{"id":3082,"date":"2021-04-06T08:35:05","date_gmt":"2021-04-06T15:35:05","guid":{"rendered":"https:\/\/production.ca.andersen.com\/?p=3082"},"modified":"2021-04-07T08:43:59","modified_gmt":"2021-04-07T15:43:59","slug":"canadian-covid-19-guidelines-international-tax","status":"publish","type":"post","link":"https:\/\/previous.ca.andersen.com\/fr\/blog\/canadian-covid-19-guidelines-international-tax\/","title":{"rendered":"Canadian COVID-19 Guidelines \u2013 International Tax"},"content":{"rendered":"\n

On April 1, 2021, Canada Revenue Agency (“CRA”) updated its guidance with Part VII \u2013 Supplemental Guidance[1]<\/strong><\/a><\/em> which provides further relief from Canadian residency and Canadian permanent establishment for certain non-residents of Canada and businesses by extending the relief period to December 31, 2020.\u00a0The updated guidelines also provide an alternate method for cross-border employment income to be taxed.\u00a0The alternate method may be a significant tax win for affected individuals.\u00a0<\/a><\/p>\n\n\n\n

Cross-border Employment<\/h2>\n\n\n\n

A Canadian resident employee who normally works in the U.S. for a U.S. employer would be subject to U.S. tax on the related income. Due to COVID-19 and government travel restrictions, many employees were forced to work for their U.S. employers from Canada for most of 2020. <\/p>\n\n\n\n

Where Canadian resident individuals work in Canada for a U.S. employer, the related income would be taxable in Canada and not the U.S.[2]<\/a>  The U.S. employer would normally withhold U.S. taxes from their pay. The affected individuals would receive a large U.S. tax refund but would have a large Canadian tax liability.<\/p>\n\n\n\n

CRA is concerned with both the complexity individuals face in preparing their Canadian and U.S. tax returns and their cash flow. Would such individuals receive their U.S. tax refund in time pay an abnormally large Canadian tax liability by the April 30th<\/sup> deadline? CRA allows individuals in these circumstances two choices for the 2020 year:<\/p>\n\n\n\n

  1. CRA will provide interest relief for individuals who cannot pay by the Canadian tax deadline if they are waiting for a U.S. tax refund, or<\/li>
  2. CRA will grant a foreign tax credit for the U.S. tax reported on the U.S. tax return where the individual files their U.S. and Canadian tax returns as if all the income was earned from employment services rendered in the U.S<\/u><\/em>.<\/li><\/ol>\n\n\n\n

    The individual should pay no more overall tax under either Option 1 or 2. Most individuals will get a better tax result using the second option due to better foreign exchange rates and increased foreign tax credits for U.S. payroll taxes.<\/p>\n\n\n\n

    Example<\/em> A <\/h3>\n\n\n\n