American wants to work for Austrian Company in Canada while wife and children remain in Seattle - ARTICLE IV and Article XV of t

I am considering a potential position with a company that will be based in Canada (subsidary of an Austrian Company) The length of the assignment will be approximately 2 years.
I would be spending 4-5 days a week working thoughout Canada residing in hotels and/or temporary housing paid for by the company.
My family, wife and three children, would maintain our residence in Seattle.
Since I have not accepted the position as of yet, I am wondering what my tax situation would be.
I had read that as long as I am only in Canada less than 183 days a year, my tax situation will be only conducted in the US and I could be paid in American dollars.
Is this correct?
If not, I would like to understand all the potential implications, as it would be part of my negotiations.





david ingram replies:

The 183 day rule applies to worldwide income, not income earned in Canada. In other words, if you are in Canada for less than 183 days you are only taxable on income earned in Canada and not your worldwide income. After 183 days, you become taxable on your worldwide income but Article IV of the US / Canada Income Tax Convention would seem to make you a resident of the USA for worldwide tax purposes.

You would be taxable on the money earned in Canada as soon as it exceeded $10,000. In other words, under article XV, you can file a Canadian T1 return and report all the income on line 104 and deduct it on 256 and have no taxable income in Canada. After $10,000, the whole amount earned in Canada, becomes taxable in Canada.

This is NOT double taxation. After paying the tax to Canada, the US will give you credit for the Canadian Tax when you file form 1116. And if you are being paid for working in the US and Canada, the amounts would be prorated between the two countries.

If you were to earn all the income in Canada, You would pay significant more tax to Canada than you will in the US because Canada does not have a joint tax return and taxes you at the equivalent of a US married filing separately rate on the whole income. Plus Because you are not a resident of Canada, the official rule is that you have to keep track of which provinces you are working in and you (maybe we) will have to file a multi-jurisdictional return.

If this has not scared you off yet, it is only money. You need to know that it is do-able and we can look after it for you. We file multi-jurisdictional returns on a regular basis although I am willing to bet that you could walk into a dozen other tax preparation offices in a row and they will never have prepared one, let alone a couple of hundred.

What you have to do is get the figures calculated in advance, and negotiate enough money with your employer to make it worthwhile.

You might want to buy an hour of my time by way of a phone consultation. The fee is $350 Canadian and I think you should likely take advantage. Otherwise you could be in for a rude awakening.

The following is taken from the US / Canada Taxation section at www.centa.com. You should read the whole 27 pages as well.

US Canada Income Tax Convention (1980)

Article IV

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);

(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

1980 to 95. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person.

1996 on. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person.