Working from India on Canadian payroll max duration to avoid tax issues

[canuck78]

This only applies if you are also earning some income in India.

You then have to declare your combined worldwide income and are taxed in proportion in 1 country.

If you are earning Canadian dollars in a Canadian bank account and paying taxes on it and no other income, you are good to go. If you are transferring money from Canada to India, you might have to declare the inflow in India as income.

Not quite. OP may not actually be a Canadian tax resident. They need to speak to CRA and if CRA determines they aren’t a tax resident their employer will alter things like contributions.

 

[andrewvarghese]

Not quite. OP may not actually be a Canadian tax resident. They need to speak to CRA and if CRA determines they aren’t a tax resident their employer will alter things like contributions.

OP can still have secondary ties and continue to be a tax resident - they are earning in a Canadian account.

I spent 1 year outside Canada earning income in Canada and was taxed by the CRA as a tax resident of Canada even with secondary ties. You only become a tax resident of another country if you sever all your ties with Canada.

OP needs to decide if either
1) This is a temporary arrangement (there is no time defined for temporary). OP has said they are stuck in India. That is a choice, there are ways, albeit difficult, to return.

OR

2) Crosses the 6 month residency threshold in India and become a tax resident of India, in which case, needs to prove established ties in India to be considered a tax resident of India over Canada in the eyes of the CRA.

 

[canuck78]

OP can still have secondary ties and continue to be a tax resident - they are earning in a Canadian account.

I spent 1 year outside Canada earning income in Canada and was taxed by the CRA as a tax resident of Canada even with secondary ties. You only become a tax resident of another country if you sever all your ties with Canada.

OP needs to decide if either
1) This is a temporary arrangement (there is no time defined for temporary). OP has said they are stuck in India. That is a choice, there are ways, albeit difficult, to return.

OR

2) Crosses the 6 month residency threshold in India and become a tax resident of India, in which case, needs to prove established ties in India to be considered a tax resident of India over Canada in the eyes of the CRA.

Did you contact CRA to determine your tax residency status? OP has already indicated that he is in no rush to come back to Canada after leaving in March as long as there are no negative impacts. He no longer has a home in Canada and he has been out of Canada for 5 months at this point. He has minimal ties to Canada except his job which is being done remotely with no firm date of return to the office if ever. He is not actually stuck. There are large volumes of people from India who arrive daily in Canada and I assume that direct flights will return around September. He needs to speak to CRA about his tax residency status now and after 6 months although there may not be a difference between the 2 times.

 

[andrewvarghese]

Did you contact CRA to determine your tax residency status? OP has already indicated that he is in no rush to come back to Canada after leaving in March as long as there are no negative impacts. He no longer has a home in Canada and he has been out of Canada for 5 months at this point. He has minimal ties to Canada except his job which is being done remotely with no firm date of return to the office if ever. He is not actually stuck. There are large volumes of people from India who arrive daily in Canada and I assume that direct flights will return around September. He needs to speak to CRA about his tax residency status now and after 6 months although there may not be a difference between the 2 times.

OP hasn't mentioned their gender so I don't know why you say 'he'.

OP has also not indicated they are in no rush to come back to Canada. They have asked for tax implications if they stay in India for 6 months and have said their employer doesn't have any issues with where they work from. This does not translate to the OP being in no rush to come back.

And yes, I did speak to the CRA about my status. Even earning small indirect items such as dividend income in a Canadian bank account can qualify as secondary ties and keep you ongoing as a tax resident of Canada.

 

[Naheulbeuck]

This only applies if you are also earning some income in India.

You then have to declare your combined worldwide income and are taxed in proportion in 1 country.

If you are earning Canadian dollars in a Canadian bank account and paying taxes on it and no other income, you are good to go. If you are transferring money from Canada to India, you might have to declare the inflow in India as income.

This is quite wrong and will get whoever reads this at face value in quite the trouble. This is such a complex area of tax that there is really no point delving into the details of why it is wrong, people should contact a tax specialist, ideally in both countries whenever dealing with two countries taxation system. the residence in India can trigger ROR status resulting in taxes in India, even if you pay taxes in Canada, that's what the treaty is for, to prevent excessive double taxation, but it does not prevent you from having to declare and potentially pay taxes in two separate countries. Even if you don't earn income per say in India, the fact that you live there, makes you liable (depending on many factors) for taxes on global income.

People in those complex tax situations should always consult with tax specialists in each country.

Ties in Canada only impact Canada (except for the treaty to prevent double taxation) and are not considered by India who has its own set of rules. It is absolutely untrue that it is only money transferred that becomes liable, most countries deal with income not money transfers to determine taxes.

Furthermore, there are implications for employers as well as it can trigger mandatory deductions (for example in France those are quite significant, so significant in fact, that Canada does not accept the full amount as foreign taxes paid through the treaty and therefore results in, in fact, double taxation of some income).

Consult with tax specialists and definitely do not trust people on this forum telling you that "if you keep it in Canada" or "if you are taxed in Canada" you are fine.

 

[canuck78]

OP hasn't mentioned their gender so I don't know why you say 'he'.

OP has also not indicated they are in no rush to come back to Canada. They have asked for tax implications if they stay in India for 6 months and have said their employer doesn't have any issues with where they work from. This does not translate to the OP being in no rush to come back.

And yes, I did speak to the CRA about my status. Even earning small indirect items such as dividend income in a Canadian bank account can qualify as secondary ties and keep you ongoing as a tax resident of Canada.

If OP is a woman I apologize. The advice remains the same. OP did indicate that they have no immediate plans to return to Canada and has almost been out of Canada for 6 months. You have no idea what ties OP has to Canada which is why OP needs to speak to CRA who is the only one who can determine OPs tax residency status if they remain in India for longer than 6 months.

 

[SindhujaG]

This only applies if you are also earning some income in India.

You then have to declare your combined worldwide income and are taxed in proportion in 1 country.

If you are earning Canadian dollars in a Canadian bank account and paying taxes on it and no other income, you are good to go. If you are transferring money from Canada to India, you might have to declare the inflow in India as income.

Hi,
Are you sure of this? Except for the CAD to INR conversion income declaration, one can continue to stay in India more than 180 days under Canadian payroll, paying Canadian taxes?

 

[canuck78]

Hi,
Are you sure of this? Except for the CAD to INR conversion income declaration, one can continue to stay in India more than 180 days under Canadian payroll, paying Canadian taxes?

No you need to speak to an accountant who specializes in India and Canadian taxes. There should be specialists in the large cities like Toronto and Vancouver who specialize in Indian and Canadian taxes.

 

[steaky]

No you need to speak to an accountant who specializes in India and Canadian taxes. There should be specialists in the large cities like Toronto and Vancouver who specialize in Indian and Canadian taxes.

Aren't accountants and specialists (specialize in Canadian and India taxes) are the same?

 

[alok4best]

Hi,
Are you sure of this? Except for the CAD to INR conversion income declaration, one can continue to stay in India more than 180 days under Canadian payroll, paying Canadian taxes?

If you stay for 183 or more days in a financial year (1 Apr-31 Mar) in India, then you become a tax resident in India. And you must file your IT return. Since these cases involve income earned in multiple countries, you need to take the help of an accountant who understands and has experience in filing such returns so that you do not end up being taxed twice on the same income.

 

[canuck78]

If you stay for 183 or more days in a financial year (1 Apr-31 Mar) in India, then you become a tax resident in India. And you must file your IT return. Since these cases involve income earned in multiple countries, you need to take the help of an accountant who understands and has experience in filing such returns so that you do not end up being taxed twice on the same income.

Avoiding double taxation and knowing the tax treaties between countries is just one of the reasons using an accountant is a good idea. Plenty of other reasons. It is worth the expense.