I'm hoping that some of you won't mind giving me your two cents on working overseas and paying taxes in Canada. When I first started working overseas I never had a problem with taxes in Canada because where I was working I always paid more tax than I would in Canada, but now I've moved somewhere where the tax is next to nothing and I could potentially face a huge canadian tax bill. I've done a bit of research and the two ways around this are to become either a non-resident (severing all ties with Canada) or becoming a deemed non-resident (providing sufficient proof that the country I'm working in is where I intend to reside and therefore I can keep what little personal possessions I have in Canada). It's immensly complicated and I'm just sifting through the endless material now, so if anyone has been through it and can chip in it would be greatly appreciated!
Thanks in advance.
Tax issues from working Overseas
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5400AirportRdSouth
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Re: Tax issues from working Overseas
I worked overseas for about 18 months in a country with a low tax rate as well. I had a he'll of a time finding the info as well and most of what I did find was from unofficial sources ( expat forums, etc).
What I found in the end was as follows;
To be deemed non- resident for tax purposes, you need tosever as many of the "primary" ties as possible and then as many "secondary" ties as you can.
Primary ties were things like real estate, health coverage, dependants in Canada, and the like. The list I found on the net had ten or so things they deemed primary and having more than one or two would make it very difficult to avoid Canadian tax liability.
Secondary ties included stuff like savings accounts, credit cards, student loans, etc.
We had both a Canadian credit card, savings account and Student loans that we could not sever. We also kept our Canadian drivers license as well.
Letters to your provincial health dept informing them of your departure are good official records, or to any go toe private agency you can, before you leave.
Now, we "claimed" non- resident status upon our return by simply not filing for the periods we were out of the country. We got a letter from revcan asking for the missing periods and w wrote them back informing them that we were out of the country and claiming non-resident status for taxation. They accepted this and asked for no proof at all. Just because we got away with it doesnt necessarily mean it was the right way, as with all things tax, anything is legal, till you get audited otherwise.
One other point I was told was that one key factor they look at was your time away. One year is iffy, two or more years awAy is apparently easier . As we were on a two year contract that ended early, I felt we had reasonable proof of intention to meet the two year criteria.
Like I said, most of this info came from unofficial sources. I never could get ahold of anyone on the ph
What I found in the end was as follows;
To be deemed non- resident for tax purposes, you need tosever as many of the "primary" ties as possible and then as many "secondary" ties as you can.
Primary ties were things like real estate, health coverage, dependants in Canada, and the like. The list I found on the net had ten or so things they deemed primary and having more than one or two would make it very difficult to avoid Canadian tax liability.
Secondary ties included stuff like savings accounts, credit cards, student loans, etc.
We had both a Canadian credit card, savings account and Student loans that we could not sever. We also kept our Canadian drivers license as well.
Letters to your provincial health dept informing them of your departure are good official records, or to any go toe private agency you can, before you leave.
Now, we "claimed" non- resident status upon our return by simply not filing for the periods we were out of the country. We got a letter from revcan asking for the missing periods and w wrote them back informing them that we were out of the country and claiming non-resident status for taxation. They accepted this and asked for no proof at all. Just because we got away with it doesnt necessarily mean it was the right way, as with all things tax, anything is legal, till you get audited otherwise.
One other point I was told was that one key factor they look at was your time away. One year is iffy, two or more years awAy is apparently easier . As we were on a two year contract that ended early, I felt we had reasonable proof of intention to meet the two year criteria.
Like I said, most of this info came from unofficial sources. I never could get ahold of anyone on the ph
Remember, only YOU can stop Narcissism
Re: Tax issues from working Overseas
This is a relatively complicated tax matter that can seriously kick you in the arse down the road if not done properly. I work overseas but reside in Canada and work for a Canadian company, but I get the Overseas Employment Tax Credit. I work with quite a few people who are in the same position as you, and I can tell you it's nothing but headaches for some people to try to convince Revenue Canada that they are non-resident, even though they no longer live in Canada and haven't for some time, while for others who have sketchy cases, never hear from Revenue Canada.
I would highly recommend talking to an accountant or a tax lawyer who is knowledgeable in this area, it would be worth the few bucks for the time, trouble and potential expense down the road.
I would highly recommend talking to an accountant or a tax lawyer who is knowledgeable in this area, it would be worth the few bucks for the time, trouble and potential expense down the road.
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5400AirportRdSouth
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- Joined: Fri Jan 05, 2007 12:23 am
Re: Tax issues from working Overseas
My previous post got cut off, I'd definitely second KK7's advice. Once you're out of the country it's hard to get good advice.
For the amount of stress and effort I put into trying to figure it out from the other side of the world, a few hundred bucks to a good accountant or lawyer would been money well spent. There is also a lot you should do Pre-departure that makes your case that much better. If revcan denies you non- resident status, you could be on the hook for as much as every nickel you would have paid in Canadian taxes had you earned the money here....
For the amount of stress and effort I put into trying to figure it out from the other side of the world, a few hundred bucks to a good accountant or lawyer would been money well spent. There is also a lot you should do Pre-departure that makes your case that much better. If revcan denies you non- resident status, you could be on the hook for as much as every nickel you would have paid in Canadian taxes had you earned the money here....
Remember, only YOU can stop Narcissism
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PanEuropean
- Rank 5
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- Location: Toronto, Canada
Re: Tax issues from working Overseas
5400AirportRoadSouth has provided two very well thought out answers above.
In general, to be considered a non-resident, you have to seriously and genuinely be a non-resident. This means cutting sufficient ties to Canada that any "reasonable person" would conclude that you no longer have any economic or other lingering ties to the country. A single Canadian library card, driver licence, or RSP alone won't sink your ship, but owning property in Canada, keeping bank accounts in Canada, and (most especially!) maintaining a mailing address in Canada will imply that you are still resident here - or that you have sufficiently strong enough ties to be deemed a resident here.
The length of time you are away also makes a big difference. If you are out of the country for 3, 5, or 10 years, have a residence in another country, and are paying taxes in that other country, then it's pretty easy for Revenue Canada (and any "reasonable people" who might be invited to pass judgement) to agree that you really don't live here anymore. If you are only planning to be away for a year, it's kind of tough to make the same case unless you have really iron-clad evidence that you have 1) severed all your ties with Canada, and; 2) established similar new ties in your new country of residence.
Be aware that you have to pay tax somewhere... there's no (legal) free ride. If you are not paying tax in the other country, this makes it very easy for Revenue Canada to posit that you are not a resident of that country.
When you file your income tax return for the year that you leave Canada, fill in the little box to indicate that you have left Canada. You get to provide a date. There may be some accounting advantages to leaving at the end of the year - for information about this, you need to consult an accountant or a lawyer who specializes in tax issues.
In general, to be considered a non-resident, you have to seriously and genuinely be a non-resident. This means cutting sufficient ties to Canada that any "reasonable person" would conclude that you no longer have any economic or other lingering ties to the country. A single Canadian library card, driver licence, or RSP alone won't sink your ship, but owning property in Canada, keeping bank accounts in Canada, and (most especially!) maintaining a mailing address in Canada will imply that you are still resident here - or that you have sufficiently strong enough ties to be deemed a resident here.
The length of time you are away also makes a big difference. If you are out of the country for 3, 5, or 10 years, have a residence in another country, and are paying taxes in that other country, then it's pretty easy for Revenue Canada (and any "reasonable people" who might be invited to pass judgement) to agree that you really don't live here anymore. If you are only planning to be away for a year, it's kind of tough to make the same case unless you have really iron-clad evidence that you have 1) severed all your ties with Canada, and; 2) established similar new ties in your new country of residence.
Be aware that you have to pay tax somewhere... there's no (legal) free ride. If you are not paying tax in the other country, this makes it very easy for Revenue Canada to posit that you are not a resident of that country.
When you file your income tax return for the year that you leave Canada, fill in the little box to indicate that you have left Canada. You get to provide a date. There may be some accounting advantages to leaving at the end of the year - for information about this, you need to consult an accountant or a lawyer who specializes in tax issues.
Re: Tax issues from working Overseas
Thank you everyone for the kind and prompt replies.
I've been doing some serious digging on the matter and I think that maybe my situation is slightly different to the examples above in that I am considered a resident of another country through the tax treaty. I've sent off a complicated form to the government just to confirm and officially give me this status so we'll see what comes of it. As per your advice, I'm also going to speak to someone who specializes in the matter just to cover my own butt.
Thanks again.
I've been doing some serious digging on the matter and I think that maybe my situation is slightly different to the examples above in that I am considered a resident of another country through the tax treaty. I've sent off a complicated form to the government just to confirm and officially give me this status so we'll see what comes of it. As per your advice, I'm also going to speak to someone who specializes in the matter just to cover my own butt.
Thanks again.
