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Secondment Agreement Tax Issues

The organization of secondment contracts for employees or executives raises tax issues that may not be immediately visible. When staff are seconded to a group of companies or between parties at arm`s length, it is important to ensure that the desired business results are achieved. In particular, two tax issues should be considered: if the secondment plan is subject to the GST and if the seconded employer (the normal employer of the seconded worker) or the receiving employer (the employer who temporarily receives the worker`s services) is responsible for withholding and transferring deductions to the Canada Revenue Agency (CRA). The tribunal considered whether BIAL and the seconded workers had an employer-worker relationship and whether the payment to the subject under the secondment agreement was a reimbursement of wage costs. A cra views document of 21 July 1992 (No. 9214537 – employment for 24 (1)) contains an analysis of a detachment scenario in which an employer has seconded a worker to a joint enterprise in which the seconded employer is involved. The document reminds at the end of the question that a joint venture or partnership is not a “person” (and therefore cannot be an “employer” within the meaning of Part I of the regulations) and specifies that, in a typical detachment agreement, the parties may characterize the employer/employee relationship differently for various purposes, such as. B than Canada`s “Social Security Totalization Agreements,” to limit Canada`s ability to demand PPP contributions from Canadian employment income. For example, the agreement between the Government of Canada and the Government of the United States of America, in accordance with Social Security, exempts U.S. citizens from having to, in certain circumstances, pay PPPs to income from Canadian sources. U.S.-based U.S.

citizen must be subject to the U.S. equivalent CPP for the work of a U.S. employer headquartered in the United States, and the U.S.-based worker must be required by the U.S. employer to work in Canada. A secondment agreement is usually used when a person is transferred to another country for a certain period of time and his or her salary is paid by the company on which he or she depends. Detached employees work under the control and supervision of the other company. However, he is still employed in his country of origin, since his social security contribution is paid in his country of origin. A strategy that can minimize the existence of a “permanent institution” by creating the country of origin in the United States is to structure the secondment agreement so that the establishment of the country of origin is considered a “wage intermediary” and not an employer of the seconded worker.