US Citizen Residing in Canada and Working in Iraq

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QUESTION:
We are a USA based company and may be hiring a Canadian resident (who is a
US citizen) for a year-long assignment in Iraq.  What type(s) of taxes
should be withheld from this candidate's pay?
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david ingram replies:
On Sept. 15, 2003, the U.S. military administration of Iraq imposed an income tax of 15 percent on Iraq, starting in January 2004. . 
L. Paul Bremer, the administrator in Baghdad, stated in Coalition Provisional Authority Order Number 37, "Tax Strategy for 2003," that "The highest individual and corporate income tax rates for 2004 and subsequent years shall not exceed 15 percent." Bremer exempted the coalition authority, the armed forces, their contractors and humanitarian organizations from taxes. 
As a US citizen, your employee must file a US tax return and is  taxable on anything over $80,000 US.  He can however, claim a foreign tax credit on form 1116 for any tax paid to Iraq on any earnings over the $80,000.
As a Canadian resident, he is taxable on everything from the first dollar earned.  Canada will only recognize tax paid to Iraq because that is  where the money is earned.   The US will not allow credit for the taxes paid to Canada unless he is ruled a resident of Canada under the tie-breaker rules under Article IV of the US / Canada Income Tax Treaty.
I need more information and it should be on a fee for service basis.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 
[email protected]
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 & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
This from "ask an income tax and immigration and bankruptcy expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,  Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
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You may find more answers at www.centa.com
If the number of messages is too many for you or the US / Canada Taxation and Immigration information is not of interest, simply  reply with a remove request.
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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