Discussion:Canada tax and treaty

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Discussion Forum Index --> Advanced Tax Questions --> Canada tax and treaty
Discussion Forum Index --> Tax Questions --> Canada tax and treaty

Dhtax (talk|edits) said:

12 February 2008
Any Canadian experts out there? My new client has the following situation. I can handle the US side, but can anyone enlighten us on the Canada side?

Client is a "dual citizen", ie Canadian who now holds US green card & passport. He has lived in the US for the last five years or so, has no substantial ties in Canada, and has filed as a US resident. Last year he worked for a few months in Canada as self-employed on a contract (ie independent, no fixed place of business). He was given a Canadian tax statement, I believe a T4, which I believe is their equivalent of a 1099-MISC.

He clearly needs to report all the income in the US. He wants to know if he needs to file in Canada, and, if so, if he needs to pay Canadian tax.

As I read the treaty, Art XIV says that Independent Personal Services performed in Canada by a resident of the US are not taxable in Canada. Am I reading this right?

I know that Canada applies a "facts and circumstances" test to determine if he is no longer a Canadian resident, but for our purposes let's assume he passes the test and is a US resident.

If so, does he need to file in Canada and declare a treaty position? Any guidance on how to file?

The non-treaty alternative would be to pay tax in Canada and take the credit in the US, but if the treaty applies it should make things easier and cleaner . . . maybe. How would he file if the treaty does not apply? Is this something I can handle from here or should he get a Canadian accountant?

Thanks, David H

LKfromCANADA (talk|edits) said:

13 February 2008
Yes, you have to file a Canadian income tax return. Basically, the income goes on then gets deducted under the Treaty as long as your client is entitled to treaty benefits. That is, he must not have had a "fixed place of business" in Canada. The payor also should have withheld 15%? He would need to file to get this back. You can find Canadian forms on the Canada Revenue website at www.cra.gc.ca.

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