My_question_is: Applicable to Another Jurisdiction or Multi-jurisdictions Subject: Overseas Employment Tax Credit Expert: taxman at centa.com Date: Friday October 27, 2006 Time: 01:19 AM -0400 QUESTION: Hello, I’m from Chilliwack, BC, and I’m currently in my second year of teaching in South Korea. I’m a contract employee for a provincial board of education teaching middle school students and training teachers. I had my taxes done last year and think that I may have paid too much. I'm trying to figure out what tax credits I qualify for. I heard that I may qualify for the "Overseas Employment Tax Credit", which would potential reduce the tax I pay by 80%, but I'm stuck on the part that states a “specified” employer must employ me. What is this? Does this mean that the Overseas Tax Credit is only for a select few? If so, what makes these groups so special to receive a credit, while it appears that I may not. Also, how does the Canadian Tax Treaty with South Korea affect me? Because I’m working in a country that has a “tax treaty” with Canada, does that automatically make me a “Deemed Resident” of Canada? I’ve also heard that because I’m a “Contract Employee” I may qualify as “Self-Employed” and may be able to write off a lot of work related expenses. This is all very confusing. Any help explaining any of my tax questions would be greatly appreciated. Thanks in advance. --------------------------------------------------------------- david ingram replies: I am assuming that you are an ESL teacher. As such, you do not qualify for the Overseas Tax Credit which only applies to: * the Exploration for or exploration of petroleum, natural gas, minerals, or other similar resources * any construction, installation, agricultural or engineering activity * any contract performed under contract with the United Nations or * any activity performed to obtain a contract to undertake any of the above activities. --------------------------- However, there is a tax treaty with Korea and Article IV of the Treaty reads as follows: 2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then this case shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (hereinafter referred to as his "centre of vital interests"); (b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode; (c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national; (d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. ------- What this means is that although you may be taxable in both countries, you are only taxable on your world income in one country. If you are working in Korea but deemed a factual resident of Canada, you would report the Korean income to Canada but exempt every cent on line 256. In other words, you would not pay tax to Canada on the Korean income. If this is the case, you can file a T1-ADJ form and amend your Canadian return to remove the Korean income. I am, of course, assuming here that you are paying your Korean Tax and reporting any Canadian income such as interest or dividends or rents on your Korean return and claiming any foreign tax credits there. ----------------------------------- 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 10 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com www.centa.com www.david-ingram.com Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included." Be ALERT, the world needs more "lerts" David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Saudi Arabia to Mexico to China or Chile - Cross border, dual citizen - out of country investments are all handled with competence & authority. -------------- next part -------------- An HTML attachment was scrubbed... URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/20061027/47299413/attachment.htm
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