# Working abroad for 1-2 years - tax question



## Saniokca (Sep 5, 2009)

Hi all,

I might have an opportunity to work abroad for about 1-2 years through my firm. My question is who will I pay taxes to? My logic says just that country but will I owe anything to Canada? What about ei and cpp?

Thank you in advance!


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## Spudd (Oct 11, 2011)

No clue, but since it's through your company, just ask HR and I'm sure they can tell you.


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## stardancer (Apr 26, 2009)

http://www.cra-arc.gc.ca/ebci/cjcm/...IndexForms=internet_formspubs_e&Submit=Search

Since you will not be giving up your Canadian residency, you might have to pay taxes to both countries. Depending on the country, Canada might have a foreign tax treaty in which you would get credit on your Canadian return for at least part of the foreign taxes you paid. Some companies pay the taxes on your behalf; the company would then give you a T4 in Canadian $$ and a letter stating how much foreign tax you paid (to use on your Canadian return). Check out how this will come down with your HR department. Also check out whether the employment would be eligible for the Overseas Employment Credit.

CPP will be withheld from your paycheque if this is a Canadian company located in Canada. Not that sure of EI but I doubt foreign employment is eligible for EI.


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## MoneyGal (Apr 24, 2009)

What SD said. To be crystal clear: Canada taxes citizens on worldwide income, no matter where it is earned.


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> What SD said. To be crystal clear: Canada taxes citizens on worldwide income, no matter where it is earned.


Did you mean 'residents' rather than 'citizens'


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## MoneyGal (Apr 24, 2009)

Residents has an ambiguous meaning for tax purposes. I was typing quickly. Here's a better statement: Canada taxes actual and deemed residents (so, those who are actually resident and those who are deemed resident for tax purposes) on worldwide income. "Citizens" captures most of those people (but you can be a citizen, living abroad, with no residential ties to Canada and thus no Canadian tax due...however this pool of people is smaller than residents who are not resident here but taxed as though they are). 

I need a Venn diagram, and probably more coffee. :stupid:


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## Nemo2 (Mar 1, 2012)

And...unless things have changed since I worked in the Magic Kingdom......non-resident status is granted (or not), rather than 'demanded'.


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## Dopplegangerr (Sep 3, 2011)

If you are not earning income in Canada that what would you be paying taxes on?
I lived over seas on and off for ten years and have only made claims for the years I earned income in Canada. I checked with my accountant and with Revenue Canada and they both said this was fine.


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## MoneyGal (Apr 24, 2009)

Detailed explanation: http://www.taxtips.ca/personaltax/whopaystax.htm


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## indexxx (Oct 31, 2011)

If you stay out of Canada for two years to the day or more, you can claim non-residency status and pay no Canadian takes. to qualify you must show that you have cut most ties to residency, like no residential address (property ownership is fine as long as you don't claim to live there) nor provincial healthcare among a few other criteria. Basically you can't get the perks of residency (E.I. and CPP included) and expect to not pay Canadian taxes. I lived in the Caymans for five years, claimed non-residency, and paid zero tax on everything earned during that entire period. If you return before the two-year date, you owe on everything you've made up to that point. So I lost five years of CPP payments, but earned tax-free income.


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## TaxGuy (Apr 7, 2009)

You would be liable for tax in Canada if you were to remain a resident and whether you are resident here is a question of fact. If you leave Canada, have few if any ties here (house, bank accounts etc.) and you have residential status elsewhere, you may be off the hook for Canada tax. You may have to pay an exit tax on the gains of most assets (other than RRSP’s & TFSAs) that can be undone when you return.

It is possible you may still be liable for tax in both countries and in that case, there may be treaty tie breaker rules. 

Canada taxes residents on worldwide income and citizenship has no relationship to Canadian taxation. Canadian citizens can easily be non-residents of Canada and non-citizens can be residents of Canada. The Income Tax Act is clear about the issue.


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## MoneyGal (Apr 24, 2009)

Good post from TaxGuy. I should never have used the word "citizen" in my earlier post.

Here's the basic page on residency on the CRA site: http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html 

Includes a link to the interpretation bulletin on residency.


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## indexxx (Oct 31, 2011)

TaxGuy said:


> You would be liable for tax in Canada if you were to remain a resident and whether you are resident here is a question of fact. If you leave Canada, have few if any ties here (house, bank accounts etc.) and you have residential status elsewhere, you may be off the hook for Canada tax. You may have to pay an exit tax on the gains of most assets (other than RRSP’s & TFSAs) that can be undone when you return.
> 
> It is possible you may still be liable for tax in both countries and in that case, there may be treaty tie breaker rules.
> 
> Canada taxes residents on worldwide income and citizenship has no relationship to Canadian taxation. Canadian citizens can easily be non-residents of Canada and non-citizens can be residents of Canada. The Income Tax Act is clear about the issue.


You can, in fact, retain bank accounts. I did so and would wire money home into them once a month, at a rate of almost 2:1 Cayman to Canadian dollars at that time.


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## MoneyGal (Apr 24, 2009)

Hence, from the page I linked, "A determination of residence status can only be made after all the factors have been considered. Your circumstances have to be reviewed in their entirety to get an accurate picture of your residence status." 

One factor or one bank account won't be the determining factor. :02.47-tranquillity:


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## TaxGuy (Apr 7, 2009)

You can retain bank accounts, credit cards, TFSA, RRSP etc. But the more you have in Canada the more it looks like you've not left.

Ideally, I advise clients to limit their connections to their TFSA/RRSP. If you retain a credit card, then a bank account is fine (to facilitate payment of the credit card).


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## Saniokca (Sep 5, 2009)

Thanks everyone! That line with RRSP/TFSA/bank accounts is not too reassuring but if you say that it might still be ok there is hope


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## indexxx (Oct 31, 2011)

TaxGuy said:


> You can retain bank accounts, credit cards, TFSA, RRSP etc. But the more you have in Canada the more it looks like you've not left.
> 
> Ideally, I advise clients to limit their connections to their TFSA/RRSP. If you retain a credit card, then a bank account is fine (to facilitate payment of the credit card).


...Keeping in mind that AFAIK, if you claim non-residency for tax purposes, you cannot contribute to your tax-sheltered investments, only hold them as they were when you left.


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## HaroldCrump (Jun 10, 2009)

indexxx said:


> ...Keeping in mind that AFAIK, if you claim non-residency for tax purposes, you cannot contribute to your tax-sheltered investments, only hold them as they were when you left.


I also wonder if you are working abroad in a country that has no tax treaty with Canada, will the income/returns earned inside the TFSA or RRSP become taxable _in that country_.


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## indexxx (Oct 31, 2011)

HaroldCrump said:


> I also wonder if you are working abroad in a country that has no tax treaty with Canada, will the income/returns earned inside the TFSA or RRSP become taxable _in that country_.


I would think so- if you've claimed residency in that country and given up your Canadian residency. Income is income. Just dispense with the whole magilla and move to a tax-free country! Of course, when I did eventually move back to Canada and filed my first return after reclaiming Canadian residency, I was on the hook for six years of investment gains earned in my Canadian holdings while I was away. But everything I made in the Caymans was untouchable, including a small pension I still have there.


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