# Working out of country



## couchman (Oct 10, 2013)

I have a daughter that has received a job and is working in Germany. She will be working there for the next 2 or 3 years. I am trying to find some information on tax implications in Canada. I will need to speak to a accountant on this but would like some advice here if possible. Would she still need to fill out Canadian tax forms every year even though you have made nothing in Canada. Any advice would be great.


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## AltaRed (Jun 8, 2009)

Become familiar with the Canada Germany tax treaty http://www.collectionscanada.gc.ca/...tp://www.fin.gc.ca/news01/data/01-042_1e.html to see which country she will be considered a tax resident of and when.

I know nothing about this treaty, or how tax residency tie breakers might work, or what the provisions for foreign tax credits might be to avoid double taxation.


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## indexxx (Oct 31, 2011)

My personal experience working abroad was that if you are deemed to have severed ties with Canada (no Canadian address, no provincial health insurance, a few other criteria) and claim residency in a foreign country for a minimum of two years, you are not required to pay Canadian tax. However this may have changed. You can always call the CRA.


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## lost in space (Aug 31, 2015)

indexxx said:


> My personal experience working abroad was that if you are deemed to have severed ties with Canada (no Canadian address, no provincial health insurance, a few other criteria) and claim residency in a foreign country for a minimum of two years, you are not required to pay Canadian tax. However this may have changed. You can always call the CRA.



Pretty straight forward, once you leave Canada you're tax liability ends. For example you work 10 months in Canada and leave you pay tax as if you'd worked the whole year. You file a tax return and get a bit more money back than you normally might.

Withholding tax of 15% on dividends interest, no tax on capital gains

If she has rental property she'll need an agent and need to file a tax return each year (my information may be a bit out of date on this aspect)

You can keep you bank accounts and Credit Cards but you won't be able to apply for credit increases.

You won't be able to contribute to an RRSP but you can keep the one you have

Not sure about how a TFSA would work. 

if she ends up leaving Canada long term her CPP credits will vest and she will be eligible for prorated OAS. If she leaves Germany before 5 years she gets her social security contributions refunded but personally I'd suggest sticking it out for a bit over 5 as German pensions are very generous. 

If she's in Germany tell her to check out Toy Town Germany an English-language community website. Internations and Meetup are both good websites as well.

Can I ask what city she's living in.


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## james4beach (Nov 15, 2012)

Step 1: check the tax treaty
Step 2: consider her overall investment and tax situation. Does she use a TFSA? Have investments in Canada? Doing a tax departure from Canada can be complicated and expensive. If she's only working there for 2 years, do you really want to do a tax departure and then shuffle everything backwards again in two years? Seems like a lot of hassle.

I'm in a similar situation and am working in the US for a handful of years, but still temporarily -- and plan to return to Canada. I decided *not* to do a tax departure from Canada, and am still a Canadian resident. I still file a Canadian tax return, as well as a US return. The tax treaty with the US solves the problem of double taxation (I am not taxed doubly) and clarifies, via the treaty tie-breaker position, that I am a resident of Canada and not a US resident for tax purposes.

You might ask why I decided to do this. I could have also officially "departed" Canada and no longer reported/paid taxes in Canada. My reasons are all based around my investments, which are significant and entirely domiciled in Canada. I rely heavily on Canadian discount brokerages and don't want to stop using my established procedures for my investments. Doing a departure would incur a departure tax and cause a tax disposition event, but it would also complicate the way I do my investments. My RRSP would be frozen, unable to make new trades, and the TFSA would become impossible.

So if I departed Canada (tax-wise), how would I then buy Canadian securities? The Canadian broker would see me as a non-resident, which nearly entirely stops my activities. I absolutely am not going to transport all my assets and money to the US.

And that's why I didn't do a tax departure. Why go through all this hassle, only to reverse it and go through the opposite hassle again in just a few years? Not worth the effort. Filing two tax returns is really not very hard.

*However* if your daughter does not have investments or doesn't have assets/securities, then it's no big deal and a tax departure is probably the best route.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Doing a tax departure from Canada can be complicated and expensive. If she's only working there for 2 years, do you really want to do a tax departure and then shuffle everything backwards again in two years? Seems like a lot of hassle.


Where one knows one will return to Canada in say three to five years - another factor to consider is RRSP contribution room. The room is granted by filing a Canadian tax return so if it is a "no double tax" situation like the US, what is earning more RRSP contribution room (plus potentially making contributions to it) worth?

Being a NR for the TFSA seems to mean no further contribution room will be granted plus no contributions can be made (leaving it to grow or withdrawing are fine) from a Canadian tax perspective. As I understand it, keeping one's Canadian tax residency means the contribution room will continue to be granted plus being able to make contributions.


So even if there aren't sizeable taxable and/or registered investments (i.e. RRSP and TFSA), there may be a large enough benefit to make it worth staying a Canadian tax resident.


Cheers


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## james4beach (Nov 15, 2012)

Good point, I forgot about the RRSP.

Indeed, though I am working in the US, by continuing to file Canadian taxes (as eclectic12 says) my RRSP contribution room grows. I'm going to make a very large contribution this year. So my RRSP assets continue to grow, which I consider quite important to my future.


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## gibor365 (Apr 1, 2011)

indexxx said:


> My personal experience working abroad was that if you are deemed to have severed ties with Canada (no Canadian address, no provincial health insurance, a few other criteria) and claim residency in a foreign country for a minimum of two years, you are not required to pay Canadian tax. However this may have changed. You can always call the CRA.


CRA will tell you to fill out some special form and CRA will decide if your tax home "moved" to another country


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## hyperdude (Jul 29, 2011)

My wife and I have worked in various countries including US, Switzerland, and India. The outcome will be very country dependent.

Is this a company transfer? If so, will they provide tax equalization? If so, there is 0 point in losing ties to Canada. Seeing as how she already moved, I am guessing not.

Find out the personal tax rate for her in Germany. Germany typically has higher taxes than Canada so it may not make much sense to lose ties to Canada. Taxes paid in Germany will transfer to Canada (tax treaty).

If she keeps residency in Canada, you continue to accrue TFSA and RRSP room. She will also continue to accrue OAS credits.


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## hyperdude (Jul 29, 2011)

A few other things.

She may be forced to contribute to local retirement savings schemes. This may or may not be reclaimable in the future. This will generally not transfer to CPP either.

If she wants to transfer Euros to $ in Canada, CurrencyFair works well.

Lastly, hire accountants that have experience in international transfers in both Germany and Canada -- very important come tax time. We also received tax consultation before moving but this may or may not be useful.


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