Work Permit and Canadian - INDIA tax issues -


Hi,
 
I am an IT professional located in India, working for a subsidiary in India which is headquartered in Alberta, Canada. My company is planning to send me to Canada for 5 months on a work permit. I will be continue to get paid here in India. Do i have to pay taxes in Canada or should i be put on the parent company's payroll and pay taxes in Canada for the  period of my stay. Need your help in understanding the best way to go.
 
Thanks
XXXXX
-------------------------------------------------------------------------------------------
david ingram replies:

In my opinion, you are taxable in Canada.  -  Under 15(2)(a), of the Tax Treaty between India and Canada, you are not taxable if you are in Canada less than 183 days but that also requires that your employer is not a resident of Canada (2(b) AND your payment or remuneration is not being borne by a fixed base or permanent establishment in Canada (2(c) .

If you are working in Canada at the head office of an Indian subsidiary, the chances are that the head office is funding the subsidiary and that the funding is ultimately coming from Canada.  Other minds may think differently and your employer may have received a ruling from the Canada Revenue Agency (CRA) that supersedes the treaty.  Do check and get them to put it in writing if they are implying you are not taxable in Canada. 

You can read Article 15 here.

ARTICLE 15 of CANADA INDIA Income Tax Convention (Treaty)

Dependent Personal Services

1.        Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State (INDIA) in respect of an employment shall be taxable only in that State (INDIA)  unless the employment is exercised in the other Contracting State CANADA). If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State CANADA).

2.        Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a)      the recipient is present in the other Contracting State (CANADA) for a period or periods not exceeding in the aggregate 183 days in the relevant fiscal year;

(b)      the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

(c)      the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3.        Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State, may be taxed in that State.
---------------------

The GOOD news is that Article 23(3) states that you will get credit in India for any tax paid to Canada as  follows:
----------

3.        In the case of India, double taxation shall be avoided as follows:

(a)      The amount of Canadian tax paid, under the laws of Canada and in accordance with the provisions of the Agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Canada which has been subjected to tax both in India and Canada shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax.

Good luck and you know where to get that partial year tax return prepared for Canada. - Your company should pay for it.
----------------------------------------



SUGGESTED PRICE GUIDELINES - May 17, 2008

david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 






Comments (0)


CEN-TA Cross Border Services - Tax, Visas, Immigration
http://www.centa.com/article.php/CanWeekofMon20080519000781.html