Happy Monday!
Am hoping to find some Canadian ITs (or even one!) who might be able to help me with questions regarding tax obligations back home. As a homeowner and vehicle owner who plans to keep both, and as a a teacher who has the option of taking a two-year unpaid leave before having to resign, declaring non-residency is not an option. Have been trying to get through to Revenue Canada for over two weeks with no luck!
My questions are as follows:
Do ITs receiving tax-free salaries in countries that hold tax treaties with Canada still obligated to pay tax back home? My understanding is that Canada waives tax obligations only if tax is paid on behalf of the IT.
For ITs working in countries that do not hold tax treaties with Canada, how badly are Canadian residents hit by Revenue Canada?
Are schools (or is your school) generally supportive in preparing tax documents for their Canadian teachers?
And, on a more general note, are tax-free salaries really tax-free? Or, is this simply a term indicating that tax is paid on behalf of the teacher? Package details on Search vary, and Google doesn't seem to offer up what I need!
Many thanks for anything you may be able to offer!
Tax Questions for Canadian Residents
Re: Tax Questions for Canadian Residents
I wouldn't expect your school to help you much with formal Canadian tax documents. They might give you a statement of income and that will probably come on school letterhead.
As for the tax-free salary, the answer to your question is yes but most of the time I would bet tax free means the school pays the tax.
Sorry, I can't be of much help with your other questions as we went non-resident as soon as we could and haven't looked back.
As for the tax-free salary, the answer to your question is yes but most of the time I would bet tax free means the school pays the tax.
Sorry, I can't be of much help with your other questions as we went non-resident as soon as we could and haven't looked back.
Re: Tax Questions for Canadian Residents
this is a somewhat difficult question, but there are mostly varying shades of grey that can be applied. however, in my experience, calling or doing anything official is not necessary; it even depends on who you get on the phone at CRA and tells you the information. there isn't really a red line to cross and your status can be different. take a look here if you haven't already: http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... y-eng.html
the short answer is yes. but it's fairly specific to you. you have a bunch of ties to the country that, in sum, would constitute a primary tie to canada. a CRA agent and an accountant also told me that your intentions (flexible as that is) on whether or not to return to canada can make a difference. you seem to have several primary and secondary ties to canada, and as a teacher, you are a member of an organization of domestic teachers. you have a bank account, a car, a house - follow the information above and you'll find your answers.
my wife and I have been in both situations. where we paid taxes in host country with treaty, we ended up claiming that amount. the school wrote up a letter for us. we had official looking documents from tax agency in host country. they converted the amounts and filled it in. for other 'tax free countries' we didn't claim anything as we had no ties, we filed as emigrants.
but, if you go back work at home, you will have to file taxes and as long as you file as an emigrant for the previous years, you should be okay. they may look into it and decide you should pay taxes, especially considering your ties to canada, they can make an estimation of your intention to return.
i hope you find a satisfactory answer somewhere, but in your case you would/should file. you have significant primary ties to canada and seems your intention would be to return. BUT, get other opinions. if you've search internet already, you'll know there isn't always a clear answer to this question!
good luck!
v.
the short answer is yes. but it's fairly specific to you. you have a bunch of ties to the country that, in sum, would constitute a primary tie to canada. a CRA agent and an accountant also told me that your intentions (flexible as that is) on whether or not to return to canada can make a difference. you seem to have several primary and secondary ties to canada, and as a teacher, you are a member of an organization of domestic teachers. you have a bank account, a car, a house - follow the information above and you'll find your answers.
my wife and I have been in both situations. where we paid taxes in host country with treaty, we ended up claiming that amount. the school wrote up a letter for us. we had official looking documents from tax agency in host country. they converted the amounts and filled it in. for other 'tax free countries' we didn't claim anything as we had no ties, we filed as emigrants.
but, if you go back work at home, you will have to file taxes and as long as you file as an emigrant for the previous years, you should be okay. they may look into it and decide you should pay taxes, especially considering your ties to canada, they can make an estimation of your intention to return.
i hope you find a satisfactory answer somewhere, but in your case you would/should file. you have significant primary ties to canada and seems your intention would be to return. BUT, get other opinions. if you've search internet already, you'll know there isn't always a clear answer to this question!
good luck!
v.
Re: Tax Questions for Canadian Residents
Thanks, Overhere! As long as I can obtain a statement of income for tax purposes, I can sort out the documents.
And...yesterday must have been my lucky day - got through to Revenue Canada, and directly to a representative without even being put on hold! It seems as that long as I'm employed in a country which holds a tax treaty with Canada, I'll be considered a deemed non-resident - regardless of ties back home. Unfortunately, one of the places I'd love to be has no such agreement with Canada, but it looks like close to 100 others do!
And...yesterday must have been my lucky day - got through to Revenue Canada, and directly to a representative without even being put on hold! It seems as that long as I'm employed in a country which holds a tax treaty with Canada, I'll be considered a deemed non-resident - regardless of ties back home. Unfortunately, one of the places I'd love to be has no such agreement with Canada, but it looks like close to 100 others do!
Response
You do have a more unique situation, and i would be hesitant to put all your faith in what a customer service rep told you on a phone call. You could make that call 10 times and get a variety of answers.
Based on your scenario as you described it I would concur with the prior contributors that you are going to have a tax liability with RC. The IS might pay the regional tax for you, but youve made no indications of permanently separating yourself from CAn so why should you not have to contribute to the maintenance of the state. At best a CAN tax treaty lets you exempt the taxes you paid or were paid on your behalf. In very (maybe overly)simple terms if you pay CAN$1000 in OS taxes, but your total global income gives you a liability of CAN$3000 than you owe at best CAN$2000, also understand that RC considers benefits as taxable income.
Without a tax treaty you pay taxes on your income regardless of where you live in the world. At that point there isnt a difference between you and a business traveler who spends months OS on a project.
ISs generally arent very supportive. They will provide local regional tax and earning statements, and will prepare an annual letter for you with your total salary, and taxes, which you can use, but they don't generally do much more than that.
As Ive written before Tax Free salaries arent really tax free, treaty or no treaty, what usually happens is that an IS pays the local tax for you if it must, at least thats what good ISS do. Others will use creative accounting or deception to withhold taxes. The reality is at anytime, including well after your gone the IS may be called to pay those taxes, and they generally dont like getting stuck holding the bag. Also things can change overnight. AN IS that promises a tax free salary can over night can enact a change of policy that effectively means you ahve to pay taxes from that day on.
Based on your scenario as you described it I would concur with the prior contributors that you are going to have a tax liability with RC. The IS might pay the regional tax for you, but youve made no indications of permanently separating yourself from CAn so why should you not have to contribute to the maintenance of the state. At best a CAN tax treaty lets you exempt the taxes you paid or were paid on your behalf. In very (maybe overly)simple terms if you pay CAN$1000 in OS taxes, but your total global income gives you a liability of CAN$3000 than you owe at best CAN$2000, also understand that RC considers benefits as taxable income.
Without a tax treaty you pay taxes on your income regardless of where you live in the world. At that point there isnt a difference between you and a business traveler who spends months OS on a project.
ISs generally arent very supportive. They will provide local regional tax and earning statements, and will prepare an annual letter for you with your total salary, and taxes, which you can use, but they don't generally do much more than that.
As Ive written before Tax Free salaries arent really tax free, treaty or no treaty, what usually happens is that an IS pays the local tax for you if it must, at least thats what good ISS do. Others will use creative accounting or deception to withhold taxes. The reality is at anytime, including well after your gone the IS may be called to pay those taxes, and they generally dont like getting stuck holding the bag. Also things can change overnight. AN IS that promises a tax free salary can over night can enact a change of policy that effectively means you ahve to pay taxes from that day on.
Re: Tax Questions for Canadian Residents
Many thanks, vandsmith and PsyGuy, for your detailed replies. For the moment, at least, I will have to keep my residency and keep my sights on jobs in countries with tax treaties with Canada.
@vandsmith: While you were residents working in countries that held tax treaties with Canada, did you ever have to pay any differences in tax to Revenue Canada?
@PsyGuy: I will certainly heed your cautionary words about not putting all (or even the majority!) of my faith in a customer service rep at RC, but it seems, at least, that the potential hit when working in a country that has a tax treaty with Canada will be far less than going the non-treaty route. Don't think I want to do any fancy dancing with an accountant to try to get out of residency status, as that can turn into it's own special kind of nightmare! I remember seeing an article (here, or on the International School Teachers group on Facebook) about a couple who, after several years teaching in Asia, were challenged on their residency status and charged tens of thousands of dollars in back taxes. Wish I could track down the article for specifics, but can't seem to find it!
Thanks again, and have a great weekend!
@vandsmith: While you were residents working in countries that held tax treaties with Canada, did you ever have to pay any differences in tax to Revenue Canada?
@PsyGuy: I will certainly heed your cautionary words about not putting all (or even the majority!) of my faith in a customer service rep at RC, but it seems, at least, that the potential hit when working in a country that has a tax treaty with Canada will be far less than going the non-treaty route. Don't think I want to do any fancy dancing with an accountant to try to get out of residency status, as that can turn into it's own special kind of nightmare! I remember seeing an article (here, or on the International School Teachers group on Facebook) about a couple who, after several years teaching in Asia, were challenged on their residency status and charged tens of thousands of dollars in back taxes. Wish I could track down the article for specifics, but can't seem to find it!
Thanks again, and have a great weekend!
Re: Tax Questions for Canadian Residents
Over the years we have received numerous viewpoints on our residency from both in and outside of government. So I am not convinced advice over the phone is the best. The next step you could take is to fill out the forms supplied by Revenue Canada and have them officially determine your status. One of the problems with that is it may put you on their radar. Here is a link to the leaving Canada form if you already haven't see it.
http://www.cra-arc.gc.ca/E/pbg/tf/nr73/nr73-12e.pdf
I have had friends get letters from Revenue Canada in return declaring them non resident. Put that in your files and you're good to go without any worries.
http://www.cra-arc.gc.ca/E/pbg/tf/nr73/nr73-12e.pdf
I have had friends get letters from Revenue Canada in return declaring them non resident. Put that in your files and you're good to go without any worries.
Reply
@MissMe
It really doesnt matter which you pursue, those with a tax treaty or not, because until you are ready to separate from CAN, than what you are is living in a a friends apartment and writing a book, or doing something else, anything that doesnt involve income, etc. You are just a traveler.
It really doesnt matter which you pursue, those with a tax treaty or not, because until you are ready to separate from CAN, than what you are is living in a a friends apartment and writing a book, or doing something else, anything that doesnt involve income, etc. You are just a traveler.