TN Visa - Taxes for Canadian returning home due to covid

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Lucida
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TN Visa - Taxes for Canadian returning home due to covid

Post by Lucida » Thu Aug 13, 2020 4:06 pm

Hi everyone!

I wanted to prepare for the 2020 tax year in advance given my situation is going to be confusing this year. I have worked in America since 2017 under a TN Visa, filing taxes in America in 2017, 2018 and 2019, the last time I filed taxes in Canada was 2017 (the year I left). I returned to Canada in February 2020 and have remained here since, working remotely for my U.S employer as an employee (not a contractor). I wanted to understand how I should be preparing for 2020 taxes given I am likely to stay in Canada the rest of the year (will be here longer than 183 days). To add to the mess, I currently have a 401k that I am considering withdrawing from in order to place a downpayment on a house in America and I know this in itself adds another layer of complexity.

There was updated guidance posted by the CRA (https://www.canada.ca/en/revenue-agency ... s.html#h_i) but it left me even more confused given the travel restrictions/what is considered non-essential travel is in a fairly grey area.

Any help would be greatly appreciated.

nelsona
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by nelsona » Fri Aug 14, 2020 8:17 am

Thanks for posting that update.

As you probably know, having a job in US allows one to travel to US by any means. There are flights leaving Cdn airpots for US daily, with no restrictions on reasons for travel. So where the guidance states "solely as a result of the Travel Restrictions", I would think that this waiver would not apply.
You would be considered a CDn resident, and a Cdn employee of the foreign company (with the added requirements on them). You may wish to inform your employer about this, so they can decide how to deal with you in future.

The 401(k) withdrawal would also be taxable in Canada, to the extent that it would be in US (so if there is some program in US that would make some of this money not taxable in US, you would apply that to your CDn tax return as well).

What were the reasons for returning to Canada and remaining there for all this time? What ties remain in US?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by nelsona » Fri Aug 14, 2020 8:33 am

If you feel you have circumstances not addressed by the guidance, I would certainly contact the CRA using the email listed (not phoning) in the guidance.
The quality of their response will be directly proportional to the detailed information you give: reasons, ties, etc.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by nelsona » Fri Aug 14, 2020 8:33 am

Let us know what you find out!
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by jixca » Sat Aug 15, 2020 5:52 pm

Thanks for the CRA update.

I have a similar thread on viewtopic.php?f=2&t=203914 but everyone's situation differs. It depends on your long term plan for the next 2 years and family/employment situation.

If you're staying longer than 183 days and have ties to Canada, then you're likely resuming residency. But you're buying a house in US so it sounds like the move is temporary so perhaps try to avoid resuming residency if you can, that way you won't have to account for non-wage income worldwide reporting to CRA. You'll still get double taxed on the employment income by US withheld at source and then Canada next year then you claim it back from IRS as foreign tax paid, but that'll be the only thing on the hook if you can remain non-resident.

nelsona
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by nelsona » Sat Aug 15, 2020 7:38 pm

The employer would also have to withhold Cdn payroll taxes for the CDn resident employee, if the person becomes a Cdn resident. This has always been the case, as pointed out here many times. The new guidance makes this clearer. The status quo cannot continue, unless the persomn in canada can prove that they are only in canada "solely" due to COVID.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Lucida
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by Lucida » Thu Sep 03, 2020 9:24 am

Finally heard back from the CRA, below is their response.

"Where the individual has remained in Canada solely because of the Travel Restrictions, that factor alone will not cause the Agency to consider the common-law factual test of residency to be met. In addition, as an administrative matter and in light of these extraordinary circumstances, the Agency will not consider the days during which an individual is present in Canada and is unable to return to their country of residence solely as a result of the Travel Restrictions to count towards the 183-day limit for deemed residency. This will be the Agency position where, among other things, the individual is usually a resident of another country and intends to return, and does in fact return, to his or her country of residence as soon as he or she is able to do so.

Provided that the individual meets the requirements described in the Guidelines for the relief to apply, the days spent in Canada from March 16, 2020 to the now updated date of September 30, 2020 will not count towards the 183-day limit.

In this regard, we would generally view the Canadian government’s recommendation to Canadians to return to Canada as a “Travel Restriction”, including in a scenario where an individual would have been permitted under the laws of their country of residence to remain in (or return to) that country."

FIRELife
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by FIRELife » Thu Sep 03, 2020 12:05 pm

Hey man,

In the exact same boat (Came back in March, company cool with staying here until end of year). I was having been trying to find answers with no success. Thank you for posting this. Per you CRA reply, is your take that you can claim Non-Residency this year since Canada only recommends "Essential Travel" to the US and thus we do not fit under that?

jixca
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by jixca » Fri Sep 04, 2020 11:25 am

Thanks for posting the CRA response, did you ask via PERESCOVIDG@cra-arc.gc.ca whilest describing your unique situation?

If one is able to exclude those days from 183 day count then that's pretty useful and would eliminate a lot of filing hassle for 2020.

FIRELife
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Joined: Thu Sep 03, 2020 12:02 pm

Re: TN Visa - Taxes for Canadian returning home due to covid

Post by FIRELife » Fri Sep 04, 2020 12:21 pm

I emailed PERESCOVIDG@cra-arc.gc.ca but seems like the reply will take a while.

@jixca are you thinking that with the reply above - even if we stay >183 days, we can avoid all Canadian taxes in general as a non-resident (assuming no ties to Canada other than being a citzen)?

FIRELife
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Re: TN Visa - Taxes for Canadian returning home due to covid

Post by FIRELife » Mon Sep 21, 2020 6:01 pm

CRA Reply here:

This is in response to your email dated September 3, 2020.



Response part I - the CRA guidance on individual income tax residency states:



Where the individual has remained in Canada solely because of the Travel Restrictions, that factor alone will not cause the Agency to consider the common-law factual test of residency to be met. In addition, as an administrative matter and in light of these extraordinary circumstances, the Agency will not consider the days during which an individual is present in Canada and is unable to return to their country of residence solely as a result of the Travel Restrictions to count towards the 183-day limit for deemed residency. This will be the Agency position where, among other things, the individual is usually a resident of another country and intends to return, and does in fact return, to his or her country of residence as soon as he or she is able to do so.



Provided that the individual meets the requirements described in the Guidelines for the relief to apply, the days spent in Canada from March 16, 2020 to the now updated date of September 30, 2020 will not count towards the 183-day limit.



In this regard, we would generally view the Canadian government’s recommendation to Canadians to return to Canada as a “Travel Restriction”, including in a scenario where an individual would have been permitted under the laws of their country of residence to remain in (or return to) that country.



There are no actions that need to be taken to qualify for this relief. However, an individual seeking to benefit from the administrative measure should maintain any documents that support that the individual was in Canada solely as the result of the Travel Restrictions in case the Agency contacts them in the future for verification purposes.



Response part II – U.S. employer payroll obligations



The situation may arise where, due to the COVID-19 crisis, a non-resident employee of a non-resident employer, traveled to Canada for personal reasons and as a result of the Travel Restrictions, was unable to return to their country of residence when intended. Although it may not have been their intention, if the non-resident employee performs their duties of employment remotely while in Canada, and continues to receive remuneration for those duties, the non-resident employer would be subject to Canadian withholding, remitting, and reporting obligations, notwithstanding that non-resident employee may ultimately be exempt from tax in Canada due to a tax treaty.



For the non-resident employer to be relieved of their obligation to withhold and remit the applicable taxes, the non-resident employee would have to apply for and receive a waiver of the tax required to be deducted. Alternatively, the non-resident employer could apply for certification as a qualifying non-resident employer, and if the non-resident employee also qualifies, the non-resident employer would not have to withhold and remit tax on the payments they make to the non-resident employee. Both these remedies apply only where the non-resident employee is working in Canada for a limited time and is exempt from tax in Canada under a tax treaty. However, these remedies are only available in respect of a payment if granted prior to the date that the payment was made.



In light of the extraordinary circumstances caused by the COVID-19 crisis, it is plausible that a non-resident employee, that customarily performed their duties of employment for the non-resident employer in their jurisdiction of residence, traveled to Canada unexpectedly, in haste, or under personal distress, and continued to perform their duties of employment remotely after arriving Canada, without the time necessary to obtain the available relief from Canadian withholdings, or without the knowledge, at the time, of these remedies.



Potential Issue

The non-resident employee would be subject to both Canadian payroll withholdings, and those of their jurisdiction of residence, and the resulting reduction in net pay could cause undue hardship.



Additionally the non-resident employer, failing to withhold and remit the required Canadian amounts without authorization from the Agency, could be held liable for the whole amount with interest and penalties.



Agency Position

As an administrative matter and in light of these extraordinary circumstances, the Agency will not assess or penalize a non-resident employer for failing to withhold the required Canadian payroll deductions, in respect of remuneration paid to a non-resident employee performing duties of employment remotely in Canada, where the non-resident employer and the non-resident employee, as may be required, can reasonably demonstrate that:

• the non-resident employee is resident in a country with which Canada has a comprehensive tax treaty (treaty);

• the non-resident employee is not resident in Canada for tax purposes in accordance with the relevant treaty;

• the remuneration received by the non-resident employee for performing their duties of employment in Canada would otherwise be exempt from taxation in Canada in accordance with the relevant treaty;

• the non-resident employee regularly and customarily performs their duties of employment outside of Canada and has not previously performed duties of employment in Canada, as a non-resident of Canada, for any employer;

• there is no employer-employee relationship between the non-resident employee and any employer in Canada;

• the non-resident employee travelled to Canada due to the COVID-19 crisis or for reasons not relating in any manner whatever to their employment, and could not return to their jurisdiction of residence solely due to COVID-19 Travel Restrictions; and

• the non-resident employee and the non-resident employer have made the necessary efforts to obtain the available relief from Canada’s payroll withholding rules (i.e. the non-resident employee has applied for a Regulation 102 waiver; the non-resident employer has applied for certification as a qualifying non-resident employer and recognizing that the non-resident employee would be a qualifying non-resident employee).



The Agency will respect this position for the period beginning:

• the day the non-resident employee commenced exercising their duties of employment in Canada because they were unable to return to their jurisdiction of residence due to the COVID 19 Travel Restrictions, and ending

• the date that is the earliest of:

o the day the non-resident employee was able to return to their jurisdiction of residence;

o the day specified on a Regulation 102 waiver relieving the non-resident employee from the relevant Canadian withholdings; or

o The day the non-resident employer was certified by the Minister as a qualifying non-resident employer and the non-resident employee was also a qualifying non-resident employee.

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Thoughts? It makes it slightly clearer than the 183 days rule does not to apply as long as travel restrictions are in-place for Canadians

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