Contract worker for US company working for India in Canada :)
- Thread starter syahska
- Start date
You may want to change your sole proprietorship and register in Canada so you won't have to pay taxes in both Canada and India. You would need to work with an accountant who is preferably knowledgeable with both the Canadian and Indian tax system. If you are spending over 6 months in Canada you will be a Canadian tax resident. You may be able to only pay Canadian taxes and not Indian and Canadian.
Does your employer have offices in Canada?
From your PM:
Thought it might be pertinent to PM you here. Helpful if you can clarify. Lets also make it clear that what i plan to do is definitely within the book, laws as the govt suggests. Now here is my dilemma. I am currently in India and will most likely land a job with a US firm. Since the firm does not have a legal entity in India, i will be a contract employee. The salary paid in USD will be remitted into my INR account in India. Since the money is good enough to help me lead a more than comfortable life in Canada, I was wondering if I come to Canada and sustain myself on the international income which is my salary. Now, I will pay the Canadian taxes whatever it may be. But, I would have also paid my Indian taxes. How does this work? Now to net the perceived Canadian taxes, I hear that RRSP might be a good solution. What might be your advice?
Sorry don't have a suggestion for a CA. There will be quite a few CAs who have worked in India and Canada. Would google. You can't just live and work in Canada yet send the payments you received directly to India and not declare and be taxed on the money you are earning from the US firm while living in Canada. Your yearly RRSP contribution limit is based on your income on your past taxes. RRSPs will decrease your taxes but also lock away money for retirement. There is no reason you can't set up a sole proprietorship, incorporate, etc. in Canada based on what is best for your situation and deposit the payments you receive in Canada. As a resident and tax resident of Canada and not India you may have no option but to create your sole proprietorship in Canada. Assume you would then close the one in India. This is getting above my scope of knowledge.
I agree with others that you'll need to pay taxes in Canada.
I also agree that having a sole proprietorship in India could lead to double taxation. This is true for me as well with the U.S. I had an LLC in the U.S. for the purposes of rental income. If I kept this when I became a PR of Canada, then I would be double taxed. So, I needed to dissolve the LLC.
You may need to do some more research about the option of setting up a sole proprietorship in Canada. My understanding, is that if you do this in order to do freelance work for a single company, CRA may not like this and may consider your business as a Personal Service Business, and this can have negative tax effects. Basically, if it appears that you're acting like you are an employee of a company (even if you are invoicing as a freelancer), then this is frowned upon by CRA.
The less risky route would be to use the services of a Professional Employer Organization (PEO). Yes, you or your company will be paying them, but you'll be staying within the law.
Here's a link to more info about being declared a Personal Service Business.
https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621
I also agree that having a sole proprietorship in India could lead to double taxation. This is true for me as well with the U.S. I had an LLC in the U.S. for the purposes of rental income. If I kept this when I became a PR of Canada, then I would be double taxed. So, I needed to dissolve the LLC.
You may need to do some more research about the option of setting up a sole proprietorship in Canada. My understanding, is that if you do this in order to do freelance work for a single company, CRA may not like this and may consider your business as a Personal Service Business, and this can have negative tax effects. Basically, if it appears that you're acting like you are an employee of a company (even if you are invoicing as a freelancer), then this is frowned upon by CRA.
The less risky route would be to use the services of a Professional Employer Organization (PEO). Yes, you or your company will be paying them, but you'll be staying within the law.
Here's a link to more info about being declared a Personal Service Business.
https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621
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Here's another potentially helpful link about Personal Service Business
https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk