# Tax to pay? on Profit Sharing / Pension / Cash Separation / Termination Indemnity



## HighFive (Mar 23, 2015)

Dear Experts,

Friend of mine from Calgary who has been working as petroleum engineer in oilfield for almost 14 years has been laid-off last week.
His contract was terminated without cause due to massive headcount reduction, so now company he was working for, has to pay him Profit Sharing / Pension / Cash Separation / Termination Indemnity he was contributing for the past 8 years of his international assignments.
He became a Canadian resident on February 2011 and paid taxes (from 2011 to 2014) both in the assigned countries where he was working (US, Malaysia, Russia & UK) and Canada as his family does reside in Calgary.

So his question is - should he pay any tax from the mentioned above $$$ to Canadian government in 2015 as all those contributions were made from his salary and tax on that salary was already paid in many countries mentioned above.

Also he would like to clarify if he is entitled for Employment insurance in Canada as he paid tax here from his international assignments. 

Should you have any questions or require any additional information - just ask.

Thank you for all your suggestions and clarifications in advance.


----------



## OnlyMyOpinion (Sep 1, 2013)

It sounds like the various incomes you mention are all being paid in the 2015 tax year by a Calgary-based company when he will be a resident of Canada? If so, it sounds like Canadian taxes to me - but I'm not an expert. Would he not be offered the assistance of some accounting/tax professionals with his lay-off package?
Re/ EI, he should just apply asap and let them determine his eligibilty.


----------



## HighFive (Mar 23, 2015)

OnlyMyOpinion, thanks for your reply. I can confirm that company he was working for is US based company and all $$$ will be paid from Houston.

Can someone who knows better about situation mentioned above comment/suggest, please. Thank you.


----------



## Eclectic12 (Oct 20, 2010)

I'm not sure there's enough information to provide more than a few guesses or suggestions.

A few of the issues:

a) profit sharing ... what are the details? 

I've had friends who put only their own money into the plan but as it was buying shares, no taxes were paid and when the shares were sold - they had to pay taxes (same as a regular investor using after-tax dollars to buy a non-dividend paying stock where only capital gains taxes are due when sold).

I've had other friends participate in what sounds like the same thing but as options were granted - there was also taxes to pay on the options.



b) Pension ... most of the ones I am familiar with have the employer contributing as well as the employee. When laid off (or the employee quits) - the individual is presented with the choice of leaving it where it is (typically no taxes to pay until the payouts start around age 65) or leave the pension. The most common situation I am aware of that there *might* be taxes is where it is a Defined Benefit (DB) pension that has collected much more from the employee/employer than is needed to pay the benefit. Usually the employer portion can only be transferred to a LIRA, the employee portion can be rolled into the employee's RRSP without taxes/RRSP contribution room being used. Where the excess is big enough, it has to be taken as income but can be used to contribute to an RRSP where there's contribution room (the RRSP contribution makes a deduction that will reduce income).

c) Cash separation / Termination Indemnity sounds like severance pay ... which is never from previous employee income, is brand new income and taxable the same as any other employment income.


I'm not sure it helps much ... 


Cheers


----------

