Canada’s Temporary Foreign Worker Program & the New Era of Compliance September 2014 Presented by:

Canada’s Temporary Foreign Worker Program & the New Era of Compliance

September 2014

Presented by:

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• Why Immigration? The Modern Mobility Movement

• The Business Visitor• When is a work permit required?

• Taxation considerations for business visitors

• The Work Permit Process• Recent Changes to Canada’s Temporary Foreign Worker Program

• Taxation considerations for workers

• Strategies for Ensuring Compliance

Overview

Why immigration?

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Modern mobility1970–1990

• Majority of moves are outbound from US- and European-based large multinationals

• Oil, gas and mining send talent to more remote locations

• Typically 2 to 5 year assignments

• Rich, attractive expatriate package, with government incentives to promote immigration

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Modern mobility1990–2010

• Global Mobility increases – New markets to sell to, lower-cost production locations, offshoring gathers pace

• More commuter and project-based assignments, as well as business traveller arrangements

• Global governance, managing costs and compliance becoming increasingly difficult

• Economic downturn results in immigration changes for political scoring

• Impact of global security threats, terrorism 5

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Modern mobilityFast-forward to 2020

• Global Mobility volumes increase – The number of ‘host’ locations an organization deals with expected to grow by 50% between 2010 and 2020, from an average of 22 to 33

• Organizations expect management of Global Mobility to be part of the new ‘normal’ for HR and tax professionals

• Mobility of talent is fluid; it enables global growth, resourcing, talent and succession planning strategies

• Multinationals become true global entities

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Modern mobilityModern mobility

46%of CEOs are concerned about new market entrants

of CEOs are concerned about the availability of key skills

63%of CEOs are or have implemented changes to their talent strategies

32%

of CEOs say creating a skilled workforce is a priority for their company over the next 3 years

44%of CEOs believe technological advances will most transform their business over next 5 years

81%

Source: PwC 17th Annual Global CEO Survey, 2014

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Scenario #1:Janet, a U.S. citizen, has spent the last three years living in India and working for Co. India. She has been offered a 3-year secondment to Canada to work at Co. India’s parent company, Co. Canada.

Scenario #2:Janet has been requested to provide supervision on a project in Canadaover the next 6 months. During this time, she will enter periodically butonly for a couple days at a time.

What immigration questions does Janet’s employer need to ask?

What are the relevant tax considerations? 8

Real world example: Janet Doe

To be or not to be… a Business Visitor

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Business Visitor

Who is a Business Visitor?

• In limited instances, individuals may enter Canada or the US for work or business without requiring a work permit. “Business Visitors” must undergo examination and demonstrate they will:

o maintain their primary place of residence outside of the host countryo maintain their primary source of remuneration for the business

activities outside of the host countryo maintain their principal place of business and actual place of accrual

of profits outside of the country of destinationo be entering for the sole purpose of engaging in international business

activities

• All business visitors must undergo examination either at the port-of-entry or visa post (if applying for a TRV)

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Business Visitor

Business visitor activities defined

• Attending meetings (for discussions only)

• Conducting research for a foreign-based enterprise

• Conducting commercial transactions on behalf of a foreign enterprise; i.e. discussions and negotiations respecting the sale, purchase, marketing, etc. of goods or services

• Sales representatives taking orders for goods or services for a foreign enterprise, or purchasing goods or services for a foreign enterprise

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Business Visitor

Business visitor activities defined

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• Transportation operators transporting goods or passengers

• Attending or participating in conventions or conferences

• Intra-company training (in Canada)

• After-sales services (pursuant to a contract)

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Business Visitor: Taxation considerations

Resident vs. Non-Resident

• Living in Canada

• Family and home in Canada

• Visiting Canada

• Business trips and meetings

• Deemed Resident

• Greater than 183 days

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Business Visitor: Taxation considerations

Treaties

• Permanent home: Purchased or rental

• Personal economical ties: Center of vital interests

• 183 day test: 12 month vs. calendar

• Remuneration borne by or a permanent establishment (PE) of

• Or on behalf of, who is benefiting from the employment?

• Deemed PE

• Regulation 102 Requirements

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Business Visitor

Q: Could Janet enter Canada as a Business Visitor?

Q: Would Janet be subject to tax?

Q: What is her employer’s responsibility?

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The work permit process

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When is a work permit required?

Regardless of the country of destination, a work permit is almost always required where a foreign national will be entering the local labour market

Definition of “work”:

• An activity for which wages or commissions are earned, or

• An activity that competes directly with activities of citizens or permanent residents in the labour market

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The work permit process

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Temporary Foreign Worker Program 1

International Mobility Program2

Canada’s Temporary Foreign Worker Program has

been reorganized into two distinct programs:

The new Temporary Foreign Worker Program

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Temporary Foreign Worker Program

• Managed by Employment and Social Development Canada (ESDC)

• Based on employer demand to fill specific jobs

• Employer must pass new Labour Market Impact Assessment (replacing the former Labour Market Opinion)

• Unilateral and discretionary

• No reciprocity

• Results in employer-specific work permits

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Objective: Last resort for employers to fill jobs for which qualified Canadians are not available

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Temporary Foreign Worker Program (TFWP)

Labour Market Impact Assessment (LMIA)

General process for obtaining a work permit includes a 2-stage process:

1 Employer applies for an LMIA from ESDC / Service Canada

2 Foreign worker applies for a work permit from CIC

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TFWP – Labour Market Impact Assessment

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Low Wage High Wage Primary Agricultura

l

Live-In Caregivers

Highest Demand, Highest

Paid, Shortest Duration

Occupations at/above the provincial/territorial median wage

Replacing Seasonal Agricultural program

No change to stream for live-in caregivers

Occupations below the provincial/territorial median wage

*New* stream to facilitate LMIAs for certain occupations

The LMIA process

• ESDC has restructured the TFWP and process for assessing labour market impact with the introduction of 5 streams based on wage level and occupation type

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Median hourly wages by province*

*as of August 2014 – median wages for all provinces and territories available at ESDC’s website

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Province Wage ($/hr)

Newfoundland and Labrador 20.19

Prince Edward Island 17.26

Nova Scotia 18.00

New Brunswick 17.79

Quebec 20.00

Ontario 21.00

Manitoba 19.00

Saskatchewan 21.63

Alberta 24.63

British Columbia 21.79

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Low wage stream

• Positions where salary offered falls below the provincial/territorial median wage, including general labourers, food counter attendants, sales, and service personnel

Cap on low-wage temporary foreign workers

• Employers with 10 or more employees will be subject to cap of 10% of their total workforce at each worksite may consist of temporary foreign workers

Reducing work permit duration

• Maximum duration granted will be reduced from 2 years to 1 year

Areas of high unemployment

• LMIAs will not be approved for occupations in the non-tradeable services (accommodation, food services, and retail trade) in regions with an unemployment rate of 6% or higher

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High wage stream

• Positions at or above the provincial/territorial median wage, including managerial, scientific, professional and technical positions

• Minimum recruitment efforts and prevailing wage requirements must be met

New transition plan requirements

• Transition plan must be provided to demonstrate how the employer will increase efforts to hire Canadians, and reduce their reliance on temporary foreign workers

• Proof of investment in skills training, hiring Canadian apprentices, more active recruitment efforts from within Canada, or transitioning temporary foreign workers to Canadian permanent residence

• Report on progress/success of transition plan must be provided with applications to extend LMIA/work authorization; compliance reviews

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Highest-demand, Highest-paid, Shortest-duration

Highest-Demand

• Skilled trades where the wage offered is at or above the provincial/territorial median wage; additional occupations may be added at a later date

Highest-Paid

• Highest-paid occupations, where prevailing wage is in the top 10% of wages earned by Canadians in a given province or territory (i.e. physicians)

Shortest-Duration Occupations

• Temporary foreign workers entering for 120 calendar days or less where wages offered are at or above the provincial/territorial median (i.e. technical specialists entering for repair or warranty work); renewals will not be permitted

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LMIA processing times of ten (10) business days or less!

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LMIA – wage requirements

Prevailing wage

• Companies must pay at least the prevailing wage as reported on Service Canada’s reports at the time of application for all positions

• Prevailing wage is calculated based on the NOC code, and should be considered in all advertising efforts

• Wage reports available on Service Canada’s website, and updated regularly:

www.workingincanada.gc.ca

Source of pay

• Key factor in determining “employer” for LMIA

• Consideration for taxation and payroll purposes

http://www.workingincanada.gc.ca/

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LMIA – Advertising requirements

Where?

• Canadian Job Bank (or territorial/provincial equivalent); and

• Two or more additional but distinct methods of recruitment consistent with the normal practice for the occupation, one of which must be national in scope

How long?

• Employers must advertise available positions in Canada for at least four (4) weeks before applying for an LMIA

• The advertisement must remain posted to actively seek qualified Canadians and permanent residents until the LMIA is issued

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LMIA – Other considerations

Increased Fees

• The LMIA fee increased from $275 to $1,000 for every temporary foreign worker position requested by an employer

• New $100 privilege fee on employers applying for LMIAs to offset the costs of Government of Canada investments in skills and job training

New Forms and Attestations

• Employers must attest that they cannot lay off or reduce hours of Canadians where TFWs are employed

Public Lists

• Employers who engage in the TFWP will have their names and number of LMIAs obtained posted on the ESDC website

The new International Mobility Program

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International Mobility Program

• Managed by Citizenship and Immigration Canada (CIC)

• Based largely on reciprocity and multi/bilateral agreements with other countries (NAFTA, GATS)

• No Labour Market Impact Assessment required

• Largely for high-skilled, high-wage occupations

• Results in either open or employer-specific work permits

Objective: To advance Canada’s broad economic and cultural national interest

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• Examples of LMIA-exempt work permit categories under the International Mobility Program (IMP) include:

NAFTA professiona

l

Post-graduate

work permit

Bridging open work

permit

Emergency repair

Spousal work

permit

Reciprocal employmen

t

Intra-company transfers

IEC / Working holiday

IMP

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Intra-company transferees

Who may qualify?

• Citizens of all countries

• Senior managers, executives, or specialized knowledge workers

• Current employee of foreign enterprise

Requirements

• Employee must have been employed by overseas parent, subsidiary, affiliate or branch for at least 1 year in the last 3 years

• Both foreign and host companies must be related and be permanent and continuing establishments

• Entering for a temporary period, to work on behalf and for benefit of host company

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New threshold for “specialized knowledge”• Effective June 2014, CIC officers will now apply a more

rigorous test for specialized knowledge, focusing not only on the applicant’s degree of proprietary knowledge, but also their advanced expertise and experience within the company and industry

• Specialized knowledge is:◦ unique and uncommon◦ held by only a small percentage of employees within a

company ◦ critical to the company’s operations; held by key

personnel◦ held by specialists; more than just highly skilled staff◦ remunerated accordingly

• Specialized knowledge workers should not require any training in Canada

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Mandatory Wage Floor

• Employers must now demonstrate that they pay their specialized knowledge workers a salary meets or exceeds prevailing wage in Canada

• Non-cash per diems cannot be included in the calculation of the overall wage

• Special exception specialized knowledge ICTs entering Canada pursuant to an international free trade agreement, including NAFTA

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Open work permits

• Some LMIA exemptions allow for foreign nationals to apply for open work permits, including under the IEC, post-graduate, spousal, and bridging open work permit categories

New fees

• CIC will be imposing a $100 privilege fee on holders of open work permits

• The funds collected will be used to provide information to foreign nationals and their employers to promote the transition to permanent residence through the new Express Entry system, expected to be rolled out in 2015

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Dependents – New rules

New definition of “dependent”

• Dependent children may be eligible for status in Canada on the basis of their parents’ work permit or permanent residence

• Effective August 1, 2014, in order to qualify as a “dependent child”, children must be:

o Under 19 years of age; or

o Financially dependent due to a physical or mental condition

• With the new changes, the exception to the age limit of dependent children for full-time students will be removed

• Children aged 19 or above will need to qualify for status on their own merits

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Work Permits and tax considerations

Canadian source wages

• A day is a day

• 10 work days in Canada, 10/240 x base

• Lump sum payments

• Relocation allowances etc

• Housing, cost of living

• Temporary workers, tax free housing, per diems

• Prior year earnings

• Bonus source base on prior year

• Long term incentive payments

• Stock options, RSUs, etc

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Work Permit Process

Q: Under which program should Janet be submitting her immigration application: TFWP or IMP?

Q: If Janet remains on Indian payroll, what considerations must the company keep in mind? How will that impact immigration? Tax?

Ensuring compliance

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Ensuring compliance

Increased emphasis on immigration compliance

• 2011 - Changes to regulations placed increased scrutiny on employers

• 2012 – Introduction of employer compliance reviews and increased penalties

• 2013 – Increased authority to conduct on-site inspections

• 2014 – Increased enforcement and implementation of employer penalties

• Increased focus on payroll reporting

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Ensuring compliance

Impact on the company

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Monetary fines (ranging up to $100,000)

Imprisonment

Civil litigation

Company name published on publicly available blacklist

Bar from hiring any foreign workers across Canada for up to 2 years

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Ensuring compliance

Impact on the employee

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Fines

Bar from applying for future work permits

Bar from entering the country for either a set or indefinite period of time

Arrest and deportation

PricewaterhouseCoopers LLP

Ensuring compliance

The role of the employer – Bill C-35

• Bill C-35 identifies who, in a paid position, may advise or assist an individual with any type of immigration process or application under the Immigration and Refugee Protection Act (IRPA)

• Authorization extends to lawyers, licensed paralegals, and immigration consultants in good standing

• CIC has confirmed:

1. “Authorization” does not extend to HR personnel or other paid employees of the individual’s employer

2. HR personnel can assist with LMO applications only

3. HR is prohibited from providing immigration advice and assisting in preparation of immigration applications

44PricewaterhouseCoopers Immigration Law LLP

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Ensuring compliance

What do companies need to do? - Immigration

1.Plan Ahead

2.Confirm if a visa, work permit, or LMIA is required

3.Ensure documentation is thorough and complete

4.Track work permit history of all foreign workers

5.Monitor terms and conditions of authorized work

6.Start the permanent residence process early

7.Establish and implement an immigration policy

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Ensuring compliance

What do companies need to do? - Taxation

1. Social insurance number vs. individual identification number (ITN)

2. Spouse, children

3. Filing of Canadian return – due April 30th

4. New requirements for reporting foreign assets

5. Withholding

6. T4 reporting

◦ Who’s the employer?

◦ EHT, other payroll taxes

7. Treaty exemption

◦ Waivers

◦ Reporting

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Questions?

Speakers

Melodie [email protected]

PricewaterhouseCoopers Immigration Law LLP

Carola Trolley [email protected] LLP

Human Resource Services

mailto:[email protected]

mailto:[email protected]

PwC

Thank you!

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Immigration Law LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers Immigration Law LLP. All rights reserved.

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Canada’s Temporary Foreign Worker Program & the New Era of Compliance September 2014 Presented by: