Tax implications of working overseas
Congratulations, Eddy. That sounds thrilling however clearly difficult to depart your loved ones behind in Canada while you’re working half a world away.
Canada levies federal and provincial revenue tax primarily based on residency, not citizenship. So, whereas residing in Canada, each residents and non-citizens alike must report and pay tax on their worldwide revenue. When revenue is topic to tax overseas as properly, Canada typically permits a international tax credit score to be claimed to keep away from double taxation.
The United Arab Emirates (UAE) doesn’t cost revenue tax, neither is there any withholding tax. It’s a widespread expat vacation spot the place incomes and the price of residing could be excessive, and its tax-free standing is interesting. That stated, when a Canadian works within the UAE and doesn’t break ties with Canada, they are going to usually proceed to file Canadian tax returns and pay Canadian tax.
Who is taken into account a “resident” for tax functions?
In your case, Eddy, your spouse and minor kids will nonetheless be Canadian residents and reside in your house. A partner, dependants and a everlasting residence out there in Canada can be thought-about vital residential ties.
When you’re quickly residing or working outdoors of Canada, however nonetheless have residential ties like yours, Eddy, you could stay a factual resident of Canada. With the intention to be thought-about an emigrant non-resident of Canada and now not topic to Canadian revenue tax on worldwide revenue, it’s essential to typically sever residential ties.
What if in case you have residential ties overseas?
In some conditions, you possibly can set up residential ties overseas when you nonetheless have vital residential ties in Canada. You and your partner might, for instance, transfer to a different nation to work, whereas a baby stays behind and lives in your house whereas going to college.
On this scenario, you could be thought-about a resident of the opposite nation in addition to Canada. It’s essential to look to the tax treaty between the 2, if relevant, to find out which nation is your major tax residence. In some international locations, a tax treaty would possibly mean you can be thought-about a deemed non-resident of Canada and keep away from Canadian taxation.
If you don’t develop into a non-resident of Canada, Eddy, your tax obligations in Canada is not going to change. Primarily based in your scenario, it seems like you could stay a factual resident of Canada, such that you’re nonetheless a resident for tax functions.