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 US / Canada Real Estate Specialists 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 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 and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included." 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