# Canada Design working & being paid abroad



## mrlangley (Aug 8, 2015)

Hi,

I'm a Graphic Designer working out Ontario and had a few tax related questions.

1) If I'm working for a company in Europe and get paid into a European bank account, do I need to pay tax in Canada?
2) If the money is being paid into a European bank account, do I need to set up a European work permit per country and pay tax in each country?
3) Is this the same rules for working in the USA?
4) Would it be worth the companies who I work for outside Canada, to pay me via PayPal and I charge Canadian Tax?

Any information would be grateful, this seems a mind field. My initial thought was I wasn't earning much in the European country so not to claim in any country. But I'm worried a huge tax bill if I do not claim and I get looked into.

Thx


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## Just a Guy (Mar 27, 2012)

I'd talk to an accountant to be sure, but any money you make will most likely be taxed in Canada not Europe. If it's in a European bank, you may also be subject to European tax and have trouble getting the money out. The rules will probably be country specific, so don't assume it's like the USA. As the company isn't located in Canada, they probably won't be subject to Canadian taxes, so you wouldn't charge them gst.


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## Spudd (Oct 11, 2011)

If you live in Canada, you are taxed on your worldwide income, so any income you make in Europe or USA would be taxed in Canada. You do not need to charge sales tax to your overseas clients, however.


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## Guban (Jul 5, 2011)

I would guess that you'd have to file and pay taxes to the European country, and because you are a Canadian tax resident, file a Canadian tax return, and claim a foreign tax credit for anything you've paid. Are they withholding for taxes?


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## indexxx (Oct 31, 2011)

To my knowledge Spudd is correct. Only if you claimed residency in a foreign country would their tax laws apply. And you must claim everything you earn. Really want to take that risk?


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## Robillard (Apr 11, 2009)

mrlangley
The question of whether you owe tax in Europe depends on whether your business has a permanent establishment in that European country. If it does, your business is liable for income tax, may need to be registered for VAT, and may be liable for social contributions and personal income tax in that country. If your business had a permanent establishment in Europe, your business would report all that income in Canada, but you would get to claim foreign tax credits for the foreign tax paid. 

If your business doesn't have a permanent establishment in Europe or anywhere other than Canada, then you probably are not liable for those foreign taxes; however, the income would be fully taxable in Canada. Also you should note, as exported services, the HST would be zero-rated.

I would recommend consulting an accountant on these issues.

Whether you need a work permit for those other countries, you should consult someone who understands the immigration considerations for that country. Check the website of the relevant foreign embassy or consulate for starters. For the US, I think the DHS will issue Canadians an entry permit at the border, (class B1, B2 or something along those lines). Moreover, under NAFTA, certain Canadian professionals and work in the US for a certain period of time without requiring a work permit (refer to TN visa status). Residency for immigration purposes is not exactly the same as residency for tax purposes though.


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## mrlangley (Aug 8, 2015)

Basically I'm a resident of Canada and my company is based and registered in Ontario.

I work for a few companies, in the UK and a few in Switzerland. I would say the yearly earnings are around $10,000 - $15,000, so not that much. Not enough to pay taxes in those two countries - i believe? 

They pay into my accounts in the UK and my account in Switzerland. I leave the money in those countries too, for vacations, old age etc.

I understand Canadian's are taxed on worldwide incomes, but as I'm working remotely from Canada and money doesn't come into the country I'm interested in knowing what to do, especially as I'm a registered Canadian company now - I don't want to get caught out.

I have emailed my accountant with this question too, so I will let you know what they say. But was hoping for a quicker response - ha.

Any other information would help...


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## OhGreatGuru (May 24, 2009)

Whether or not it comes into the country is irrelevant. It is foreign income you earned while a resident Canadian taxpayer. You have to declare and pay tax on it.

Please explain "working remotely from Canada". Are you traveling to those countries and working there? Or are you working in Canada on foreign projects by remote communications? i don't think it makes any difference to your Canadian tax status, but might have a bearing on whether or not you would be a tax resident of the other countries. (We won't even go into the issue of work permits if you are traveling abroad to work.)

Opening foreign accounts might make it easier to hide the money from CRA, but if you are keeping an honest set of books for your business the income would show up there. But IMHO having overseas accounts makes it more likely the foreign countries will start questioning your tax status within their jurisdictions.


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## Robillard (Apr 11, 2009)

I wouldn't expect depositing foreign earnings in a foreign bank account as an avoidance strategy to work (it's also illegal if it isn't reported), given that the Canada Revenue Agency may be able to request bank account information on taxpayers where there is a double tax treaty or a tax information exchange agreement, if they suspect tax avoidance/evasion. Moreover, once the OECD's common reporting standard comes into effect in 2017, countries will be regularly exchanging information on bank and brokerage accounts held by non-residents and/or non-nationals. 

With respect to whether "working remotely from Canada" constitutes a taxable permanent establishment (PE), it generally should not; however, it depends on the factual circumstances, as well as the definition of a PE under local tax law and in the double tax treaty (if any). Just travelling to another country generally does not, on its own, give rise to a taxable PE. More typical indicators are: maintaining or working from a fixed place of business in another country, having a dependent agent (that can substantially negotiate and/or conclude contracts) in another country, and spending more 183+ days in another country. It can also depend on the type of activities carried on. If you or your employees travel to another country to engage in preparatory or auxiliary activities connected to a sale or service, (and don't trigger any other conditions that would lead to a taxable PE) then generally these activities should not rise to the level of a taxable PE. Nevertheless, if this is a major concern, I would recommend getting professional tax advice.


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## VideoTaxJoe (Jun 24, 2015)

Also be conscious of the amount of funds that you are building up in those foreign accounts. Once the total of all these accounts reache the equivalent of $100,000 CDN, your company would be required to file a T1135. Penalties are generally $2,500 per year for non-compliance.

Robillard and OhGreatGuru are correct - Generally, the presence of a permanent establishment is the key and your business is taxed on worldwide income regardless of whether the funds are repatriated or not.


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## OhGreatGuru (May 24, 2009)

mrlangley said:


> ...
> 
> They pay into my accounts in the UK and my account in Switzerland. I leave the money in those countries too, for vacations, old age etc....


As an aside, I would remark that using the same accounts for business income and personal expenses is going to complicate your bookkeeping.


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## amack081 (Jun 23, 2015)

mrlangley said:


> Hi,
> 
> I'm a Graphic Designer working out Ontario and had a few tax related questions.
> 
> ...


1) Since you are still a resident of Canada, you will be taxed in Canada on your world wide income. There will likely to tax treaties between the European country and Canada.
2) You will need to pay taxes in the country in which you are working (this is where foreign tax credits will be applicable). I'm not certain about the work permit.
3) US have treaties with Canada but it varies as US are more stingy (see FACTA).
4) Would need more information to answer this question. Are you a contractor or an employee?


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## mrlangley (Aug 8, 2015)

This is an interesting one indeed.

I spoke with my accountant and they said as the money doesn't enter Canada, I do not have to charge HST/GST etc. Also I don't have to add my business number to the invoices. 

I have personal bank accounts in Switzerland and the UK which these companies pay into. Which I keep the money in and don't bring to Canada.

I need to speak to her more about this I believe - ha ha...

So to confirm with you all, I'm a Graphic Designer based in Toronto. I work on a few projects outside the country, mainly Switzerland and the UK. As I never visit these countries for work I work remotely from my office here in Canada.


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## Spudd (Oct 11, 2011)

She's right, you don't have to charge HST/GST to foreign customers. It doesn't matter if the money enters Canada or not. 
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/txbl/mprtsxprts/xprtdsrvcs-eng.html

You do need to pay income tax on any money you make worldwide, even if it doesn't enter Canada. Also, there is a special form you need to fill out if you hold over a certain threshold (I think 100K) in foreign assets. 
http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/menu-eng.html


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## mrlangley (Aug 8, 2015)

Thanks Spudd!

I had a meeting and understand the rules now!


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## Eclectic12 (Oct 20, 2010)

indexxx said:


> ... Only if you claimed residency in a foreign country would their tax laws apply.


The US is the US ... but for the short time I was working there - I did not meet the requirements to be a resident but had to pay income taxes for the work done. Then too, Canadian income taxes are based on tax residency ... not claiming to be a Canadian resident who is physically in Canada.

Personally, I'd prefer to dig into it more ... maybe Europe is better or maybe not on this front.


Cheers


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## Eclectic12 (Oct 20, 2010)

mrlangley said:


> Basically I'm a resident of Canada and my company is based and registered in Ontario ...
> I understand Canadian's are taxed on worldwide incomes, but as I'm working remotely from Canada and money doesn't come into the country I'm interested in knowing what to do, especially as I'm a registered Canadian company now - I don't want to get caught out.


It is not about what money comes into the country ... it is about whether you are considered a tax resident of Canada. It seems clear you are ... which means *all* income is reported and taxes by Canada.


http://www.marketwired.com/press-release/CRA-Income-Earned-Abroad-Is-Taxable-826962.htm
http://www.cbc.ca/news/business/taxes/6-must-know-tax-facts-for-canadians-earning-abroad-1.1167892


One thing that might help out is that likely there's a UK - Canada tax treaty that will help deal with any double taxation, similar to the USA-Canada one.


As I say, when I worked in the US for around five months, I had to file US tax return and then report what US taxes I paid so that the foreign tax credit (FTC) could help with the double taxation.


Cheers


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## Eclectic12 (Oct 20, 2010)

Robillard said:


> I wouldn't expect depositing foreign earnings in a foreign bank account as an avoidance strategy to work (it's also illegal if it isn't reported), given that the Canada Revenue Agency may be able to request bank account information on taxpayers where there is a double tax treaty or a tax information exchange agreement, if they suspect tax avoidance/evasion.


+1 ...




Robillard said:


> ... With respect to whether "working remotely from Canada" constitutes a taxable permanent establishment (PE), it generally should not; however, it depends on the factual circumstances, as well as the definition of a PE under local tax law and in the double tax treaty (if any).


Part of the critical area, IMO is how being a business/contractor changes things from a foreign country perspective.

For better or worse, my experience in the US is as a Canadian employee whose services were sold to the US counter-part. In that case, I had to pay US income taxes. As I understand it, US counter-parts brought into Canada had to pay Canadian income taxes as well.


Cheers


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