# tax question for non-resident



## moneytroll (Apr 1, 2015)

Hi,
I am a Canadian non-resident (UK resident), self-employed, and fulfilled services in Canada last week (March 20th till 27th 2015). A 15% withholding tax has been applied to my fee. I am in the entertainment industry.
I would like to file a tax return to get some of the tax back since the expenses were very high. I have downloaded 5013 form and have a couple of basic questions:

1. Is the deadline for this 30th of April 2015 or 2016?
2. Does a non-resident get a basic personal allowance before any tax is applied? (I think in Canada it is called Basic Personal Amount).
3. What do else do I need to include with the form in order to get a refund? (I received a X fee and want to have expenses deducted to get some refund of the tax).
4. I also have to file a US tax return every year as my earnings there are over a certain amount, I don't presume there is some sort of agreement where I can claim Canadian tax refunds via US tax return (sorry, this is probably a stupid question since these are different countries/governments but most forums I searched for, seem to be for both Canadian and US taxes so i thought perhaps there is some sort of reciprocal agreement).
Many thanks in advance. Would appreciate some answers please.
moneytroll


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## Eclectic12 (Oct 20, 2010)

For #1 ... the deadline is for the following year. If no work/services happened in 2014, then it would be 2016.

For #2 ... I believe the following link from Canada Revenue Agency will help but maybe someone with more experience can comment.
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

For #3 ... the 15% withholding tax is low compared to some who are payin 32% overall or 46% on the next dollar earned. However, being a Canadian citizen in Canada ... I have no direct knowledge.

For #4 ... I doubt it. 


Cheers


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## Guban (Jul 5, 2011)

#2. Only if most (90% or more) of your income comes from Canada.
#4. Are you a US citizen or green card holder? If yes, then your US tax return can claim foreign tax credits paid to another country, such as Canada. But, you have to file a Canadian return to claim these. If you are not a US person, I assume that you are filing a US return for US sourced income via a 1040NR, and that would have nothing to do with Canada.


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## moneytroll (Apr 1, 2015)

Many thanks! I am a UK resident. They also have a tax treaty with both Canada and US but I barely earn anything in UK (most earnings are from other countries) and UK earnings not enough to offset tax paid in other countries against UK earnings.
The withholdings are high (in some countries, sometimes at over 50%) so whenever I can, I would like to claim back the withholding tax directly.

"#2. Only if most (90% or more) of your income comes from Canada."

If this is not the case, does the personal amount reduce to 0? (otherwise I believe people start paying taxes from $11k onwards in Canada).

Again, many thanks for your help with this.


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## Guban (Jul 5, 2011)

moneytroll said:


> Many thanks! I am a UK resident. They also have a tax treaty with both Canada and US but I barely earn anything in UK (most earnings are from other countries) and UK earnings not enough to offset tax paid in other countries against UK earnings.
> The withholdings are high (in some countries, sometimes at over 50%) so whenever I can, I would like to claim back the withholding tax directly.
> 
> "#2. Only if most (90% or more) of your income comes from Canada."
> ...


I think that there is some misunderstanding about foreign tax credits (FTC). *If they are the same as on a Canadian and US return*, FTC's are used on your UK return so that the UK doesn't tax what has already been taxed again. It is not that your UK earnings are used to offset taxes paid to other countries. It is that the taxes paid to other countries is used to reduce or offset the additional taxes they would cause on your UK return.

You are correct in trying to get the withholding tax directly from the withholding country, and you do this by filing a tax return for that country. For example, you would file a Canadian tax return to get back some/all of the withholding that Canada requires.

Yes, AFAIK, you start paying income taxes from the first dollar of earned income if you cross below the 90% mark. Doesn't seem fair to me. 90% you get all the personal amount. 89% and you get nothing.


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## moneytroll (Apr 1, 2015)

"For #1 ... the deadline is for the following year. If no work/services happened in 2014, then it would be 2016."

I understood that tax years in Canada run between 1st April and 31st of March? (Or is it calendar years, like in the US?). Since my engagements happened around 22nd of March 2015, wouldn't they still have to be filed under the 2014 return?


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## moneytroll (Apr 1, 2015)

Guban said:


> I think that there is some misunderstanding about foreign tax credits (FTC). *If they are the same as on a Canadian and US return*, FTC's are used on your UK return so that the UK doesn't tax what has already been taxed again. It is not that your UK earnings are used to offset taxes paid to other countries. It is that the taxes paid to other countries is used to reduce or offset the additional taxes they would cause on your UK return.


The way they calculate your tax in UK is: they take your worldwide income (including UK) and then take into account tax withheld at source when calculating your overall tax position (and don't tax you twice). So in theory, I could offset some of the overseas taxes against my UK taxes but I can't since I don't have enough earnings originating from the UK. (I think that's the way my accountant explained it to me once).

Since taxes in some countries are very high (and difficult/impossible to claim back at source), I always end up in a situation where I paid too much in taxes than I would be otherwise liable, had all my earnings come from the UK (this has also to do with the fact that expenses, commission etc are also high).


edit: yes, I think we are saying the same thing. For example (simplified):

Net profit from UK: $10,000
Gross income e.g. Australia: $80,000, net profit: $20,000, taxes withheld in Australia (at 46%) $46,000

Net profit overall: $30,000
UK tax liability: $5,000
but instead I paid $46,0000

But if my net profit in UK was $200,000 for example and tax liability was say $50,000, I would only have to pay $4,000 in additional taxes (in UK). 
At least that's how I understood it and that's the point of the tax treaties. But please correct me in case that's not the case.


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## Eclectic12 (Oct 20, 2010)

moneytroll said:


> ... I understood that tax years in Canada run between 1st April and 31st of March? (Or is it calendar years, like in the US?).


Calendar years ... 



> After the calendar year, Canadian residents file a T1 Tax and Benefit Return[4] for individuals. It is due April 30, or June 15 for self-employed individuals and their spouses, or common-law partners. It is important to note, however, that any balance owing is due on or before April 30. Outstanding balances remitted after April 30 may be subject to interest charges, regardless of whether the taxpayer's filing due date is April 30 or June 15.


http://en.wikipedia.org/wiki/Income_taxes_in_Canada

I work from Jan 2015 to Dec 2015, the company withholds income tax. In Feb 2016, I will receive a T4 income slip for tax year 2015. The 2015 tax return is due April 30th, 2016.




moneytroll said:


> ... Since my engagements happened around 22nd of March 2015, wouldn't they still have to be filed under the 2014 return?


2015 engagements/income means that appropriate tax return to be reporting them on is 2015 tax return that can't be filed until Feb 2016 or so.


For example, currently the tax year 2014 return is coming close to being due so that CRA's web site says:


> Starting early February 2015, you can have a printed copy of the 2014 General guide and forms book mailed to you by calling 1-800-959-8281.


http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/gttng/menu-eng.html

The electronic way of filing (NetFile) didn't open for tax year 2014 until Feb 9th, 2015. The paper copies of the tax guides and forms available at the local post office were made available in early Feb 2015.


Cheers


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## Guban (Jul 5, 2011)

moneytroll said:


> The way they calculate your tax in UK is: they take your worldwide income (including UK) and then take into account tax withheld at source when calculating your overall tax position (and don't tax you twice). So in theory, I could offset some of the overseas taxes against my UK taxes but I can't since I don't have enough earnings originating from the UK. (I think that's the way my accountant explained it to me once).
> 
> Since taxes in some countries are very high (and difficult/impossible to claim back at source), I always end up in a situation where I paid too much in taxes than I would be otherwise liable, had all my earnings come from the UK (this has also to do with the fact that expenses, commission etc are also high).
> 
> ...


I have had very little experience with UK taxes, other than to hear that they are much simpler, and that a tax return is often not necessary. 

The having been said, here are my thoughts ...
1) I am not sure what you are referring to as "net profit".
2) I don't think that we are saying the same thing. As I indicated above, I'm not sure how things work in the UK, but your example wouldn't work in Canada. 
There is a formula for foreign tax credits that takes a look at the ratio of income made outside of Canada vs the total income. 
See: http://www.cra-arc.gc.ca/E/pbg/tf/t2209/t2209-14e.pdf
This ensures that the tax credit you get is limited not only by how much taxes you paid, but also by what fraction was made outside of Canada. Thus, in your example, if you made $200,000 in Canada, the CRA would want taxes on that $200,000. The $46,000 in taxes can only go against the $80,000 made outside of Canada. This ensures that Canada is actually paid and actually collects taxes.

This is my understanding, anyways. Anyone else want to throw their thoughts in?


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## moneytroll (Apr 1, 2015)

Guban said:


> I have had very little experience with UK taxes, other than to hear that they are much simpler, and that a tax return is often not necessary.
> 
> 1) I am not sure what you are referring to as "net profit".


Perhaps "net profit" is equivalent to "net income" in Canada? (I have to check the Canadian forms but it's gross income after all expenses/commissions have been deducted etc).



Guban said:


> 2) I don't think that we are saying the same thing. As I indicated above, I'm not sure how things work in the UK, but your example wouldn't work in Canada.
> There is a formula for foreign tax credits that takes a look at the ratio of income made outside of Canada vs the total income.
> See: http://www.cra-arc.gc.ca/E/pbg/tf/t2209/t2209-14e.pdf
> This ensures that the tax credit you get is limited not only by how much taxes you paid, but also by what fraction was made outside of Canada. Thus, in your example, if you made $200,000 in Canada, the CRA would want taxes on that $200,000. The $46,000 in taxes can only go against the $80,000 made outside of Canada. This ensures that Canada is actually paid and actually collects taxes.
> ...


It does make sense to do it that way (even though it would be very disadvantageous to my circumstances). Then it must be different in UK. There is no formula, the calculations are done automatically and they take you total world-wide income and you can either use your foreign taxes and set them against UK taxes as I illustrated above (that's the way the return calculates it for you when you fill out the foreign pages) or you can set them against gross income as expense. You can't do both however.

Thanks for clarifying about the financial years! I got confused as on Wikipedia it said: "In Canada,[7] the government's financial year runs from 1 April to 31 March (Example 1 April 2015 to 31 March 2016 for the current financial year)." But I should have scrolled lower where it said that for individuals, it is calendar years. Then of course 2015 return makes sense. In UK, tax years run between April 6 and April 5 which is a little annoying since most other countries do it by calendar years.


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