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Old 03-13-2012, 07:06 AM
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Looks like my daughter has the opportunity to go to Japan and work as an English teacher later this year,,i was wondering how the income tax works in this situation, does she pay Japanese and Canadian income tax? does she pay both but get reimbursed by one or the other?does she only pay income tax in the country she works?
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Old 03-13-2012, 07:26 AM
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She'd have to report foreign employment income on Canadian income tax:

"Foreign employment income is income earned outside Canada from a foreign employer. Report this income in Canadian dollars."

Line 104 - Foreign employment income

It seems that Japan doesn't require a foreigner to pay tax if the foreigner files a note that she'd be leaving Japan:

Information about Income Tax?Information about Income Tax?National Tax Agency

Seems that whether she stays there more or less than one year, makes a difference for tax purposes.

Google is your friend!
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Old 03-13-2012, 02:32 PM
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If she's going to be gone for more than half a year she can simply file for non-resident for tax purposes status. This is done with form NR73. It just needs to be printed and mailed to Ottawa. Then CRA sends a confirmation of her new status in the mail, to whatever address she wants. Then she doesn't have to file any tax returns in Canada or pay any tax to Canada for as long as she's living abroad.

Note that in order to be approved, she will need to indicate some ties to the new country such as employment, membership in a club or two, having a bank account, etc; and also indicate a reduction in ties to Canada such as not owning a vacant house in Canada, not having a job in Canada, not having a spouse in Canada, etc. She doesn't need to sever all ties, and can still keep many of the things on the form in Canada such as bank accounts, personal belongings, and still be approved. The point of the questions is to screen out people who are going on vacation for a six weeks and have no real ties to their vacation destination (vacationers generally don't open bank accounts in their new country, or have a job, or join local clubs/associations, etc)

This is much simpler, quicker and less costly than attempting to navigate the bizarre web of double taxation interpretations and delayed reimbursement (without interest), with much lower probability of errors or being ripped off by CRA due to weird tax treatments, exchange rate treatments, inappropriate classifications of allowances as income or standard benefits as income, etc, as has been the painful and extremely costly experience of people I've known who chose the double taxation route (apparently they were unaware of the non-resident option). For example, I've seen CRA tax a Canadian citizen who was a PhD student at a US university, and who had a tuition waiver at that US university, as though the tuition waiver was income. Since this was a leading private university the tuition waiver was huge (something like 40k per year) and more than wiped out the stipend that she was supposed to live on as a PhD student (20-25k per year). So on an income of 20-25k per year CRA taxed her as though she was making over 60k. American PhD students do not pay tax on a tuition waiver since this is a standard part of a PhD offer in the US, and neither should she have. It was a nightmare for her, resulted in financial problems and an extremely low quality of life while trying to complete the PhD, which in turn led to major delays in completing the PhD (several years delay), which inflated the burden of the double tax further (she became poorer with each passing year). Furthermore, this was during a time when the Canadian dollar was weak and getting weaker, which further inflated the burden of Canadian government's hand in her pocket. And it could have been avoided entirely by simply completing the 4-page form above.

So my view is generally to avoid double taxation and reimbursement like the plague -- at least anytime CRA is involved -- unless there is some sort of clear huge tax shield or benefit from doing the double taxation method, or there is no alternative.

If daughter has any questions she can call the CRA help line which was very helpful for me when I filed for non-resident for tax purposes status. They answered all the questions I had and it was quite simple.

Last edited by Lepistiku; 03-13-2012 at 03:01 PM..
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