taxation of non-resident canadian with canadian contract

JJDD · Post by **JJDD** » Thu May 21, 2015 3:54 pm

Hi, I am a Canadian citizen who has been a non-resident of Canada for 3+ years. I have an opportunity to work as a contractor for a Canadian company for work to be performed mostly outside of Canada. I will continue to reside outside of Canada, and will only be physically in Canada for about 60 days per year.
I would appreciate your insights into the following questions:
1). would CRA continue to consider me as a non-resident ? (I currently have no ties to Canada, and I will not establish ties during those 60 days)
2). how would CRA tax my canadian contract income if I only spend 60 days per year in Canada ? (The country I now live in as a permanent resident has no tax treaty with Canada).
Thank you ,
JJDD

nelsona · Post by **nelsona** » Thu May 21, 2015 4:14 pm

1. Definitely. This is not a residential tie.
2. Your client would need to withhold 15% gross from source, since you have no treaty provision (like a US resident). Your would then file a non-resident return reporting only the Cdn income.

See:
http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... r-eng.html

JJDD · Post by **JJDD** » Thu May 21, 2015 4:23 pm

thank you Nelson.
For clarification on question (2), say that the overall contract is for 200 days, and only 60 days of work are performed in Canada. Would CRA tax 60 days of the contract only ? or would they tax the entire contract value of 200 days ?

nelsona · Post by **nelsona** » Thu May 21, 2015 4:44 pm

Generally, you should only only be withheld -- and eventually taxed in canada and province -- for the work done in canada.

You will need to watch for this, especially if the client is not experienced in dealing with this.

From
IC75-6:

Services performed inside and outside of Canada
Â¶ 32. Services performed by a non-resident pursuant to
contractual obligations may be rendered both inside and
outside of Canada. Payments, or a portion thereof, for
services performed outside of Canada are not subject to
Regulation 105 withholding. In such cases, a reasonable
allocation of the payment will be required to determine the
portion that will be subject to Regulation 105 withholding.
The portions allocated to the services to be performed inside
and outside Canada must be clearly expressed either within
the contract or through the related information and
documents. It is the responsibility of the non-resident and the
payer to determine the proper value of these amounts.

and it continues, with examples.

http://www.cra-arc.gc.ca/E/pub/tg/t4061/README.html

JJDD · Post by **JJDD** » Thu May 21, 2015 5:33 pm

mil gracias Nelson !

JJDD · Post by **JJDD** » Fri Jul 31, 2015 10:58 am

Hi, I would appreciate clarification on canadian income tax filing requirements for non-resident self-employed contractor performing work in Canada for 60 days in a 200-day contract as follows:
- if the total gross amount of the work performed in Canada is $20K, does the individual have the obligation to file a Canadian income tax return (assuming that the payer has properly withheld 15% tax of the gross amount corresponding to the work done in Canada) ?
Thanks !
JJDD

nelsona · Post by **nelsona** » Fri Jul 31, 2015 11:05 am

Yes, the 15% WITHHOLDING is not the final tax obligation. You would need to determine the fianl federal/provincial taxes, perhaps even CPP (if not protected by a toatlization agreement like you are).

nelsona · Post by **nelsona** » Fri Jul 31, 2015 11:13 am

The 15% witholding is not to be confused with a flat NR tax.

In fact, under the treaty, this income is likely tax-exempt in canada, so you would certainly want to file, reclaim the tax, and pay tax only in US.

JJDD · Post by **JJDD** » Fri Jul 31, 2015 1:10 pm

ok thanks for the information.
I am currently a permanent resident in a non-treaty country, does this change anything ? Also, would CPP have to be paid as a non-resident only for the portion of the contract that is performed in Canada ?

nelsona · Post by **nelsona** » Fri Jul 31, 2015 2:45 pm

You will thus be taxable. Probably CPP too. You'll see when you file. Remember you will be taxed on NET income.

nelsona · Post by **nelsona** » Fri Jul 31, 2015 2:45 pm

We are only talking Cdn-source income in all of this.

JJDD · Post by **JJDD** » Fri Jul 31, 2015 3:13 pm

if overall contract from the canadian company is a total of $50K, with $20K of the work being performed in Canada and the remaiming $30K being done internationally (outside of Canada), is NET income for tax purposes derived from the $20K only ?

nelsona · Post by **nelsona** » Fri Jul 31, 2015 4:12 pm

C'mon.
Are you familiar with the terms NET income vs. GROSS income?

You will no doubt have expenses to write off against your Cdn-source income -- like an accountant to do your Cdn taxes for example, and travel. That will reduce your GROSS CDn-source income (the amount on which 15% is being withheld, remember?) and lower your final Cdn tax bill.

JJDD · Post by **JJDD** » Fri Jul 31, 2015 4:33 pm

Hi Nelsona, yes, but my question arises as I try to understand the terms "income sourced in Canada" versus "income from work performed in Canada" , given that the payer is a Canadian company. In deriving Canadian NET income for tax purposes, is the GROSS Canadian income the full value of the contract ($50K) which includes both work done in Canada as well as work done outside of Canada ? or is the Canadian GROSS income only the income corresponding to work performed in Canada ($20K) ?
Thanks,
JJDD

nelsona · Post by **nelsona** » Fri Jul 31, 2015 6:53 pm

Re-read what I said:

"We are only talking Cdn-source income in all of this."

Your CLIENT is obliged to withhold on the Cdn-sourced income. So THEY will know what is Cdn-sourced. they will withhold on the GROSS CDN-SOURCED INCOME THEY PAY YOU FOR WORK DONE IN CANADA.

Then YOU will file a return and determine what more or less tax you owe on the NET CDN-SOURCED income, after you have deducted EXPENSES related to the CDN-SOURCED INCOME.

We're done here. You took 2 months to come back to this thread, so the urgency for your questions are suspect, so how about you just hire an accountant.