Dear David,
My wife and I live in Montreal. She works as an editor of a travel magazine
based in Mexico City. Her company has no office, nor presence in Canada
aside
from my wife whom is a permanent resident here. She edits via internet, and
travels all over the world for the Mexican company. She has no Canadian job
nor income, though she does own a property here which operates at a loss.
Is
there a tax treaty between Canada and Mexico which would allow someone like
her
to only pay taxes in one country, namely Mexico-- we have been looking for
the
literature on this, but haven`t found anything. Any answers would be much
appreciated.
Thanks,
---------------------------------
david ingram replies:
As a resident of Canada and the province of Quebec, your wife must file a
Province of Quebec return AND a Canadian federal return. Both returns must
report her world income.
If she is performing any of her services in Mexico, she should likely be
filing a Mexican return as well and paying tax on that amount.
She would then claim a foreign tax credit in Canada on lines 431 and 433 of
the Canadian return.
Article IV of the Canada / Mexico tax treaty clearly makes her taxable in
Canada if she resides here with a husband with or without Permanent Resident
Status.
Art IV reads as follows:
Article 4
Resident
1. For the purposes of this Convention, the term "resident of a Contracting
State" means:
a) any person who, under the laws of that State, is liable to tax therein by
reason of the person's domicile, residence, place of management, place of
incorporation or any other criterion of a similar nature;
b) the Government of that State or a political subdivision or local
authority thereof or any agency or instrumentality of any such government,
subdivision or authority.
2. Where by reason of the provisions of paragraph 1, an individual is a
resident of both Contracting States, then the individual's status shall be
determined as follows:
a) the individual shall be deemed to be a resident of the State in which the
individual has a permanent home available; if the individual has a permanent
home available in both States, the individual shall be deemed to be a
resident of the State with which the individual's personal and economic
relations are closer (centre of vital interests);
b) if the State in which the individual's centre of vital interests cannot
be determined, of if there is not a permanent home available to the
individual in either State, the individual shall be deemed to be a resident
of the State in which the individual has an habitual abode;
c) an individual who has an habitual abode in both States or in neither of
them shall be deemed to be a resident of the State of which the individual
is a national;
d) in any other case, the competent authorities of the Contracting States
shall settle the question by mutual agreement.
3. 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. In the absence of such agreement such person
shall be considered to be outside the scope of Articles 6 to 21 inclusive
and Article 23.
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