Responding to just #1 above - which country gets the bulk of the tax revenue? Sounds like the scenario provided is that the U.S. gets its full taxes, then Canadian taxes would be paid (on worldwide income), and one would take a foreign income tax credit on the Canadian tax return for U.S. taxes paid. In this case the bulk of the tax revenue goes to the U.S. So, why would CRA care? As a PR you would be receiving Canadian health care benefits, education for any kids you have, etc. etc. That's why CRA wants your income flowing through a Canadian entity (or you are a Canadian contractor), whereby Canada would get first dibs on the tax revenue.
Work remotely from Canada for US Employer
- Thread starter sanchalanam
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From a contributor in a different post...
Hi, everyone, OP weighing back in here. I bit the bullet and actually paid a tax lawyer who specializes in cross-border taxation issues.
The bottom line is this: It's at best complicated and at worst illegal, depending on a variety of factors. It will almost certainly be painful for the US company to employ a resource outside the US as it confuses the IRS and the CRA will want to know why the company is not routing their pay through the CRA/Revenu Quebec. (I don't know if I mentioned this originally, but the US company has no Canadian presence, so that creates the crux of the problem.) I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same. HOWEVER, at the end of the year, I could claim the US taxes back as I wasn't physically present. It still wouldn't fix the heartburn that CRA or RQ would give me and they would likely pressure the US company (however they could) to do things "the right way" and pay through Canada first.
Now, it gets a little more complex, but he said, as a self-employed consultant, options open up considerably and the IRS doesn't nearly care as much as I wouldn't be being treated as an FTE and wouldn't be resident in the States, so the IRS tax situation gets a bit better. The most obvious problem being that what I consider self-employed and what RQ considers self-employed may be at odds, so it would be best to form a corporation, hire myself and use the corporation in Canada to bill the Corporation in the US.
In the end, I decided the juice wasn't worth the squeeze, so I turned the offer down. Shame in that it paid a good chunk of change, but, with citizenship pending, I just can't afford to make my tax situation any more complicated than it absolutely needed to be.
Thanks for everyone's input - it was very much appreciated to have the input.
As always, I am not a lawyer, your mileage may vary, batteries not included, yadda yadda yadda..
https://www.canadavisa.com/canada-immigration-discussion-board/threads/us-citizen-in-canada-pr-working-for-us-company-as-an-fte-paid-into-us-bank.708547/
Thanks for finding this thread. I am still surprised at the use of term "illegal", usually these things are black and white. Either it is illegal or it is not. Very surprised that I can't find a link to the tax law/code on this.
Can you claim to CRA that you were not a "tax resident" in Canada for tax purposes, but claim to IRCC that you were a resident in Canada?
1. If you are commuting for the work daily or weekly, no issues. But if you rarely travel and most of the work in Canada as full time employee, there may be issues. Having said that in the past I have seen many cases where people kept working in Canada and payroll running in US.
2. I don't think that will be any issues. At least in the past no issues.
3. Commuters or remote workers, its always wise to have as much evidence as possible which shows your presence and ties to Canada. Think of it like this......when you apply for citizenship or pr renewal and take you to immigration judge and ask you to prove your presence in Canada, what will you need to do that.
If you file your Canadian taxes as a resident, and U.S. taxes as a non-resident, then wy would there be an issue. Tax treaty between the two countries takes care of the taxes and why would CRA have an issue then?
So, by this logic, you could choose, or flip a coin, as to whether the U.S. or Canada receives the bulk of the tax revenue and which one you'll take a tax credit for taxes paid in the other country (given that for both countries you are required to report your world-wide income). I highly recommend running this by a tax consultant who specializes in cross-border matters before making this assumption.
Cross borer commuters have been doing it for decades and no one ever has gotten in to trouble with CRA. That literally is the purpose of the tax treaty to avoid double taxation - it makes labor movement easier. I am frustrated how not a single person can point to a solid example or tax code but keeps on scaring folks with "you never know"; on the other hand there are thousands of people who do this every year, an all CRA asks of them is for their U.S. tax transcripts just to make sure they actually paid U.S. taxes that they claim on their Canadian returns.
Please visit this link -
quoting the relevant part - https://turbotax.intuit.ca/tips/using-the-united-states-canada-income-tax-treaty-to-reduce-double-taxation-6229
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Taxes Paid in the United States
If taxes were deducted from your income, you can claim those taxes as if you paid them to the CRA. Because you have a duty to report all your U.S. income on your Canadian return, the income is deemed taxable as Canadian income. The usually lower U.S. income tax rate could leave you with an amount owing for the difference between the United States and Canadian income tax rates.
"
I am guessing as long as you pay taxes in either U.S. and/or Canada, IRS and CRA perhaps split the tax amount or something. Basically, they dont want you to pay only in the country where your tax liabilities are less (U.S.), otherwise if you file in both countries and pay what you owe to both countries, CRA is happy.
Yes, that indeed appears to be the case. Thanks for clarifying. If you live in Canada and commute and work in the U.S., you pay U.S. taxes, claim such taxes on your Canadian return as a foreign tax credit. As you stated, Canadian tax rates tend to be higher, so you'll pay the difference to CRA. In effect, you're paying the Canadian tax rate even though the U.S. receives the bulk of the revenue (as allowed with the tax treaty).
What about state and provincial taxes? According to the following YouTube link,, provinces aren't bound by the tax treaty. So you may be on the hook for provincial taxes (which you'll quickly find out tend to be much higher than most State tax rates). What about state taxes? One source states "Non-resident aliens are not subject to state or city taxation as they do not reside in the United States."
http://www.americanlaw.com/ustxtmp2.html
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The majority are not US citizens and are on work permits and not working remotely so your case is not the typical case.
Which case are you talking about.......Regular or Monday to Friday commuter I have already said no issues. You are essentially dual resident for tax purpose. You can claim tax credit for what you filed in US and pay the top up taxes in Canada.
Now if you do not travel for work and all your work is performed in Canada and your payroll runs in US, then this is different case. Its been while I had the conversation with a very knowledgeable consultant on that, she worked with one of the WITCHS in Canada. Broadly there are three areas when you move people around in global company
Taxes
Immigration
HR laws and regulations
As she would put.
Incase your payroll is running US and you living in Canada the 3 item on the list is most challenging one......that is question of jurisdiction lets leave the complication for now. In case of taxes right way to do it will be reduce your US withholding, there are forms for that....I donot remember the alphabets and number for that. Why do that, because CRA would not consider you have been resident of US to be liable for taxes on US side, CRA would expect they get the bigger share if not all the taxes. Basically you tell Uncle Sam, do not withhold my tax amount in US, I need to pay them in Canada. In Canada make sure you do not wait end of the year to pay lumpsum, rather do it through the year in installments.
One small clarification for those following along. You'd file a 1040NR if you are not a U.S. citizen (i.e., a non-resident alien). You'd file the regular 1040 if you are a U.S. citizen (and PR of Canada). At least that's my understanding.
Does CRA have a way of knowing if you are a commuter? Anyway most of these "commuters" are now fully remote anyway. I guess if the worst case is to pay double taxes that is OK with me. I just wanna make sure there are no other complications as per labor laws etc.