UK-Canada Taxation

[abrickwall]

Hi

I was wondering if someone could help with a tax question.

I intend to move to Canada on an open work permit, but carry on working for my UK company paid via PAYE into my UK bank account.

I am wondering how the taxation works. I know the UK and Canada have a double taxation policy, but i'm not 100% on the finer details.

I will be in Canada for at least a year, but it wouldn't be continuous. As I will remain employed by my UK company i intend to return to the UK, probably once a quarter for 1-2 weeks at a time.

Do i get paid by PAYE then at the end of the financial year declare the earnings in Canada? Or do i declare when back in the UK?

What happens if i earn above the double taxation threshold? Do i pay UK and Canadian Tax on just the portion that is over the tax threshold or do i pay it on my entire earnings? So say the double exemption is for 6 months only, and i earned 50K GBP per annum, but did 9 months in Canada with 3 months in the UK, would I only be taxed on 3 months of my 50k salary in Canada or on all of the salary?

Thanks for any help.

 

[pie_vancouver]

Double taxation policy? Or NO to double taxation meaning a person should not be taxed twice on the same income.
There is a foreign tax credit that you can claim to reduce the income tax when you file, it is better to call CRA so they can enlighten you:

- Individual tax enquiries
Phone: 1-800-959-8281 (Canada and United States)


Call this number for tax information for individuals, trusts, international tax and non-residents, including personal income tax returns, instalments, and RRSPs or to get our forms and publications. Also call this number for assistance with our electronic services for individuals such as My Account, Represent a Client and NETFILE.

https://www.canada.ca/en/revenue-agency/corporate/contact-information/telephone-numbers.html

 

[Alex54321]

Hi

I was wondering if someone could help with a tax question.

I intend to move to Canada on an open work permit, but carry on working for my UK company paid via PAYE into my UK bank account.

I am wondering how the taxation works. I know the UK and Canada have a double taxation policy, but i'm not 100% on the finer details.

I will be in Canada for at least a year, but it wouldn't be continuous. As I will remain employed by my UK company i intend to return to the UK, probably once a quarter for 1-2 weeks at a time.

Do i get paid by PAYE then at the end of the financial year declare the earnings in Canada? Or do i declare when back in the UK?

What happens if i earn above the double taxation threshold? Do i pay UK and Canadian Tax on just the portion that is over the tax threshold or do i pay it on my entire earnings? So say the double exemption is for 6 months only, and i earned 50K GBP per annum, but did 9 months in Canada with 3 months in the UK, would I only be taxed on 3 months of my 50k salary in Canada or on all of the salary?

Thanks for any help.

The key word here is "to move to Canada". If you really move and become a Canadian resident for taxation purposes than yes, you would need to file your Canadian taxes on your world income and use UK/CA treaty to avoid double taxation. If you are non-resident of Canada then you do not have to file Canadian taxes. It's all about residency -from taxation point of view. Read about definition of "Canadian resident".

 

[billy68]

I’ve got a double taxation question – a burning one.

I’ve been in Canada for 2 years and I’ve got 20000 CAD rental income a year from a property in the UK - I transfer it every month in my CAD account.

The last tax return in the UK was for the year ending April 4th 2018 – I’ve paid tax for these first three months of 2018 already. So far so good.

Now, form T1135 asks me for the rental income of my ‘foreign real property’ for the full 2018 calendar year. Yes I can extrapolate that, but I have not paid tax in the UK for all of 2018 yet – the next tax return in the UK is due January 2020, and this will cover from April 5th 2018 until April 4th 2019.

So what will happen in the next weeks after I submit my T1145 with this extrapolation?

Will the CRA charge me tax on this income and then when in 10 months I pay tax for it in the UK the CRA may refund me some of it? Moreover, this offset between the Canadian and UK tax periods feels problematic. The tax-free allowance in the UK is over 20000 CAD whereas here it’s about 12000 CAD. So while I do not actually have to pay any tax on this income in the UK, I may do here and with a higher tax bracket, as I already have a job and an income here in Canada.

Could it be that I may have to pay 25% of 20000, so 5000 right after I submit to the CRA?

OR

...will they wait for the UK to tax my income in January 2020 and then see if according to Canadian tax I need to pay any extra to the CRA? I need to know this for cash flow.


Does submitting this form result in paying tax on the income declared or is it just for reporting purposes and the only tax you pay is the one in the UK?


Thoughts?

 

[canuck_in_uk]

I’ve got a double taxation question – a burning one.

I’ve been in Canada for 2 years and I’ve got 20000 CAD rental income a year from a property in the UK - I transfer it every month in my CAD account.

The last tax return in the UK was for the year ending April 4th 2018 – I’ve paid tax for these first three months of 2018 already. So far so good.

Now, form T1135 asks me for the rental income of my ‘foreign real property’ for the full 2018 calendar year. Yes I can extrapolate that, but I have not paid tax in the UK for all of 2018 yet – the next tax return in the UK is due January 2020, and this will cover from April 5th 2018 until April 4th 2019.

So what will happen in the next weeks after I submit my T1145 with this extrapolation?

Will the CRA charge me tax on this income and then when in 10 months I pay tax for it in the UK the CRA may refund me some of it? Moreover, this offset between the Canadian and UK tax periods feels problematic. The tax-free allowance in the UK is over 20000 CAD whereas here it’s about 12000 CAD. So while I do not actually have to pay any tax on this income in the UK, I may do here and with a higher tax bracket, as I already have a job and an income here in Canada.

Could it be that I may have to pay 25% of 20000, so 5000 right after I submit to the CRA?

OR

...will they wait for the UK to tax my income in January 2020 and then see if according to Canadian tax I need to pay any extra to the CRA? I need to know this for cash flow.


Does submitting this form result in paying tax on the income declared or is it just for reporting purposes and the only tax you pay is the one in the UK?


Thoughts?

How did you do it for your 2017 taxes?

If you don't pay any tax on this income in the UK, then there is issue, as there is no foreign tax credit to claim. You will owe full Canadian taxes on this income.

 

[billy68]

I did not declare the property in 2017 - I asked the CRA about it recently and they said it's 'ok' to omit declaring the first year, so I did not have to re-submit my 2017 return.

 

[mad_hatter]

Your Canadian tax is calculated base on the income you reported on your T1 tax return. T1135 is for CRA to keep tab on your foreign asset. In addition, you report gross rental income in T1135.

Canada will tax you on the total rental income received in 2018. You can estimate how much UK tax you have to pay for the year 2018 and use this amount to calculate your foreign tax credit. If the UK tax end up to be substantially different than the estimate, you can file an amendment.

 

[mad_hatter]

I did not declare the property in 2017 - I asked the CRA about it recently and they said it's 'ok' to omit declaring the first year, so I did not have to re-submit my 2017 return.

It is true that you do not have to file T1135, with your first income tax return as a new resident. However, you still have to include the rental income in your T1. If you did not do that in 2017, I suggest you file an amended return for 2017 because you owe Canadian tax.

 

[canuck_in_uk]

I did not declare the property in 2017 - I asked the CRA about it recently and they said it's 'ok' to omit declaring the first year, so I did not have to re-submit my 2017 return.

I'm not referring to the T1135. I'm referring to the rental income. You were required to declare that income on your Canadian taxes. As said above, if you didn't, file an adjustment request to correct that.

 

[billy68]

Thanks 'canuck' - I did not have a rental income in 2017 as my family was still in the uk living in the house.