The Employer-Employee Agreement

There is much more to huge tax savings than just incorporating. Too many operators and accountants stop short. When that happens accountants fill out a Corporate T2 using the exact same numbers as if the client was self employed. If this is your situation, don't bother incorporating.

The next step HAS TO BE an employer-employee agreement (EEA).


The EEA is a contract, a legally binding document that the courts and labor boards enforce. Historically EEA's have been made between unions and management or just by companies looking to recruit people. Some agreements are standard and applies to all employees while others are custom, provideing benefits to one group, individual or position over another.


An EEA that truckers regularly utilize is the "Cell phone requirement". Many companies require that a driver provide their own cell phone in order to perform their duties. CRA allows drivers to use their cell phone as a deduction provided that it was a written condition of employment. This "condition of employment" is actually an employer-employee agreement. It is a small simple agreement but operates under the exact same principle as a complex EEA inclusive of subsistence allowance.


The details of an EEA can be as varied as employees and positions. They can be as restrictive or liberal as creative minds produce. However, there are limitations as to what can be classified as a non-taxible benefit. For instance, subsistence allowance allowance can't be set at $500 per day (without defending the value). Whatever value is assigned as a "non-taxable benefit" must be deemed reasonable. CRA is mandated the responsibility to determine what is reasonable and what is not.

There are pipeline workers, for instance, that are apparently getting $95 per day living allowance (subsistence), even though the treasury board of Canada only has its numbers at $81.55 (as of October 1, 2008). If this is true, the extra $13.45 must be defendable in the tax courts (if CRA would contest). For the trucking industry, however, I am only interested in pegging subsistenace allowance at Treasury Board numbers.


I think I'll take another day to go a little more in detail about this topic. For right now, however, It would be prudent to state that the EEA is hammered out between the "President" (officer) of the corporation and the driver. If both roles are filled by the same person it can feel rather schizophrenic.