How Does Canada Tax You When You Earn in Other Countries

How Does Canada Tax You When You Earn in Other Countries

This is a classic opera singer/digital nomad type question, and like every tax question… it can get super complicated.

Tax stuff is tricky when you’re dealing with one country, let alone two or three or all of them.

The best advice I could possibly give is to find an accountant that you trust to help you navigate the nitty gritties of filing your taxes. Everyone is different, and so one-on-one advice from someone who knows your numbers is the best thing.

But I wanted to give you a few bullet points that I hope will help.

 

How your taxes work ties in to where you claim ‘residency’

Residency is a squishy word. You’d think it would be cut and dry – it’s where you live right?
Well, any of you people who live out of a suitcase, or haven’t had a fixed address in years know that it’s rarely that simple.

The government defines residency as a place where you have ‘significant ties’. Those ties can be things like a house, or family, or where your storage locker is.

Some countries (like the US) have specific formulas based on how many days you spend there to determine if you’re a resident, but you can even challenge that… if you think all the evidence points in another direction.

If you claim residency in Canada, but are working around the world… here’s what happens next:

 

Canada taxes you on your ‘worldwide income’ not just what you make in Canada…

So, if you’re Canadian and you’re working in the US or the Netherlands, Canada wants to tax you for all the income you make.

Let’s say you make $10,000 in the US, $20,000 in Canada and $15,000 in the Netherlands, you’ll be taxed on the whole $45,0000.

But here’s the thing that so many of you world travellers know: the country that you’re in often takes a huge amount of withholding tax off of the top of your cheque.

So if you’ve already paid tax in the country you’re in, what happens if Canada taxes it AGAIN?

 

Canada will give you a tax credit for all the tax you’ve already paid in another country

In an effort to make the worldwide tax system possible for mere mortals to exist in, Canada has set up tax treaties with lots of other countries.

Most of that doesn’t matter to you, but in this case it really does.

Those relationships allow Canada to give you a tax credit for any tax you’ve already paid to another country (think all that withholding tax you already gave).

That means that generally you won’t get double taxed on the same income.

Consider this: You’ve been working on a musical in the US, and every time you get paid your weekly cheque the US government takes a huge chunk of that in withholding taxes (which they will).

When you come back to Canada and file your taxes, there will be a place to tally up the amount of taxes you’ve already paid to the US government.

That amount, will be credited against the rest of the taxes you owe, if you paid more than you owe… you’ll get a refund. A refund from the Canadian Government, even though you paid in the States.

 

 

I’ll say again that these are pretty general statements to give you an overview of how the system works. Every country is different depending on the tax treaty, and there are lots of exceptions to even the most basic rules because … it’s taxes.

I hope this will be a tiny bit helpful. If you want to chat any of this out, feel free to send me an email (chrisenns@ragstoreasonable.com), or if you’ve got really technical questions find your way to an accountant that specializes in these kind of taxes.

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact... I was a bit of a disaster. I remember (very clearly) what it feels like to be 'financially out of control'.

And honestly, I still get stressed about money... that doesn't stop... the difference is that now I have the tools to deal with that stress.

And those tools are what's made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I'd love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

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