Remote Work, Global Risks: Canadian Cross-Border Tax Rules Employers Can’t Ignore in 2025

Remote and mobile work present a significant growth opportunity to Canadian companies in 2025, but they also create some complicated tax considerations.

As the workforce becomes more borderless, the Canada Revenue Agency (CRA) is strengthening payroll scrutiny, reporting standards, and cross-border enforcement. 

Multijurisdictional employment can expose companies to: 

• Dual tax residency risks
• Cross-border taxation
• Expanded reporting obligations
• Greater documentation requirements 

Recent CRA updates — including stricter reporting, reduced residency reliefs, tighter payroll enforcement, and treaty updates — mean older compliance practices are no longer sufficient.

To remain compliant, organizations require more robust tracking systems, frequent reviewing of contracts, proactive tax planning and education of employees. When done correctly, Canadian employers will have the ability to minimize risk and manage their global workforce with confidence.

Understanding Cross-Border Tax Compliance in Canada

Businesses or individuals operating across borders must follow cross-border tax compliance rules, which involve reporting to both Canadian and foreign authorities when work or employees are based outside Canada.

Scope of Cross-Border Tax Obligations

Cross-border tax compliance is a set of regulations regarding reporting the tax-to-tax departments both in Canada, and in the country where a business operates or an employee works.

What Does It Cover?

It includes identifying the tax residency under the Canadian law and treaties, use of the appropriate withholdings, the submission of the correct returns and the provision of complete supporting documents in the two jurisdictions.

Who Needs to Pay Attention?

The employers that have employees either in the foreign countries or in other provinces should comply with local and Canadian payroll regulations.

Foreign workers or those that travel a lot may be liable to paying taxes in two or more jurisdictions. Complicated withholding and reporting requirements can also be applied to contractors.

What Usually Triggers These Rules?

Some of the main variables are the place where you show residency or perform work (residency status), the location of payroll processing and the use of tax treaties to ensure that the issue of taxation rights and the prevention of double taxation are achieved.

2025 CRA Rule Changes Employers Shouldn’t Miss

If your team includes non-resident or cross-border employees, the CRA has rolled out new rules for 2025 that you’ll want to keep on top of. Here’s what’s changing:

Reporting for Non-Resident Employees

Employers now must track how many days non-resident staff work in Canada and the income tied to those days. Unless their Canadian income is under $10,000, you’ll need to file a T4 slip and payroll summary.

T4/T4A Reporting for Global Staff

All T4 and T4A slips are due by February 28, even for employees or contractors who no longer work with you. If there’s a mistake, it must be fixed and refiled quickly. Missing the deadline or filing incorrectly can lead to penalties.

Tax Treaty Withholding

Employees from treaty countries may not owe full Canadian tax if a Regulation 102 waiver is in place. Make sure waiver applications are filed at least 30 days before the employee starts work. Without it, withholding rules like Reg. 105 and Part XIII still apply.

CRA Audits & Recordkeeping

The CRA also mandates the employers to record where the cross-border employees do the work and where their remuneration is received. In the high-tech era of audit quality and data transfer around the world, compliance has become vital.

Remote Work in 2025: Tax and Payroll Challenges

Remote and hybrid work used to be a trend, but they currently represent the new form of work most of us exercise. By 2025, more than 80% of remote-capable employees in North America are either hybrid or fully remote, and nearly 40 million people worldwide now call themselves digital nomads. Flexibility has become the new standard.

But with all this freedom comes a new set of headaches especially around taxes and payroll.

Tax Residency: Why Where You Work Still Matters

It may sound that you can work anywhere, but the thing is, your tax bill may depend on the place you are literally sitting.

• In India, spending more than 182 days in a year makes you a tax resident—meaning your worldwide income becomes taxable.
• US citizens living abroad cannot escape the need to file with the federal government, that and some states may require a return based on convenience to the employer.
• Digital nomad visas (such as in Portugal or Thailand) are making waves as they sound tax-friendly, however, they do not eliminate local taxation.
• And remember staying too long, renting a place, or building ties in a country could all trigger tax residency.

Payroll: Why Employers Can’t Ignore Location

Payroll has become more complex, driven not just by company location but also where employees work. Employers may need to withhold taxes across multiple states or countries. While some U.S. states have reciprocity agreements to reduce double taxation, global payroll adds further challenges with currencies, labour laws, benefits, and compliance. To manage this and avoid penalties, many businesses now rely on automated payroll systems and cross-border HR solutions.

International Employee Compliance Scenarios (Semantic bridge)

• Canadian Employer Hiring a US-Based Remote Worker
  When applying to a Canadian employer system a U.S. based remote employee, U.S. payroll tax and payment provisions apt. The employer might have to inscribe himself in the U.S. or a payroll service. The payroll laws of Canada do not affect such an employee because he/ she is outside Canada.

• Canadian Employee Working Temporarily Abroad
  A Canadian employee who works in a foreign country continues to be a Canadian tax resident; however, the employee may also become an overseas tax resident unless he/she leaves after a short period (not allowed to leave by his/her employer). Employers are subject to two tax risks, visas and work permits.
   

• Cross-Border Secondments and Projects
  In the case of secondments or project assignments to abroad employers usually require visas and permits. Employers are required to come in agreement with payroll, benefits, and taxes costs. The country of destination might need withholding and proper documentation is therefore necessary to avoid penalty payments.

 

Scenario	Key Compliance Factors	Tax/Payroll	Immigration/Legal
Canadian employer, US remote worker	US employment law, cross-border tax, worker classification	US payroll & taxes; EOR option	No Canadian visa/details needed
Canadian employee temporarily abroad	Tax residency, PE risk, local labour/employment law	Canadian payroll (CPP/EI); local tax triggers	Work permits/visa likely
Cross-border secondment/project assignment	Contracts, visa/work permit, payroll, control, documentation	Host country withholding; documentation	Work permits, secondment contracts

Risks of Non-Compliance

• Double taxation:
  Employees or employers can find themselves paying tax on the same income in two or more countries if reporting and treaty claims are not made properly; this can greatly increase the total tax burden.
   
• CRA penalties for incorrect reporting:
  There are very hefty penalties that the Canada revenue agency can impose such as 10% of unreported income, or 50% of understated tax in the instance of false statements. Late/missed remittances or payroll slip errors will result in triggering audits and fines.
   
• Treaty benefits lost due to incorrect documentation:
  This includes using incorrectly filled out and submitted forms or maintaining incomplete or not up-to-date records which can result in loss of access to tax treaty benefits, resulting in additional tax and loss of credit against such tax.
   
• Payroll remittance errors:
  Wrong or improperly filed CPP, EI and other taxes may create penalties, payment of interests and a tangle of administrative problems and even a CRA audit. Adherence to compliance saves both the employer and the workers due to its huge cost.

Step-by-Step Compliance Checklist for 2025

The manner of working is a new reality remote workstations, international workforces and international projects are the order of the day. However, along with the concession to flexibility comes a concession to tax compliance issues that may be a particular concern in 2025, when both Canadian authorities and international tax authorities will be keeping an increasingly watchful eye.

Verify employee tax residency

Before anything else, confirm where your employees are considered tax residents. Residency determines which country has taxing rights, so it’s the foundation for compliance.

Review payroll withholding under tax treaties

Cross-border workers may benefit from treaty relief. Double-check payroll systems to avoid over-withholding or missing required deductions.

Update contracts with cross-border clauses

Employment agreements should reflect potential tax implications for work done in multiple jurisdictions. Clear contracts help prevent disputes down the line.

Maintain travel logs and work location records

Keeping accurate records of employee travel and work locations is critical. These details often inform both residency and payroll compliance.

File CRA forms and slips on time

Stay ahead of deadlines compliance isn’t just about calculation, it’s also about timely reporting. Make sure all required T-slips and CRA filings are in place.

Key Tax Treaty Considerations in 2025: What Employers Need to Know

As cross-border work becomes the norm, tax treaties play a huge role in avoiding surprises for both employers and employees. The Canada–US tax treaty is particularly important, given the volume of workers moving between the two countries.

Canada–US Treaty on Employment Income

The treaty helps determine where employment income should be taxed. Typically, short-term work in the U.S. (under 183 days) may remain taxable only in Canada, if certain payroll conditions are met. For employers, it’s critical to know these thresholds before deciding on withholdings.

Short-Term Assignment Clauses

Many treaties, not just Canada - US, include special clauses for short-term assignments. These rules can exempt employees from host-country taxes—but only if the conditions are satisfied. Missing a detail here can mean unexpected tax filings for your team.

OECD Remote Work Guidance

With the rise of remote work, the OECD has clarified how tax treaties should apply when employees are working from abroad. One key focus is ensuring a “home office abroad” doesn’t create an unintended permanent establishment (PE) for the employer. Companies now need clearer policies on remote work to stay compliant.

Technology and Tools for Cross-Border Tax Compliance in 2025

Managing cross-border employees is no longer just about policies—it’s about having the right tools in place to stay on top of compliance. With governments tightening rules and audits becoming more common, technology can make all the difference.

Payroll Software with Multi-Jurisdiction Features

Today’s workforce often earns income in more than one country. Payroll systems that handle multi-jurisdiction withholding and treaty rules simplify what used to be complex manual work.

Automated Residency Tracking

Residency status drives tax liability but tracking employee travel days manually is risky. Automated residency trackers help monitor movements and alert employers before thresholds are crossed.

Digital Document Management for CRA Audits

Audits are stressful enough without scrambling for paperwork. Cloud-based document management systems keep contracts, travel logs, and tax slips organized, ensuring readiness if the CRA or IRS comes knocking.

 

How AKM Global Can Help Canadian Businesses

AKM Global supports Canadian enterprises through their cross-border tax compliance regulations of 2025 by delivering expert payroll tax help and treaty guidance and mobile workforce solutions.

Payroll Tax & Compliance Expertise

As a Canadian payroll tax processing provider, AKM Global enables organizations to efficiently manage their Canadian and international payroll tax compliance, by correctly withholding, reporting and documenting compliance, whilst constructing payroll activities in keeping with CRA guidelines and preventing assessment penalties.

Treaty Interpretation & CRA Audits

We translate tax treaties, apply exemptions to minimize on the double taxation, and assist clients throughout this process with documentation and responses to the CRA audits.

Mobile Workforce Support

With mobile and international employees, we provide end-to-end assistance, including the monitoring of employee locations, conducting permanent establishment assessments and providing compliant HR systems and payroll systems.

Faqs

 

How does CRA track remote workers in 2025?

The CRA now requires employers to report each remote worker’s location, duration, and proof of a remote work agreement. Global data sharing makes it easier to detect undisclosed employees, so maintaining accurate records is essential.

 

Do I need to file Canadian tax forms for non-resident employees?

Yes, if they work in Canada or earn Canadian-sourced income. In 2025, e-filing was expanded to allow non-residents to file returns online and access treaty-based relief.

 

Can remote employees trigger permanent establishment risks?

Yes. A permanent establishment may arise if employees regularly work from home in Canada and conduct core activities like sales, contract negotiations, or decision-making. Regular reviews are necessary.

 

What’s the penalty for non-compliance with new CRA rules?

Penalties in 2025 can reach up to $25,000 for failing to respond to CRA notices, along with back taxes, interest, and reputational risks.

With CRA tightening oversight, employers and payroll teams must be proactive to stay compliant.

 

Conclusion 

Fuelled by remote work, a new era of compliance complexity is dawning on Canadian businesses by 2025 as tax authorities are increasing the scrutiny and expanding the scope of reporting. This is the moment when organizations should refresh the policies and payroll to be in accordance with the newest CRA regulations and international principles. To ensure that organizations are indeed cross-border tax compliant, contact AKM Global to help you navigate the fine print of compliance in cross-border tax environments. To initiate a cross-border tax consultation visit the AKM Global.