Canadian working remotely for US company in Africa
Moderator: Mark T Serbinski CA CPA
Canadian working remotely for US company in Africa
I am a Canadian citizen and will be remotely doing consultancy work for a US company and will be paid a daily rate as well as through invoices. However, I will be in Africa all the time during this consultancy. My contract (which I haven't signed yet) states that the 'independent consultant will be responsible for paying all relevant US taxes.' Being an independent consultant implies that the company is correctly not treating me as an employee. Since I am not working on US soil I will not have to pay US taxes. However, being in Africa complicates the situation. Being a Canadian citizen, can I still pay Canadian taxes even though I will be in Africa for the entirety of the pay period? What tax documents will the company and I need to fill? Any help will be greatly appreciated.
You are in essence self-employed, so yo are not taxable in US, even if you were spending some time in US, so you certainly are not taxable there now.
If you maintain Cdn tax residency, then you will report all income as such to canada. You are not eligible to exempt your income (by usuing the OETC, for example) since you are not working for a Cdn comapny.
If you break ties with canada, you could be non-resident, but that does not seem to be your intention.
You may wish to structure yourself as a corporation to get this benefit -- and be paid corp-to-corp by the US firm. this will result in tax reporting issues in canada, and in US.
I'm not about to look into any treaty issues with the unnamed country(ies) in Africa you are going to.
If you maintain Cdn tax residency, then you will report all income as such to canada. You are not eligible to exempt your income (by usuing the OETC, for example) since you are not working for a Cdn comapny.
If you break ties with canada, you could be non-resident, but that does not seem to be your intention.
You may wish to structure yourself as a corporation to get this benefit -- and be paid corp-to-corp by the US firm. this will result in tax reporting issues in canada, and in US.
I'm not about to look into any treaty issues with the unnamed country(ies) in Africa you are going to.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Thanks for your prompt reply!
Canada does have a tax treaty with the country I will be working in.How does that impact how I file taxes?
What documents will I have to file in this situation with the IRS, if any, as a non resident?
I am very new to all this so apologize for the seemingly obvious questions.
Canada does have a tax treaty with the country I will be working in.How does that impact how I file taxes?
What documents will I have to file in this situation with the IRS, if any, as a non resident?
I am very new to all this so apologize for the seemingly obvious questions.
If you are paid corp-to-corp, you are supposed to file 1020-F with IRS
If you are a contractor, it is good practice to file W-8BEN. The client would keep this for records.
The treaty issues you have are two-fold.
First is residence. Does the Canada-VeryMysteriousAfricanCountryWithoutName (VMACWN) treaty have a residency article which would allow you to become resident there, or are you even wanting that.
The second is US taxation of business income based on resdince. If you remain canadian residnet, then the Cdn-US treaty aplies, and you will be treated as I've already outlined. However, if you elect VMACWNresidency, then you woudl need to look at their treaty with US.
The simplest TO ME, especially if you will not be taxed in VMACWN, is to incorporate, work as employee of that corp, and use OETC to reduce your Cdn tax, and file 1020-F in US, not for tax, but for reporting.
If you are a contractor, it is good practice to file W-8BEN. The client would keep this for records.
The treaty issues you have are two-fold.
First is residence. Does the Canada-VeryMysteriousAfricanCountryWithoutName (VMACWN) treaty have a residency article which would allow you to become resident there, or are you even wanting that.
The second is US taxation of business income based on resdince. If you remain canadian residnet, then the Cdn-US treaty aplies, and you will be treated as I've already outlined. However, if you elect VMACWNresidency, then you woudl need to look at their treaty with US.
The simplest TO ME, especially if you will not be taxed in VMACWN, is to incorporate, work as employee of that corp, and use OETC to reduce your Cdn tax, and file 1020-F in US, not for tax, but for reporting.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Nelsona is trying to say that you file a 1020F for reporting not tax, means its a treaty based return all your saying to the IRS is I am a CND resident I file my taxes in Canada and have no reporting requirements in the US so I am filing this 1020F as a reporting formality to tell you that I am not taxable in the US, and this is the best approach since you have taken a position that hopefully protects you in case of any dispute.
My only concern in incorporating a CND company is the access to be able to take the small business deduction of say 16% ( Ontario) it may not be available if CRA determines that the income was not earned in Canada ( see my earlier posts on this) and further more you do realise that running a corp will result in more accounting and legal fees , that is how Nelsona and myself earn our keep, so for me its a mater of the numbers to see if it is worth it.
My only concern in incorporating a CND company is the access to be able to take the small business deduction of say 16% ( Ontario) it may not be available if CRA determines that the income was not earned in Canada ( see my earlier posts on this) and further more you do realise that running a corp will result in more accounting and legal fees , that is how Nelsona and myself earn our keep, so for me its a mater of the numbers to see if it is worth it.
JG
Just to throw cold water on this whole OETC thing, a perosn working for himself, either self-employed or self-incorporated is NOT allowed to cklaim OETC, since OETC is not granted for self-employed, not for corposrtins with 5 or less employees, nor for employees that are not at arm's length.
So, forget about incorporation for OETC purposes.
Som you only recouses is either severing residential ties, and becoming VMACWN resident, wit hthe hope that that country has a similar treaty with US as Canada-US with respect to independent services.
The other choice -- if this country has income tax nad you are required to pay it, is take foreign tax credit.
Without incorporation, no need to file 1020F (as I said, not as I tried to say).
So, forget about incorporation for OETC purposes.
Som you only recouses is either severing residential ties, and becoming VMACWN resident, wit hthe hope that that country has a similar treaty with US as Canada-US with respect to independent services.
The other choice -- if this country has income tax nad you are required to pay it, is take foreign tax credit.
Without incorporation, no need to file 1020F (as I said, not as I tried to say).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing