Moving to Hawaii on L1 Visa, effect on income tax and Canadian residency if term extends past 3 years


HI David et al,

Thank you for creating such an informative site!

I have a few questions:

My Canadian parent company is applying for an L1 for me to work as an employee in Managerial/Specialized capacity for our US subsidiary in Honolulu. I will be paid in USD by US company and subject to American employment law and tax, etc.  I understand I am to file income tax in both countries, and do not understand exactly how the foreign tax credit works and if this should affect my negotiations at all for compensation.  Also, I don't understand how my Canadian residency might be affected since I am single woman with no dependants (father and brother live here but not sure if this classiefies as "family").  This said, is it wise to continue investing in RRSPs', etc while I'm away... Sorry this is a long question, perhaps I need an appointment? Any resources you can share to point me in right direction would be great.  I can afford a lawyer but not a senior partner, and this is the first move I've ever done like this.

Thank you!



If you are transferring to Hawaii on a full time basis, you will become a tax resident of the USA and will not need to file a Canadian return as long as you are there.

This assumes that you do not leave your home here empty and your car licenced and come back every couple of weeks. article IV of the Tax Treaty is very clear.  If you do not have a home availagble to you in Canada, yiou are taxed in the US on your workld income.  If you have mutual funds or bank accounts in Canada, tell the financial institution your new US address and they will deduct 10% tax on any interest paid and 15% tax on any dividends paid to you well a resident of the United States

You will have to file a departing Canada return for the  year you left. That return might require a T1161, 1243 and 1244 if you are leaving any assets behind.

There is a seven or eight year limit for an L1 visa.  If you decide you want to stay there "forever", you will need to be sponsored by the comapny for a resident alien or "green" card.

If you decide that you want to stay there be sure you do not fall into the trap that the company pays CPP (Canada Pension Plan) for you instead of US FICA (social Security and Medicare).

The reason is that You have to pay into US Social security for 30 years to receive a fair prorated share of your retirement pension. 

There is a provision that says that the comapny can  pay CPP instead of FICA for five years if the transfer is not expected to last five years.

Therefore, if your transfer is only for a 3 year period, the copmpany may want to invole that clause.  In my opinion, that is to your detriment if you intend to stay there.

Paying CPP instead of FICA saves the company a bundle but costs you a lot in retirement.

Do NOT invest in a Canadian RRSP while a resident of the USA.

I am available for individual; consultations.  The fee is $400 by phone or in person for an up to one hour consultation.  If you are physically in Canada at the time, GST of $24.00 is also charged.

In the meantime, goto and read the US/CANADA Income Tax section in the second box down onthe right hand side.  This is mainly aimed at American citizens living in Canada but you will get more ideas from it.