How You Can Work Outside Canada and Pay Taxes

June 17, 2022 | Written by: Sohail Afzal

How You Can Work Outside Canada and Pay Taxes

Do you want to work outside of Canada but are worried about the tax implications? You’re not alone! Many people are curious about how working outside of Canada will impact their taxes. This blog post will discuss how to work outside of Canada and pay taxes. We will also look at how this may affect your tax burden. Let’s get started!

The challenges of working outside Canada and paying taxes can be significant. It can be complicated and time-consuming. For example, you may be required to file taxes in both Canada and the country working. Additionally, you may be subject to dual taxation, which means you will have to pay taxes on your income in both countries.

Many questions arise in our minds when we think about working and living in another country, like the tax rates, the best way to file taxes, and how I can reduce my overall tax burden.

It’s important to remember that every situation is different, and you should always speak with a qualified tax professional before making any decisions. With that said, let’s look at some general information about working outside Canada and paying taxes.

To File Or Not To File

If you are a Canadian resident and work outside of Canada, you still have to file a Canadian tax return. However, if you are not a Canadian resident, you do not have to file a Canadian tax return.

There are things to keep in mind when working outside of Canada. First, if you are a resident of Canada, you will be taxed on your worldwide income. You have to pay taxes on any income you earn, no matter where.

Second, if you are a non-resident of Canada, you will only be taxed on your Canadian-source income. It includes any income earned from working in Canada or investments in Canada.

Third, if you are a resident of Canada, you may be able to claim a foreign tax credit for taxes paid on your income earned outside of Canada. It can help to reduce your overall tax burden.

Fourth, if you are a non-resident of Canada, you will not be able to claim a foreign tax credit.

Keep these things in mind when working outside of Canada to ensure that you pay the correct amount of taxes.

Giving up Canadian Residency vs Maintaining Canadian Residency

You can do two different things when you work outside of Canada. You can either give up your residency in Canada or keep it. If you give up your residency, you don’t have to pay taxes in Canada on your income outside of Canada. But if you keep your residency, you will have to pay taxes on all your income, no matter where it is earned.

So, what’s the best option for you? It depends on your situation. If you plan on working outside of Canada for a short period, it may be best to keep your residency so that you don’t have to go through the hassle of re-establishing residency when you come back.

But if you plan on working outside of Canada for an extended period, it may be best to give up your residency. This way, you won’t have to pay taxes in Canada on your foreign income.

Both options have some advantages and disadvantages, so it’s important to weigh all the factors before deciding.

Before Plan To Leave

If you’re working in a foreign country, it’s important to understand how your income is taxed. You can reduce your tax burden by taking certain deductions and credits, but you need to know what those are and how to claim them.

That’s where a tax orientation meeting comes in. The Canada Revenue Agency (CRA) offers free tax orientation meetings for Canadians working outside the country. At these meetings, you’ll learn about:

  • What income is taxable in Canada
  • How to file your Canadian tax return
  • What deductions and credits you can claim
  • How your foreign income is taxed in Canada

And much more.

Final Words

There are a few things to keep in mind when filing taxes as a Canadian citizen living and working abroad. Understanding how working outside Canada can affect your tax burden is important. By understanding the rules and regulations, you can ensure that you are doing everything correctly and minimize the amount of taxes. If you still have difficulty understanding this concept, it is time for you to reach out to advisory services or a tax advisory meeting. We hope this blog helps you in future.

Contact us for more information.

Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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