Article 15 Canada United Kingdom Great Britain and

Subject: Article 15 Canada United Kingdom Great Britain
and Northern Ireland Income tax Convention - Ask an
International Business Valuator Valuation Appraisal
Income Tax Expert Specialist
Date:           Saturday January 01, 2005
Time:           02:10 PM -0800
QUESTION:
Please could you advise on the following questions
below with respects to my company or myself having any
Canadian taxation liabilities?
Work Involvement and Background.
I am an electrical engineering consultant working as an
employee of my company, which is based in the United
Kingdom of which I am also a director.
My company is a registered UK Limited Company and pays
all of its relevant taxes in the UK.
Over the past many years due to my working locations
around the world I have been granted personally none
tax status in the UK for myself.
My company has been awarded a contract for my services
as an electrical/ electronic consultant for a Canadian
company for up to a period of 6 months in British
Columbia.
A work permit has been granted and issued by the
Canadian Immigration for a period of 1 year.
The payment for my services is made directly to my
company in the UK, of which I take a salary each month,
which is also paid in the UK.
Questions
1).        I have been informed by the company that I
am doing the work for that if I work in Canada for less
that 6 months I would not be require to pay Canadian
tax.
Is this correct?
2).        If I have to pay taxes would this be on my
salary paid from my UK company or on the total invoice
value paid to my UK company from Canada.
3).        Should I file any tax report for my period
of working in BC, if so what and when?
4).        Should my UK company file any tax report for
its involvement of my services?
5).        If I work over the 6 months what % of
taxation would I be expected to pay and has my UK
company any tax liability's.
Your clarification, understanding and advise on the
above would be gratefully appreciated.
Best Regards
===============
david ingram replies:
Article 15 of the Canada - UK Income Tax Convention
(Treaty) 1980 with amending protocols in 1985 and 2003
reads as follows:
Dependent Personal Services
1. Subject to the provisions of Articles 17 and 18,
salaries, wages and other similar remuneration derived
by a resident of a Contracting State (England) in
respect of an employment shall be taxable only in that
State 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.
2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting
State (England) in respect of an employment exercised
in the other Contracting State (Canada) shall be
taxable only in the first-mentioned State (England) if:
(a) the recipient is present in the other State
(Canada) for a period or periods not exceeding in the
aggregate 183 days in the calendar year concerned, and
(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 may be taxed in the Contracting
State in which the place of effective management of the
enterprise is situated.
4. In relation to remuneration of a director of a
company derived from the company the preceding
provisions of this Article shall apply as if the
remuneration were remuneration of an employee in
respect of employment, and as if references to employer
were references to the company.
5. Where under the law of a Contracting State tax is
required to be deducted and is so deducted from
salaries, wages and other similar remuneration derived
in respect of an employment exercised in that
Contracting State, tax shall not be deducted therefrom
on behalf of the other Contracting State
-----------------------------------
The question is:  WHO or What is your employer.  I know
that you say that the money is being paid to your UK
company.  However, I believe that your Visa to Work in
Canada is between the Canadian Company and "YOU" as an
employee or servant.
The visa was NOT likely issued between your company and
yourself. It has been your decision to direct the
remuneration to your UK Corporation but the Canadian
Visa is for you to work for the Canadian Company, not
for you to work for a company in the UK.
Therefore, I believe with the limited amount of
knowledge I have at this point, that you are taxable in
Canada on the gross Canadian Earnings
The 183 day rule 15(2)(a) does NOT apply because the
actual employer (look at the HRDC visa paperwork) has a
fixed base in Canada under 15(2)(b) and the actual
payment is being borne by a Canadian Employer as
specified in 15(2)(c).
"IF" and I say ""IF" your Visa to work was issued to
your personal UK company - in other words, your UK
company applied for your visa and not the ultimate
employer in Canada, than my answer would be different.
As I understand your situation, your earnings are
taxable in Canada from the first dollar because you are
being paid by a Canadian Employer and have chosen to
deposit the payment to a foreign bank (to Canada) in a
foreign country which is an expedient thing to do when
performing services in some third world countries but
has no necessity when working in Canada or the US or
Australia or Germany or New Zealand, etc.
I will also accept the fact that you may know 10 people
who have done what you propose to do and not paid tax
to Canada.  That does not make it correct.  They just
have not been caught.
The tax rate in British Columbia ranges from about 22%
at less than $32,000 Cdn to over 43% when you hit
$102,000 with a total of five progressions.
Whatever you pay to Canada becomes a credit on your UK
tax return so it is NOT double taxation.
It makes no sense to me that you would risk Canada's
coming back at you 3 years later when they start
looking for your tax return because a working visa was
issued to you as an individual.
One case I have right now with an American has over
$20,000 in interest and penalties for failure to file
in Canada because they ran the money through a US
entity when the Working Visa was issued to the
individual.
Answers to this and other similar  questions can be
obtained free on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred
Snyder of Dundee Wealth Management and I, David Ingram
will be hosting an INFOMERCIAL but LIVE talk show
called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to
listen on the internet at
www.600AM.com
Local calls are taken at (604) 280-0600 and Long
Distance calls are taken at 1( 866) 778-0600
I do not know how far the LD line reaches.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
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4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com
www.centa.com www.david-ingram.com
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