Question on income tax for Canadians working abroad

[la_rage]

I am a helicopter pilot who just moved to South America for a job and would like some tips from other pilots based on their experience. If I earn the money elsewhere, why should I have to pay taxes in Canada?

How did you deal with your tax declaration while earning money abroad?

I am looking into finding a company to do my taxes so that I pay the minimum back to the Canadian and Quebec governments.

All help would be very helpful.

[TailwheelPilot]

Being a Canadian resident for tax purposes is entirely different than where you are a resident of. In short, you need to pay taxes somewhere. If you are not paying them in your country of residence you need to pay them in your country of citizenship. Check the CRA website, there is a whole lot of information on there about a lot of different circumstances.

If your country of residence has a tax treaty with Canada and you are not considered a resident of Canada by the CRA, you can just file a form saying you are a non-resident. If the country of residence has a tax treaty and you have major ties to Canada (ie house, car, immediate family) you need to file taxes in Canada. If you can provide proof of paying taxes in your country of residence on your working income, you do not need to pay taxes again. If there is no tax treaty, I think you need to file taxes and perhaps pay any difference in taxes due between your country of residence and Canada. I have not worked anywhere without a tax treaty so I may be way off base.

[1000 HP]

The tax laws have recently changed for the worse. I work abroad and make almost no money in Canada anymore. I am in Canada on a rotating basis but less than 5 months per year now. Regardless, I am required to pay tax on the income at the usual rate. The only way to avoid this legally is to transfer everything to my wife's name, and renounce my citizenship. No problem for me as I intend to retire outside of Canada. The problem is where do I get another passport? Belize, Panama, and numerous other countries allow you to have tax free offshore companies, work overseas, and live there tax free. They realize that you will build a house, spend money, and improve the local economy. Canada has so many tax hungry social programs that they really need your taxes to support them.

One option is to start a Canadian Corporation and if the company you work for is willing to hire you as a contractor, send your money through the corporation. Buy something for the company that offers a good tax deduction (like an airplane) and reduce your taxes that way.

Consider moving and getting a different passport. I'm trying to find a country that will do that for me now.

1000 HP

[Randyb99]

Please don't take anything above as tax advice. It is way off base. As long as you are considered a resident of Canada for tax purposes, you will pay tax on your world-wide income in Canada. If you work in a country that has a tax treaty with Canada, you will be able to claim a foreign tax credit in Canada for the tax paid to the foreign country. Provided the foreign country's tax rate is less than Canada's, you get a dollar for dollar credit in Canada. The only way to not pay tax in Canada is to sever all your ties with Canada and then you must become a legal resident of another country. You cannot be a quote "world citizen" with no country of residence or the CRA will consider you to be a resident of Canada. To sever all your ties means you, your wife and all minor children must leave with you. You must sever ties such as credit cards, drivers licences etc......

Renouncing citizenship has no basis in CDN tax law. We tax based on residency. If you have sufficient ties to Canada and spend more than six months here, you will be taxed on your world wide income.

How is buying an airplane going to be tax deductible to a corporation? For any asset or expense to be deductible the cost must be incurred for the purpose of gaining or producing income. Do you plan to start a commercial operation or merely fly around for pleasure and expect the CRA to allow this as a deduction?

[photofly]

Renouncing citizenship has no basis in CDN tax law. We tax based on residency. If you have sufficient ties to Canada and spend more than six months here, you will be taxed on your world wide income.

I suspect you meant "If you have sufficient ties to Canada OR spend more than six months here".

It's quite complex, but here's the best place to start:
http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... y-eng.html

[Randyb99]

You are correct. Should have been an OR. The main thing is it is your ties to Canada that really determine your tax residency. The ties must be severed to not pay tax here.

[North Shore]

Ironic - people who have benefitted all along from taxes paid by their forebears, baulking when it falls upon them to do so in turn - even when the rates are much lower than in past years...

[photofly]

I'm hardly a socialist, but I agree: I feel slightly nauseated by the glee shown by some people who obviously benefit hugely from Canadian society when they get a sniff of the idea that they can evade paying for it.

[Panama Jack]

In short, you need to pay taxes somewhere.

No you don't. . . necessarily!

[bmc]

I am a helicopter pilot who just moved to South America for a job and would like some tips from other pilots based on their experience. If I earn the money elsewhere, why should I have to pay taxes in Canada?

How did you deal with your tax declaration while earning money abroad?

I am looking into finding a company to do my taxes so that I pay the minimum back to the Canadian and Quebec governments.

All help would be very helpful.

Get in touch with Tom Boleantu at this outfit:

http://www.expat.ca/main/page.php?page_id=1

[bmc]

In short, you need to pay taxes somewhere.

No you don't. . . necessarily!

PJ is right. Some foreign based companies have tax agreements in their country, where their expat employees do not pay taxes in that country. Some Middle East airlines have such set ups.

[Boreas]

I'm all for paying reasonable taxes as long as I get something to
show for it. While I'm abroad however, I can't benefit from any
Canadian emergency services, health care, garbage collection etc.

Despite having recently spent over 12 months outside of Canada,
I would have had to pay taxes on all the money I wanted to
transferred over... Needless to say, no such transfer occurred!

[CD]

There are a few threads from earlier that might be of interest - some of the links and information discussed could be useful:

AvCanada: How to work as a pilot in Canada and not pay income taxes
AvCanada: Canadian Taxation Regulations for Non-Residents

[la_rage]

Ironic - people who have benefitted all along from taxes paid by their forebears, baulking when it falls upon them to do so in turn - even when the rates are much lower than in past years...

You must understand I am not looking into cheating the Canadian government out of taxes. In the country where I moved to, the government taxes 33% of my income! So imagine I have to pay Canada's share on top, anywhere from 20% to 40% on the remaining 67%. Since I won't be living there for the next 3-4 years, I want to make sure I don't get raped.

I do not want to renounce citizenship, I plan on moving back. My girlfriend stayed in Canada, I still have bills to pay, our appartment, hydro, paying back loans, credit cards. So I need to send money back.

Thanks for the link bmc, will look into it.

[bmc]

I'm all for paying reasonable taxes as long as I get something to
show for it. While I'm abroad however, I can't benefit from any
Canadian emergency services, health care, garbage collection etc.

Despite having recently spent over 12 months outside of Canada,
I would have had to pay taxes on all the money I wanted to
transferred over... Needless to say, no such transfer occurred!

At one time, you had to stay out of Canada for 24 months to not be exposed to your income being taxed. Have a look at that.

[photofly]

In the country where I moved to, the government taxes 33% of my income! So imagine I have to pay Canada's share on top, anywhere from 20% to 40% on the remaining 67%

Not usually. Canada has double taxation agreements with most nations; any tax deducted abroad is credited in full against tax you owe here.

If you've already paid 33% in tax, then depending on the tax rate you'd pay in Canada it's likely you'd not have to pay a penny more.

[1000 HP]

Ironic - people who have benefitted all along from taxes paid by their forebears, baulking when it falls upon them to do so in turn - even when the rates are much lower than in past years...

I do indeed benefit from the efforts of my fore-fathers. Many of them were better people than their replacements. And I do not mind paying taxes if I am a Canadian resident. My taxes last year averaged $10,000 for each month I spent in the country. It is a fair price to pay. Canada is a nice country. The roads are good. Population density is low.

But if I do decide to move to Panama ( or wherever ) and renounce my Citizenship, I can pay no taxes. When I go I will see an immigration lawyer to make sure all the government officials with their outstretched hands are left with a happy feeling. I have children in Canada that I'd like to be able to visit once in awhile.

Another example is Chile, with a flat tax rate of 20%, but land is cheap. $20,000 for an acre of oceanfront if you shop around.

A friend of mine is semi retired carpenter and is presently living in Belize. He is renting a house for $75 a month. That leaves a lot of cash for emergency purposes. Belize offers a retirement visa for people 45 years old and up. You can bring all your possessions, including the car, boat, and airplane with no import tax.

I guess the original poster was looking for options. If his job is permanent, then giving up Canadian citizenship is an option worth looking into. There is a lot to consider. Canada is just one country. It is a good one. But there are lots of other good ones too. And of course, don't consider this as tax advice. Go see a lawyer

[1000 HP]

In the country where I moved to, the government taxes 33% of my income! So imagine I have to pay Canada's share on top, anywhere from 20% to 40% on the remaining 67%

Not usually. Canada has double taxation agreements with most nations; any tax deducted abroad is credited in full against tax you owe here.

If you've already paid 33% in tax, then depending on the tax rate you'd pay in Canada it's likely you'd not have to pay a penny more.

My accountant sends me a regular news letter. This agreement is being severely modified in the wrong direction. Bad news for expats. Talk to an accountant

[yeah yeah]

My best advice to you is to not take tax advice from anyone on an aviation forum. All the major accounting firms i.e. Price Waterhouse, BDO, have accountants that specialize in international taxation. They wil be more expensive than your average accountant, but you want someone who can effectively represent your tax interests against the Canada Revenue Agency. There are constant changes to taxation interpretations and court rulings, so you are taking a gamble relying on somebody-who-knew-a-guy's brother-in-law's friend who lived outside of the country 5years ago to give you advice. And remember, if you are wrong, you will pay penalties as well as interest on back-taxes owed. A $10,000 tax bill could balloon to $25,000 or more.

My 2 cents (plus tax)

[bmc]

My best advice to you is to not take tax advice from anyone on an aviation forum. All the major accounting firms i.e. Price Waterhouse, BDO, have accountants that specialize in international taxation. They wil be more expensive than your average accountant, but you want someone who can effectively represent your tax interests against the Canada Revenue Agency. There are constant changes to taxation interpretations and court rulings, so you are taking a gamble relying on somebody-who-knew-a-guy's brother-in-law's friend who lived outside of the country 5years ago to give you advice. And remember, if you are wrong, you will pay penalties as well as interest on back-taxes owed. A $10,000 tax bill could balloon to $25,000 or more.

My 2 cents (plus tax)

This can not be stressed enough. Get yourself properly set up to avoid future surprises.

My 2 cents (tax free)

[Beefitarian]

Ok, I have to add.

Be very careful choosing accountants. "My accountant does that." Will not fix any tax problems generated by a bad one saying, "I don't think you need to pay this because..."

Also the accounts don't have to pay the money owed or the seriously obscene interest penalties added on.