract the cost of buying Office equipment or leasing it. In conjunction with this, allowance or Reimbursement earned for this reason by an employee is considered to be a taxable benefit and to be included in revenues in the year of receipt.

Taxable benefits withholding duties

In the case where the above-noted advantages are subject to payment, withholding, and reporting of income tax are required for the tax expenses are paid by the employers on behalf of the employees. Employees and workers earn the net profit, often; the taxes paid by the employer will be called a taxable advantage. The employer can finance the tax on earnings by the remission of the withholding of income tax (including the' tax on' tax) "via payroll to the CRA.

If the employee will bear the tax expense, the employer is required withholding income tax from the daily salary of the employee in the time in which the underlying profit is earned by the worker.

Considerations to the effects of cash flow to workers

The 'future of work', until recently, was under debate in HR forums and HR leadership meetings, is suddenly upon us. We have been catapulted into the 'future of work' suddenly and corporate leaders are happily shocked by how successfully the organization works under a work-from-home arrangement. Many companies worldwide have announced their intentions to enable a degree of permanence for a portion of their employees to work from home. Realigning to a work-from-home model, there is a requirement of a restructuring of HR policy, from employee compensation to tax perspective, as well as from protecting company’s data confidentiality to a broader data protection perspective while the employee works from home.

Although the sector is eagerly awaiting relief steps from the government for workers, this will be one place where it would surely be welcomed if relief was provided and future litigation around this will be reduced.

Kapil Rana is Founder & Chairman at HostBooks Ltd. Views are personal

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