overseas employment tax credit - Form T626 Overseas Employment tax Credit. -

face="Times New Roman">XXXX XXXXXX  wrote:

Hello My Name is XXXX XXXXXX, my husband XXXX worked part of 2007 in XXXXXX and 2008 XXXXXX and XXXXXXXXXXXXX, he is Canadian and I'm resident. I tried to do his taxes and he is very confused because he was supposed to get more money, anyway to make the story short in this accountant office they said they can't used the T4 and T626 at the same time!
I'm in need of a good advice, unfortunately I worked part time and my husband hasn't work since December 2008, we live in Calgary.
I will appreciate your prompt response or if you have somebody here that can help us will be very much appreciate it.
david ingram replies:

This is old enough that you likely have your answer already.  However, it was put aside to answer when i had time so here goes.

I do not understand the accountant's comment about not using a T4 and T626 at the same time.  The practical fact is that most people filing a T626 are filing with a T4 slip.

To qualify to use a T626 and get the advantage of an Overseas Tax Credit of what amounts to up to 80% of $100,000 tax free, one must work outside of Canada for a Canadian Company or an affiliate of a Canadian Company in the fields of mineral or oil exploration or construction or selling contracts for the above.

Basically - word for word the T626 form asks the following:

A. Did this employee work for you in connection with a contract described in
item C below throughout a period of more than six consecutive months, that
began before the end of the year, and included any part of the year indicated
above? Yes or No ^
If yes, please indicate the period of employment (referred to as the
qualifying period):
from: (Year/Month/Day) ^
to: (Year/Month/Day) ^

B. Throughout the qualifying period, did this employee perform services other
than under an international development assistance program of the Canadian
International Development Agency (CIDA)? Yes or No ^

C. Throughout the qualifying period, did the employee perform all or
substantially all (at least 90%) of their employment duties outside Canada in
connection with a contract (or for the purpose of obtaining a contract) under
which you carried on a business outside Canada conducting one of the
following activities? Yes or No ^
If yes, (enter X) tick the applicable box:
- the exploration for or exploitation of petroleum, natural gas, minerals, or
other similar resources; ^
- any construction, installation, agricultural, or engineering activity; ^
- any activity performed under contract with the United Nations (UN);
- any activity performed to obtain a contract on your behalf to undertake any
of the above activities. ^

Enter the name of the country where the activities were performed and a brief
description of the project: ^

D. Throughout the qualifying period, were you an employer in one of the
following categories? Yes or No ^
If yes, (enter X) tick the applicable box:
- a person or a corporation resident in Canada; ^
- a partnership in which persons resident in Canada, or corporations
controlled by persons resident in Canada, own interests that exceed 10% of
the fair market value of all interests in the partnership; or ^
- a corporation that is a foreign affiliate of a person resident in Canada. ^

Employer's name ^
Employer's account number ^
Name of the tax services office that processed a tax waiver for this credit
(if one was requested) ^

I, Print the name of the authorized officer ^
am an authorized signing officer of the business. I certify that the
information given on this form is, to the best of my knowledge, correct and

Date ^
Signature of authorized officer ^
Telephone number (Including area code) ^

You can see the whole form at


If the company qualifies and your husband's job qualifies, he can claim the Overseas tax credit.

If you filed without it because of bad advice, you can amend the return now by filing the form along with a T1-ADJ.

These two  older questions fill in some other possibilities.


I will be working in Dubai for 2 months with a residency permit earning good money. This can be paid to me or to my Canadian company which I own ((its an Inc).

I own and will be commuting from a home in Edmonton ( 2 weeks in Dubai, 2 weeks home) and my wife will make a trip but will stay at home in Alberta.

I cant see a way of avoiding tax. I suspect its better for the company to be paid rather than me personally - any advice?

david ingram replies:

For the two months or six months, there is no way to avoid income tax as described.  Paying your corporation would likely help in the short term or in income splitting.  However, if you are truly incorporated and have  A NON-DEDUCTIBLE MORTGAGE ON YOUR HOUSE, you should not be incorporated until you have used the techniques in my November 2001 newsletter.

IF, and I say IF you were going to be there for six months or more, you could arrange for a Canadian company (not yours) with more than 5 full time employees to hire you and send you to Dubai as their employee.

In that case, by filing form T626, you could earn up to 80% of $100,000 over a year.  to qualify, you have to be employed out of the country for for at least six months. 5 months and 21 days does NOT QUALIFY.

This older question will help

Hello David,

I found your contact information by Googling for help on preparing Canadian 626 OETC forms.  xxxxxx xxxxx has field service personnel that spend weeks, months, and sometimes years out of the country while supervising the installation of mechanical equipment sold by xxxxxxxx to a client.  We have been preparing 626's for employee for several years, but administrative staff has changed and we have lost the experience in this.

Question is:

One employee was in Australia for the entire year of 2006 and for about 4 months of 2007.  He received the OETC for 2006 taxation year.  Obviously he only effectively needed 6 months of 2006 to qualify for the 626 for that year, so can the remaining months of 2006 be used to establish a claim for 2007 (in which he was away only 4 months).

I don't expect to access your time and expertise for free, so please let me know how compensation can be arranged.

Thank you in advance,
david ingram replies:

To qualify for the maximum exemption, an employee requires 12 months away.

six months qualifies one for a $40,000 tax free exemption and 9 months for $60,000.  It is prorated by the number of days.

Therefore,  someone leaving to work in Australia on Dec 1, 2005 would qualify for the month of Dec being tax free when he or she had worked in Australia unitl the end of May, 2006. If someone worked in Australia from Jan 1 to April 30th, 2007, he or she would have to have started work in Australia about Oct 29th, 2006 to qualify. If they were in Australia from Aug 1, they would get the one month of Jan 2007 as a proportional part of $80,000 tax free if they had left on Jan 31st.  As you can see, you can do a great disservice to an employee (and create animosity) by bringing someone home a month too early..

Hope this helps. 

I charge $450.00 an hour for this type of consultation.. 

Make a $225 donation to your local food bank.

david ingram


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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.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.--

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 or www.garygauvin.com.  If you forward this message, this disclaimer must be included." -


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