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| *The Commerce Journal>>>Other Taxes |
As a Canadian citizen taking up a new employment in the US, how would tax laws in both countries affect me? |
Will I be subject to double taxation on my US- earned income? Is the reverse also the same if I'm an American taking up a new job in Canada? The two questions have different answers. (1) A Canadian in the US. Under the income tax treaty between Canada and the US, a Canadian who lives ('resides') and works in the US will be taxed only by the US. (2) An American in Canada. However, under the same treaty, an American who lives ('resides') and works in Canada will be subject to tax by both Canada and the US, but it will not be a double tax. Instead, the American will pay income tax to Canada and then file in the US but receive a 'foreign tax credit' for the amount of taxes that were paid to Canada and would pay any additional amount to the US. The result is that the American would pay total income taxes equal to the higher of the Canadian or US income tax assessment. The reason for this disparate treatment is that the US is one of the only countries in the world which imposes the US income tax on its citizens who reside outside the US. The vast majority of countries imposes the income tax only on those who reside in the country and not on its citizens who reside abroad. See below for a site with an official US government publication, "Information on the United States - Canada Income Tax Treaty". The booklet is clear and easy to follow. Please re-post if you have any further questions about this. Hope this helps. Source(s): http://www.irs.gov/pub/irs-pdf/p597.pdf... its best to verify this will a recognized expert, but typically if you are a Canandian, and are out of the country more than 6 months in a year, you don't pay tax in Canada If you are an American, you pay tax in the US based on all income generated. In the U.S., as you have a job, you will be required to file a tax return but that income may be exempt from payment of U.S. tax pursuant to the U.S.-Canada income tax treaty. If, based on the tax code and your visa status you are treated as a U.S. resident, then your entitlement to treaty benefits will be impacted. You should contact the Canadian government to determine whether you must file a Canadian tax return and pay Canadian taxes. The U.S. Treasury has this helpful page on the the tax treatment of Canadian citizens working in the U.S.: http://www.irs.gov/publications/p597/ind... |
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