“What matters is not the currency in which the employee is paid, but the employer's tax obligations to the host country.”Īn employer should also contact the country's tax officials to find out if it is exempt from paying local taxes, as interest and penalties can be high in case of defaults. “The first thing an employee should mention to their employer is their intended new country of residence,” says Poitras. Here are other factors employers need to consider: This is important information because a resident of Canada must report the world income “from all sources both inside and outside Canada earned after becoming a resident of Canada …”, explains the Canadian Revenue Agency (CRA). Also, it doesn’t mean that employees will be exempt from taxes when they return to Canada, says Jean Gabriel Crevier, co-founder of the accounting firm Le Chiffre in Montreal. UNDERSTAND THE TAX IMPLICATIONSĪlthough some countries emphasize an exemption from local income tax when working from abroad, this does not necessarily mean that the individual will not be subject to Canadian tax as some individuals may remain a resident of Canada if, for example, their families still live here. According to Moss Adams, the goal is to understand “the specifics of when a taxable presence is triggered in the country where the employee is working,” because the employer could be subject to income tax or filing a return even if no taxes are levied. Other things to consider are the types of activities being conducted by the employee and the profit attributable to that activity, explains Moss Adams, one of the largest public accounting firms in the United States.Īlso, take into consideration the level of authority exercised by the employee on behalf of the organization, like the ability to enter into contracts. These answers should help an employer determine if there’s a risk of causing a permanent establishment and, therefore taxable presence, in another country.
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