PR working in Canada as expat but paying income taxes in Japan...?

[y0sh1]

I'm in a bit of a unique situation and couldn't find much info online, so hoping to get some answers here.

My wife is a Canadian citizen currently living in Ontario, and I was planning to quit my job in Japan so I can join her at the end of this year. However, my current workplace offered to transfer me to their Ontario office as an expat. Since I already have my PR so there's no need for them to sponsor me a work visa, we thought all would be smooth sailing... until we were informed that all of their expats (not just the ones in Canada) still pay income taxes in Japan while living overseas. I have yet to gather more info but it sounds like the expat currently in Ontario doesn't pay any taxes to the Canadian government per the Canada-Japan tax treaty, and either he himself or HR submits a T4 (not sure yet if they actually do a full tax return) to CRA every year to prove all taxes have been paid in Japan.

My question is - assuming I'll be living and working in Ontario at this same workplace as an expat for the next 5 years after landing -> in order to fulfill my residency obligation and to be able to renew my PR card 5 years later, does it matter in which country I've paid my income taxes, so long as I can provide supporting documents such as rental agreement under my name, letter from employer, bank statements etc (probably not Notice of Assessment from CRA I'm guessing) to prove that I've been physically living here for more than 730 days?

I hope my question makes sense - TBH I'm still a bit confused myself... Thanks so much in advance!!

 

[scylla]

I'm in a bit of a unique situation and couldn't find much info online, so hoping to get some answers here. See

My wife is a Canadian citizen currently living in Ontario, and I was planning to quit my job in Japan so I can join her at the end of this year. However, my current workplace offered to transfer me to their Ontario office as an expat. Since I already have my PR so there's no need for them to sponsor me a work visa, we thought all would be smooth sailing... until we were informed that all of their expats (not just the ones in Canada) still pay income taxes in Japan while living overseas. I have yet to gather more info but it sounds like the expat currently in Ontario doesn't pay any taxes to the Canadian government per the Canada-Japan tax treaty, and either he himself or HR submits a T4 (not sure yet if they actually do a full tax return) to CRA every year to prove all taxes have been paid in Japan.

My question is - assuming I'll be living and working in Ontario at this same workplace as an expat for the next 5 years after landing -> in order to fulfill my residency obligation and to be able to renew my PR card 5 years later, does it matter in which country I've paid my income taxes, so long as I can provide supporting documents such as rental agreement under my name, letter from employer, bank statements etc (probably not Notice of Assessment from CRA I'm guessing) to prove that I've been physically living here for more than 730 days?

I hope my question makes sense - TBH I'm still a bit confused myself... Thanks so much in advance!!

You will have to file a Canadian tax return and you will need to declare your worldwide income in that tax return. This is a requirement under Canadian tax law given you are residing in Canada. The expat status is irrelevant.

 

[scylla]

I'm in a bit of a unique situation and couldn't find much info online, so hoping to get some answers here.

My wife is a Canadian citizen currently living in Ontario, and I was planning to quit my job in Japan so I can join her at the end of this year. However, my current workplace offered to transfer me to their Ontario office as an expat. Since I already have my PR so there's no need for them to sponsor me a work visa, we thought all would be smooth sailing... until we were informed that all of their expats (not just the ones in Canada) still pay income taxes in Japan while living overseas. I have yet to gather more info but it sounds like the expat currently in Ontario doesn't pay any taxes to the Canadian government per the Canada-Japan tax treaty, and either he himself or HR submits a T4 (not sure yet if they actually do a full tax return) to CRA every year to prove all taxes have been paid in Japan.

My question is - assuming I'll be living and working in Ontario at this same workplace as an expat for the next 5 years after landing -> in order to fulfill my residency obligation and to be able to renew my PR card 5 years later, does it matter in which country I've paid my income taxes, so long as I can provide supporting documents such as rental agreement under my name, letter from employer, bank statements etc (probably not Notice of Assessment from CRA I'm guessing) to prove that I've been physically living here for more than 730 days?

I hope my question makes sense - TBH I'm still a bit confused myself... Thanks so much in advance!!

Just to add, since there's a tax treaty, you won't be double taxes. But you are still required to file a CRA return and declare your worldwide income. You will also declare any tax you have paid through your tax return in Japan.

 

[Besram]

In addition to @scylla's explanation on the requirements regarding taxes, I wanted to clarify implications on your immigration status:

• Fulfilling the residency obligation for PR is not directly tied to you filing taxes in Canada. To prove you meet the residency obligation, you only need to prove that you have spent the required time in Canada (or that you are eligible to receive credit for days spent outside Canada in a number of specific circumstances). Showing you submitted tax returns is one piece of accepted evidence, but not the only one. Bank statements and pay slips also work, among other things.
• That said, becoming eligible to apply for citizenship requires that you have been filing your taxes in Canada, "if you needed to". And as explained above, you most likely need to.

If you have any doubts about this, speak with a tax adviser in Canada who is familiar with cross-country taxation.

 

[y0sh1]

You will have to file a Canadian tax return and you will need to declare your worldwide income in that tax return. This is a requirement under Canadian tax law given you are residing in Canada. The expat status is irrelevant.

Thanks so much for your replies!
Is my understanding correct then that when I renew my PR card in 5 years, as long as I've resided in Canada for more than 730 days and have filed yearly tax returns to CRA declaring my worldwide income and taxes paid in Japan, IRCC doesn't really care whether I've paid any taxes in Canada?

I think my main source of confusion came from looking at CRA's definition for Resident vs. Non-Resident in terms of where taxes are paid, but I guess things are a bit different when it comes to criteria for maintaining Permanent Resident status... Again, apologies if I'm not making a lot of sense. All this is very new to me and the more I read the more confused I seem to become =S

 

[canuck78]

Thanks so much for your replies!
Is my understanding correct then that when I renew my PR card in 5 years, as long as I've resided in Canada for more than 730 days and have filed yearly tax returns to CRA declaring my worldwide income and taxes paid in Japan, IRCC doesn't really care whether I've paid any taxes in Canada?

I think my main source of confusion came from looking at CRA's definition for Resident vs. Non-Resident in terms of where taxes are paid, but I guess things are a bit different when it comes to criteria for maintaining Permanent Resident status... Again, apologies if I'm not making a lot of sense. All this is very new to me and the more I read the more confused I seem to become =S

You would still be a resident for tax purposes in Canada.

 

[y0sh1]

In addition to @scylla's explanation on the requirements regarding taxes, I wanted to clarify implications on your immigration status:

• Fulfilling the residency obligation for PR is not directly tied to you filing taxes in Canada. To prove you meet the residency obligation, you only need to prove that you have spent the required time in Canada (or that you are eligible to receive credit for days spent outside Canada in a number of specific circumstances). Showing you submitted tax returns is one piece of accepted evidence, but not the only one. Bank statements and pay slips also work, among other things.
• That said, becoming eligible to apply for citizenship requires that you have been filing your taxes in Canada, "if you needed to". And as explained above, you most likely need to.

If you have any doubts about this, speak with a tax adviser in Canada who is familiar with cross-country taxation.

Thanks so much for your input! I'm not planning on applying for citizenship in the future, but I'll definitely file yearly tax returns to CRA regardless of if I end up paying all or some of my taxes in Japan. It's reassuring to know that whether or not I've contributed into the Canadian tax system (income tax/EI/CPP, etc) while residing in Canada won't affect my eligibility to maintain my PR status.

A few more quick questions:

• Just out of curiosity, would I still be able to use a Notice of Assessment from CRA as one piece of evidence for residency obligation, even if the entirety of the income reported is worldwide income and all taxes were paid in Japan not Canada?
• Would not paying income taxes in Canada affect my eligibility for things like OHIP?

 

[armoured]

A few more quick questions:

• Just out of curiosity, would I still be able to use a Notice of Assessment from CRA as one piece of evidence for residency obligation, even if the entirety of the income reported is worldwide income and all taxes were paid in Japan not Canada?
• Would not paying income taxes in Canada affect my eligibility for things like OHIP?

I think you're missing the overall point that you need to declare all worldwide income in Canada and pay whatever taxes are due in Canada.

If, as it turns out, you have paid taxes elsewhere that are eligible (under tax treaty for example) to be deducted against your income taxes in Canada and you have no net amounts payable in Canada after that - well, then you have paid whatever taxes that are due in Canada. (In practice, you may or may not have to pay some amounts in Canada).

No need to overthink it. What the Canadian government cares about is whether you're paying the taxes you are required to pay (and not hiding assets to evade taxes too).

I should point out, you will pay some taxes in Canada (sales taxes for example) - and long-term this pay-abroad-through-employer may not be the best arrangement for you and your spouse. (It might be - I don't know and it would depend on your plans, amongst other things). Speak to a tax/financial planning professional.

 

[y0sh1]

I think you're missing the overall point that you need to declare all worldwide income in Canada and pay whatever taxes are due in Canada.

If, as it turns out, you have paid taxes elsewhere that are eligible (under tax treaty for example) to be deducted against your income taxes in Canada and you have no net amounts payable in Canada after that - well, then you have paid whatever taxes that are due in Canada. (In practice, you may or may not have to pay some amounts in Canada).

No need to overthink it. What the Canadian government cares about is whether you're paying the taxes you are required to pay (and not hiding assets to evade taxes too).

I should point out, you will pay some taxes in Canada (sales taxes for example) - and long-term this pay-abroad-through-employer may not be the best arrangement for you and your spouse. (It might be - I don't know and it would depend on your plans, amongst other things). Speak to a tax/financial planning professional.

This really helped clear things up. Thank you and everyone else who responded for your help!!

 

[armoured]

This really helped clear things up. Thank you and everyone else who responded for your help!!

Small additional point - I should think a Japanese company that has a fair number of expats will probably have an arrangement with a local tax accountancy, big or small, that knows the situation. You could ask for their contacts and perhaps engage for some additional advice or whatever. Again, don't know your plans, but it may be more in your interests to be paid direct by the Canadian entity (I mean that I have literally no idea, but that your situation / long term plans may be materially different than other expat employees.)