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Canadian Resident, European Company

Berty3000

Star Member
Jan 17, 2017
166
14
Hi all,

In the next week or so I will start working for a UK company whose operations are entirely in the UK, whilst living in BC. I am trying to decide whether to be paid in sterling to a UK account and then later transfer the money to here for when my taxes are due. However, this got me wondering about EI and CPP. Is it ok to pay for those through my tax return to when I file for 2021?

Any thoughts on whether this works or if there is a better way? Am I missing anything?

Thanks
 

Berty3000

Star Member
Jan 17, 2017
166
14
You can also keep a British pound bank account in Canada and receive the money.
Thanks for the idea. How about the idea of paying tax, EI, and CPP through tax return? Or does my employer have to be registered in some way in canada?
 

canuck78

VIP Member
Jun 18, 2017
52,959
12,759
Hi all,

In the next week or so I will start working for a UK company whose operations are entirely in the UK, whilst living in BC. I am trying to decide whether to be paid in sterling to a UK account and then later transfer the money to here for when my taxes are due. However, this got me wondering about EI and CPP. Is it ok to pay for those through my tax return to when I file for 2021?

Any thoughts on whether this works or if there is a better way? Am I missing anything?

Thanks
What is your status in Canada and in the UK?
 

jclarke99

Hero Member
May 10, 2020
235
83
Hi all,

In the next week or so I will start working for a UK company whose operations are entirely in the UK, whilst living in BC. I am trying to decide whether to be paid in sterling to a UK account and then later transfer the money to here for when my taxes are due. However, this got me wondering about EI and CPP. Is it ok to pay for those through my tax return to when I file for 2021?

Any thoughts on whether this works or if there is a better way? Am I missing anything?

Thanks
This may be repetitious if you've been reading other posts on this board. Seems like you have 3 options...
1. The U.K. company hires and pays you, but that company will need to deal with differences in labor laws and possible tax ramifications.
2. If the U.K. company agrees, make use of a Professional Employer Organization that will hire you, deal with all the HR and labor matters, and lease you out to the U.K. company (for a fee). Taxes become simplified as you are working essentially for a Canadian organization (the PEO).
3. If the U.K. company agrees, work as an independent freelancer and invoice the U.K. company monthly for work done. Again, taxes are simplified as you are only dealing with CRA. Note that the Canadian government is not a fan of freelancers who do work for only a single company (Google "Personal Service Business Canada"), so you'll need to mindful of that.
 
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Berty3000

Star Member
Jan 17, 2017
166
14
Thanks for the responses. I am a Canadian PR and a British citizen. Have been in Canada since August but will probably return to the UK for good around August or September this year.

Jclarke, in addition to the options you outline, wouldn't the following two also be possible:

- UK employer pays me into a UK bank account the gross amount, and I report the income on my Canadian tax return for 2021, and would owe tax EI, and CPP.

- UK employer pays me into a UK account and pays the usual taxes and NI contributions to the UK government. I declare world income and taxes paid abroad on my Canadian tax return for 2021.

Are the above options legal? I am not able to do the self employed option. I cannot return to the UK for the time being and don't want to. I have a job opportunity with a UK company that is happy for me to work from here but I doubt they'll be interested in signing up to a load of Canadian requirements since this is a one off for them. I just want to do this job, live here, and pay the correct taxes. Not sure if the two governments, under their treaty, have an arrangement for crediting one another depending on who deserves the money?

This is my predicament. I get the impression the system isn't set up well for this, but also can't see that it could be illegal or enforceable to prevent me working remotely for a UK company.

So, do the options I outlined work?

Worth bearing in mind that, if my residency status is based on the year, that I might only be working in this way, and residing in Canada, for around six months. I will likely take a vacation in Canada after that, and then return home, so my residency status for tax purposes may not be cut n dried. Anyway, this is a side point.
 

jclarke99

Hero Member
May 10, 2020
235
83
Thanks for the responses. I am a Canadian PR and a British citizen. Have been in Canada since August but will probably return to the UK for good around August or September this year.

Jclarke, in addition to the options you outline, wouldn't the following two also be possible:

- UK employer pays me into a UK bank account the gross amount, and I report the income on my Canadian tax return for 2021, and would owe tax EI, and CPP.

- UK employer pays me into a UK account and pays the usual taxes and NI contributions to the UK government. I declare world income and taxes paid abroad on my Canadian tax return for 2021.

Are the above options legal? I am not able to do the self employed option. I cannot return to the UK for the time being and don't want to. I have a job opportunity with a UK company that is happy for me to work from here but I doubt they'll be interested in signing up to a load of Canadian requirements since this is a one off for them. I just want to do this job, live here, and pay the correct taxes. Not sure if the two governments, under their treaty, have an arrangement for crediting one another depending on who deserves the money?

This is my predicament. I get the impression the system isn't set up well for this, but also can't see that it could be illegal or enforceable to prevent me working remotely for a UK company.

So, do the options I outlined work?

Worth bearing in mind that, if my residency status is based on the year, that I might only be working in this way, and residing in Canada, for around six months. I will likely take a vacation in Canada after that, and then return home, so my residency status for tax purposes may not be cut n dried. Anyway, this is a side point.
Bear in mind that I'm just a guy on the web, and I don't have professional credentials in these matters.

You need to satisfy immigration laws, labor laws, and tax laws. The option you are proposing may be tricky in satisfying all 3.

I don't think it matters whether the employer deposits yours funds into a UK or Canadian account.

Given your option #1, I don't think you should be contributing to EI or CPP. I could be wrong, but I believe those only come into play if you are working for a Canadian entity or are a freelancer.

If you go with option #1, which country will get the bulk or all of your taxes? I suspect it will be the U.K., given that you'd be working for a U.K. company and presumably they'd be taking out estimated tax payments from your paychecks. You'd then declare your U.K. income on your Canadian tax return and presumably take a tax credit for U.K. taxes paid. Or you'd try to claw back your U.K. taxes, Canada would get their taxes, and you'd take the credit on the U.K. side. Messy and unclear.

Another member on this board, OP, was considering a similar situation as yours, but it involved an option to work for a U.S. company while residing in Canada. He eventually paid a professional for their advice. Here's what he reported on another thread...

"Hi, everyone, OP weighing back in here. I bit the bullet and actually paid a tax lawyer who specializes in cross-border taxation issues.

The bottom line is this: It's at best complicated and at worst illegal, depending on a variety of factors. It will almost certainly be painful for the US company to employ a resource outside the US as it confuses the IRS and the CRA will want to know why the company is not routing their pay through the CRA/Revenu Quebec. (I don't know if I mentioned this originally, but the US company has no Canadian presence, so that creates the crux of the problem.) I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same. HOWEVER, at the end of the year, I could claim the US taxes back as I wasn't physically present. It still wouldn't fix the heartburn that CRA or RQ would give me and they would likely pressure the US company (however they could) to do things "the right way" and pay through Canada first.

Now, it gets a little more complex, but he said, as a self-employed consultant, options open up considerably and the IRS doesn't nearly care as much as I wouldn't be being treated as an FTE and wouldn't be resident in the States, so the IRS tax situation gets a bit better. The most obvious problem being that what I consider self-employed and what RQ considers self-employed may be at odds, so it would be best to form a corporation, hire myself and use the corporation in Canada to bill the Corporation in the US.

In the end, I decided the juice wasn't worth the squeeze, so I turned the offer down. Shame in that it paid a good chunk of change, but, with citizenship pending, I just can't afford to make my tax situation any more complicated than it absolutely needed to be.

Thanks for everyone's input - it was very much appreciated to have the input.

As always, I am not a lawyer, your mileage may vary, batteries not included, yadda yadda yadda.. "

https://www.canadavisa.com/canada-immigration-discussion-board/threads/us-citizen-in-canada-pr-working-for-us-company-as-an-fte-paid-into-us-bank.708547/
 
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Berty3000

Star Member
Jan 17, 2017
166
14
Awesome reply, thanks for taking the time! Very helpful.

Being self employed in Canada is an option I'm aware of, and then billing the UK client. But yes, whether it will technically satisfy CRA that it is a true form of self employment. I do know that the US is especially complex and scary when it comes to taxes, but definitely worth seeing the example.

In terms of the non self employed route, I'm a little confused by:

"I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same..."

Why can't I just report to CRA at the end of the year through my tax return? Isn't that what everybody does? Also, the tax treaty is supposed to prevent people being double taxed.
 

jclarke99

Hero Member
May 10, 2020
235
83
You wouldn't be double taxed in the end. Read OP's sentence again starting with "However" (in bold). This is the "claw back" that I mentioned. Yes, for a while you'd be paying taxes for both countries (the U.K, would be taking out estimated taxes from your paycheck, and you'd be making estimated tax payments to CRA). But when you file your taxes, you'd be trying to claw back your U.K. taxes (i.e., claiming a tax credit so that you aren't double taxed in the end).
As for self-employment, you are correct that Canada is not a fan of declaring yourself self-employed when all the evidence points to you acting as if you're a full-time employee of a single company. Is there an opportunity to do a small bit of consulting for a 2nd company? You could also advertise as a consultant. I recommend checking out the following...
https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk
 

Berty3000

Star Member
Jan 17, 2017
166
14
You wouldn't be double taxed in the end. Read OP's sentence again starting with "However" (in bold). This is the "claw back" that I mentioned. Yes, for a while you'd be paying taxes for both countries (the U.K, would be taking out estimated taxes from your paycheck, and you'd be making estimated tax payments to CRA). But when you file your taxes, you'd be trying to claw back your U.K. taxes (i.e., claiming a tax credit so that you aren't double taxed in the end).
As for self-employment, you are correct that Canada is not a fan of declaring yourself self-employed when all the evidence points to you acting as if you're a full-time employee of a single company. Is there an opportunity to do a small bit of consulting for a 2nd company? You could also advertise as a consultant. I recommend checking out the following...
https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk
The client wants me to work through an umbrella company so I cannot take the self employed option. So I will be employed. And the umbrella company would like to pay me the gross amount and is happy to do so. Id then complete my tax return in canada at the end of the year and pay everything I owe. Does this work in your opinion? Purely from my own point of view. I don't care whether the umbrella are acting properly as long as my own obligations are met.
 

jclarke99

Hero Member
May 10, 2020
235
83
Is the Umbrella company a parent company with office(s) in Canada, or a Professional Employer Organization (PEO) per my suggested option #2?
In either of these cases, your employment and payment would flow through Canada and removes the cross-border U.K. complexities. So, yes either of these would work nicely. If it's a U.K. Umbrella company that is not a PEO or has no presence in Canada, then that's another matter.
 

jclarke99

Hero Member
May 10, 2020
235
83
Then back to your original question. I'm assuming that the Umbrella company will have a Canadian presence, so you'll be employed by a Canadian company (and leased out to a U.K. company). So, EI and CPP would be just as if you worked for any other Canadian company. Because the Umbrella company should have full Canadian HR functions, they should handle the EI and CPP matters and have it automatically reflect in your paystub.
 
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Berty3000

Star Member
Jan 17, 2017
166
14
Thanks for sharing your views on this.

No, the umbrella company has no Canadian presence at all. They would be my employer but are based in the UK. So the options available seem to be for them to pay me the gross amount into a UK account, which they want to do, and then I pay tax and CPP through my 2021 canadian tax return. Or the umbrella pays all contributions to UK government as if I were living there and I then declare world income and tax paid on my 2021 canadian tax return.

Thoughts?

It is very hard to find a convincing view on this. I just want to work and ensure I pay the right tax. I've asked accountants who don't know. Also, any legal opinion is just that - an opinion. I cannot think of any reason though why I can't work for a UK company whilst being resident here, and then just pay what i owe through tax return. Who is harmed by that?