Anita, the Director of Finance of your Northern Expeditions company, has advised that the company will be opening an office in Nunavut this year. The office will offer guided northern trips to hunters and adventurers. It expects to mainly employ local guides (40 days over the summer period) but the company will also be periodically bringing in guides from its offices in Alberta, Saskatchewan and Qubec. Some of the guides from outside Nunavut may work 10 days, others could work 15 days over the summer depending on the number of bookings; they normally work in their home province for 60 days every year. The average daily rate paid to these guides is $400.

Anita is asking for information on the Nunavut Payroll Tax. Who pays the tax and how is it calculated? Are there any special considerations or challenges for the calculation of the payroll tax for the guides brought in from Alberta, Saskatchewan and Qubec? What are the reporting and remitting requirements during the year? What are the reporting requirements at year-end? Provide examples based on the information provided in the assignment to clarify.

Northwest Territories/Nunavut Payroll Tax All employers with employees working in the Northwest Territories and Nunavut are obliged to collect a payroll tax from employees on all gross employment income earned while working in these jurisdictions. These taxes apply to earned income for all employees (regardless of province of residence or province of employment) who earn income for services performed in the Northwest Territories and/or Nunavut. Gross employment income under this tax is defined as any amount included as taxable income under Sections 5(1), 6, or 7 of the federal Income Tax Act. This includes all salaries, wages, taxable benefits, and allowances. The tax is withheld from employees' employment income. Tax Rate The government of the Northwest Territories (NWT) imposes a 2% payroll tax on employees' gross employment income while working in the NWT. The government of Nunavut (NU) has an identical payroll tax system, requiring employers to register separately with the Government of Nunavut. The payroll tax for Nunavut is also 2%. Note: The province of residence has no bearing on the calculation of this tax; the liability for the payroll tax occurs when the income is earned in the NWT/Nunavut. Exempted Employment and Remuneration There are certain types of employment and types of remuneration that are not subject to the payroll tax in the Northwest Territories and Nunavut: remuneration paid to individuals who are in a religious order and who have taken a wow of poverty that qualifies under the federal Income Tax Act employees who normally work outside the Northwest Territories Nunavut (that is, work, perform duties or provide services outside the Northwest Territories Nunavut for more than half of the number of days worked for an employer in the year) and who do not earn more than $5,000.00 a year in the territory pensions or superannuateon If an employee, who normally works outside the Northwest Territories Nunavut, earns more than $5,000.00 in the territory in a calendar year, the tax is payable on the full amount of remuneration earned while in the territory.Note: If an employer has not withheld tax for an extended period for an employee normally working outside the Northwest Territories/Nunavut and if withholding the amount due in one lump sum would cause "extreme hardship" for the employee, the employee may apply to arrange for withholdings to be made over a number of pay periods. The employer is responsible for any amount not deducted at source, when required to do so. Under the Payroll Tax Act, 1993, employers must retain all payroll records for a period of six taxation years. The employer may deduct retroactively from the employee any payroll tax amounts that should have been paid. An employer who fails to collect any payroll tax amount is liable to pay the tax on behalf of any employee from whom the tax should have been collected. The employer is entitled to recover the amounts paid on behalf of the employee from the employee. The assessment of any outstanding payroll tax must occur within six years of the date the return was due; the ability to recover the outstanding amount from the employee is also limited to six years, unless otherwise approved by the Department of Finance. Note: The payroll tax is considered a statutory deduction by the Northwest Territories and Nunavut Labour Boards; therefore, obtaining permission from employees to retroactively deduct is not required. Reporting and Remittance Requirements The taxes collected must be remitted to the Government of the Northwest Territories or Nunavut, Department of Finance. The frequency of remittance of the payroll tax is based on estimated earnings in the territory. Remittance returns must be received by the Department of Finance for the respective territory by the 20" day of the month following the employer's assigned reporting period. Each territory has its own remittance form. The reporting and remittance requirements depend on the estimated total annual remuneration as follows:Exhibit 5-6 ESTIMATED TOTAL REMITTANCE ANNUAL EARNINGS FREQUENCY REPORTING PERIOD Seasonal employer - NU Annual Each year ending December 31 Seasonal employer - NWT | Seasonal Each month, during the season, ending the last day of the month $200.000 or less Annually Each year ending December 31 More than $200,000 but not more than $600,000 Semi-annually Each six-month period ending June 30 and December 31 More than $600,000 but not more than $1,000,000 Quarterly Each three-month period ending March 31, June 30, September 30 and December 31 More than $1,000,000 Monthly Each month ending the last day of the month Annual Reporting and Remittance Requirements All employers with employees working in the Northwest Territories and Nunavut must reconcile the payroll tax collected and remitted during the year with the annual taxable remuneration and file an annual return with the Department of Finance by the last day of February in each year. The annual return includes employee names, Social Insurance Numbers, total annual remuneration, total taxable remuneration, and the amount of payroll tax remitted during the year. Each territory has its own annual return. Note: Northwest Territories and Nunavut employers must file the annual return even when no employees were on the payroll during the tax year. Earnings must be reported on the annual return for each employee who worked in either the Northwest Territories or Nunavut, whether or not their income was subject to the payroll tax. Example: An employee earned $4,500.00 while working in Yellowknife, Northwest Territories during the month of May, plus a total of $44,000.00 while working in Alberta the rest of the year. Even though the $4,500.00 is not subject to the payroll tax, this employee's total remuneration of $48,500.00 must be recorded on the annual return. Penalties The following are the penalties for non-compliance with the reporting and remitting requirements of the Northwest Territories or Nunavut payroll tax:Exhibit 5-7 ISSUE PENALTY Failure to register - NT may result in a $1,000.00 to $5,000.00 penalty Failure to register - NU may result in a $1,000.00 penalty Failure to collect or remit the tax - NT 1" offence: 10% of the amount that should have been remitted 2" offence in a 12 month period - 20% of the amount that should have been remitted 18% interest on the amount owing Failure to file - NT penalty of $100.00 after an official request - greater of $250.00 and 5% of tax due Gross negligence or false greater of $250.00 and 25% of the tax due statements - NT Offences - NU 1" offence: from $100.00 to $250.00 and/or a percentage of the amount due from 5% to 25% 2'd offense in a 12-month period could result in a greater penalty being imposed Interest will be charged at 18% per annum on all amounts outstanding. In addition to penalties assessed, an employer may be charged with a criminal offence and upon summary conviction, fines ranging from $1,000.00 to $25,000.00 could be levied, a term of imprisonment not exceeding 12 months could be ordered and/or 50% to 200% of the tax due could be levied