CPD Bootcamp - Employment and Labour & Tax and Immigration Nov 2014

Helen Park

Marie-Claire Dy

Jillian Frank

CPD Bootcamp

November 26, 2014

Immigration, Tax and Employment

Considerations for US Employees

Working in Canada

2November 2014

US Employees Working in Canada:

Immigration Considerations

Helen Park

Dentons Canada LLP #11913435

Temporary Work Permits

November 2014 Dentons Canada LLP #11913435 3

• Work defined as: “an activity for which wages are paid or

commission is earned, or that is in direct competition with the

activities of Canadian citizens or permanent residents in the

Canadian labour market”

NAFTA


• The preferred tool to facilitate cross-border movement between

Canada and the U.S.

• Used for temporary entry - not permanent entry

• Must be a U.S. or Mexican citizen

• Three main categories:

1. Business visitors

2. Professionals

3. Intra-company transferees

NAFTA – Business Visitors


• Intended for short-term entry

• If quick one day meetings, can declare at entry

• If frequent visits, recommend having an invitation letter

• If after-sales services- need to be prepared

• Remuneration must be paid from outside Canada

NAFTA – Professional Work Permits


• NAFTA lists 66+ professions including Engineer, Geophysicists,

Computer Systems Analyst, Graphic Artists, etc. Occupation

must be on this list

• Renewable indefinitely (can apply for permits up to 3 years at a

time)

• Must meet relevant educational (usually Bachelor’s degree) and

experience criteria

• Must be exercising the skills of the profession in Canada

• Must have a copy of an offer letter or contract

NAFTA – Intra-company transfers


• For employees at “executive” or “managerial” level, or who have

“specialized knowledge”

• Must be currently employed and have worked 12 consecutive

months of work experience in preceding 3 years with a foreign

related entity

• Must prove proper corporate affiliation of entities

• Time caps: Up to 5 years for specialized knowledge workers and

7 years for managers

NAFTA – Intra-company transfers


• “specialized knowledge” category was clarified in June 2014

• Must have advanced and proprietary knowledge

• Must have knowledge and skills that only a small number of

individuals in the organization have

• The proprietary knowledge must not be common in the general

labour market and is limited within company

• The proprietary and advanced knowledge held by the foreign

worker must be critical to the Canadian business

Labour Market Impact Assessments / Work Permits


• Over the past couple of years, to increase employer monitoring,

Service Canada and Immigration Canada have increased data

collection, increased monitoring of foreign worker’s conditions,

and implemented capped work terms.

• Priorities:

• Tracking Employer Information

• Genuineness

• Compliance

• Cumulative Duration

Labour Market Impact Assessments


• Database for history of each employer

• Signed attestations required by employer confirming that

employers have and will abide by foreign worker program

requirements

• Copy of incorporation documents, tax documents and business

licenses required for employers applying for initial LMIA

Tracking Employer Information



• Recruitment evidence to show there are no Canadians for the

position – minimum 4 weeks advertising

• Offer must meet the minimum median wages

(www.workingincanada.gc.ca)

• Offer must be within reasonable business needs of the employer

• Employer must be able to fulfill terms of offer

• For skilled workers must include a Transition Plan with LMIA

application

Genuineness



• Increased enforcement of regulations through Employer Compliance

Reviews (ECR) and Inspections

• Proof employer has provided wages, working conditions in the

occupation set out in the LMIA application

• Employers must demonstrate past compliance including the

completion of Transition Plan activities

• This is retroactive going back 6 years and must keep documents to

demonstrate compliance

• If non-compliant, must provide “reasonable justifications” and may

need to rectify discrepancies

Compliance



• Foreign worker is permitted to work in Canada for an

accumulated total of 4 years regardless of category unless:

• A period of 48 months has elapsed since the date that the TFW

accumulated 4 years of work (start date was April 1, 2011)

• The work was performed while enrolled in full-time studies in

Canada

• Fall within an exception (i.e. NAFTA, PR application)

• An exception applies to the TFW at the time of the work permit

renewal application

Cumulative Duration – “Cap”

Why is immigration planning/compliance important?

November 2014 Dentons Canada LLP 14

• Denial of service (work permits/LMIAs)

• Loss of valuable employees (4 year cap)

• Damage to image (“Blacklist” on Service Canada/CIC’s website)

• Costly and time consuming Inspections

• Exclusion/removals for foreign nationals

• Fines for employers

• Careful to ensure HR specialists are NOT working in capacity of

immigration consultants (s. 91 of IRPA)

15November 2014


Tax Considerations

Marie-Claire Dy


Agenda

16

1. Residency of Employees

2. Tax Liability for US Employees

3. Employer Obligations

4. Secondments

November 2014 Dentons Canada LLP #11913435

Residency of Employees


• “Resident in Canada” is not defined in the ITA

• Question of fact whether a person is resident in Canada

• CRA sets out factors in three classes:

• Significant residential ties

• Dwelling place

• Spouse

• Dependents

• Secondary residential ties

• Personal property (including vehicles)

• Social and economic ties

• Landed immigrant status or appropriate work permits

Determination Factors



• Secondary residential ties (cont’d)

• Medical insurance coverage

• Driver’s license

• Seasonal Dwelling

• Other residential ties

• Mailing address

• Telephone listing

• Newspaper and magazine subscriptions

• Generally, a person is a non-resident if he does not ordinarily

reside in Canada, is physically present in Canada for less than

184 days in any year, and does not have significant residential

ties to Canada

Determination Factors



• Under the ITA, if a person is sojourned in Canada for 183 days or

more in a taxation year, then he will be deemed to be a

Canadian resident

• Any part of the day counts as a “day” if it is longer than one hour

• Possible for a person to be resident in more than one country

Deemed Canadian Resident



• Treaty contains tie breaker rules when an individual is resident in

two countries

1. Where the individual has a permanent home available

2. The country with which his personal or economic relations are

closer (centre of vital interests)

3. The individual’s habitual abode

4. Citizenship

5. Competent Authorities

• If under the treaty the individual is a US resident, he will be

deemed a non-resident for the purposes of the ITA

Canada-US Treaty

Tax Liability for US Employees


• US employee is subject to Canadian tax on Canadian

employment income, unless he qualifies for a treaty exemption

• If employment is provided both inside and outside of Canada,

only income allocated to the service performed in Canada will be

subject to Canadian tax

• Where the employer agrees to pay the Canadian tax liability for

the US employee, such payment is considered additional

remuneration

Employment Income

Tax Liability for US Employees


• Article XV exempts US employees from Canadian tax on

Canadian employment income where:

1. The remuneration does not exceed CAD$10,000; or

2. The US employee has not been present in Canada for more than

183 days in any 12-month period commencing or ending in the

fiscal year concerned, AND his remuneration is not paid by, or on

behalf of, a person who is a resident of Canada, AND is not borne

by a permanent establishment in Canada

Canada-US Treaty

Employer Obligations


• If the US employee receives remuneration for employment

performed in Canada, the employer (whether Canadian resident

or not) is generally required to withhold and remit the normal

Canadian employee payroll deductions

• Withholding is required even if the US employee is exempt from

Canadian tax under the treaty

• Employer who fails to make the required withholding is liable to

pay the whole amount that should have been deducted

Reg 102 Withholding

Employer Obligations


• Waiver of withholding requirement may be requested where the

US employee qualifies for a treaty exemption

• Usually takes 30 days to process a waiver

• Types of waivers:

• R102-J

• R102-R

• Waiver does not exempt an employer from the requirement to

withhold CPP and EI

Reg 102 Waiver

Secondments


• Lending arrangement whereby the US employee is loaned from

the US employer to the Canadian employer to perform services

for the Canadian employer

• Canadian employer is responsible for all Canadian reporting and

withholding obligations and reimburses the US employer for the

cost of the US employee’s Canadian source wages net of

Canadian payroll taxes

• US employer pays the US employee his wages net of both

Canadian and US payroll taxes

Generally

Secondments


• Minimizes risk of the US employer being subject to Canadian tax

• US employer that carries on business through a permanent

establishment in Canada will be subject to Canadian tax

• US employee working in Canada may cause the US employer to

have a permanent establishment in Canada depending on the US

employee’s activities in Canada

Advantage

Secondments


• Secondment arrangement could result in double withholding

(under Reg 102 and Reg 105)

• Reg 105 - 15% withholding on fees paid to a US resident for

services rendered in Canada

• Reg 105 should not apply to reimbursements for out of pocket

expenses

• If the US employer is being reimbursed for its expenses and is

receiving a mark-up, Reg 105 will apply to the entire amount

Disadvantage

28November 2014


Employment Considerations

Jillian Frank


Employment Legislation in British Columbia

November 2014 29

• Employment Standards Act (ESA)

• Regulates the employment relationship in BC

• Establishes minimum standards for employees and employers

• Cannot contract out

• Vacation (2 to 3 weeks)

• Termination Pay (up to 8 weeks for individual terminations)

• Job protected leaves of absence (e.g. maternity/parental, family

responsibility)

• Overtime pay (1.5 times regular wages after 8 hours/day or

40 hours/week, 2 times regular wages after 12 hours/day)


Employment Legislation in British Columbia

November 2014 30

• Workers Compensation Act

• Human Rights Code

• Personal Information Protection Act


Does BC law apply?

November 2014 31

• Only if there is a “sufficient connection” between the

individual’s employment and British Columbia

• Factors:

• Employer’s place of business

• Residence of the employee

• Jurisdiction where employee was hired

• Governing law of the employment agreement

• Whether income tax, benefits or premiums are paid in BC

• Where the employee performed work

• Application of similar employment legislation


Case law example

November 2014 32

• Employee resided in Alberta

• Employer was an Alberta company

• Employment agreement was entered into in Alberta

• 2 week work assignment in British Columbia

• Not a “sufficient connect” for BC ESA to apply

• Only factor in favor of BC was the work undertaken in BC

Re Saueracker, BCEST D677/01, D399/01


Case law example

November 2014 33

• Seasonal employee for paving company

• Employee performed 80% of his work in Alberta

• Workers’ compensation premiums were paid in Alberta

• Payroll, income tax and MSP premiums were paid in BC

• Employee resided in BC

• Employer’s head office was in BC

• Contract was entered into in BC

• Employee received a living allowance for performing work in Alberta

• Employee had “sufficient connection” to BC

• ESA applied

Re Selkirk Paving, BCEST D111/02


Case law example

November 2014 34

• Employer’s office was in BC

• Employee resided in California

• Employment duties were primarily performed in California

• Contract of employment governed by laws of Washington State

• All taxes paid in USA

• Not a sufficient connection for BC laws to apply

• Employee’s residence and usual place of employment being

outside of BC was determinative

• ESA did not apply

Re Xinex Networks, BCEST D575/98


Case Study 1


• US Co sold a customized software system to CAN Co (8 offices)

• Sales contract includes installation, training and warranty

services for 10 months

• The sale price is allocated as follows:

• Customized software: $50,000

• Installation and Training: $15,000

• Warranty services: $5,000

• Max (US citizen) is a Software Engineering Technician for US Co

who will be in Canada for 6 weeks to install software and will

return for 2 to 5 days each month during the 10-month period

• Salary to be paid for his work in Canada is greater than $10,000

Case Study 2


• Kate has been a “lead mining engineer” at US Co for 12 years

• Kate (US citizen) studied engineering but is 2 credits short of a

Bachelors degree

• US Co recently formed Can Sub to mine in Tumbler Ridge, BC

• Kate will work for Can Sub for 2 years to help establish the office

and train a Canadian lead mining engineer. After the 2 years,

she will return to the US

• During 1st year, Kate will return home every 3 weeks and in the

2nd year, Kate will travel to Canada once a month

• Kate will maintain her home and major assets in the US and her

husband will stay in the US

Questions?

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CPD Bootcamp - Employment and Labour & Tax and Immigration Nov 2014