Canadian resident, working abroad

taxation issues?

[Mtlinfo]

I heard that to pay taxes, you must do the work on the land of a country. For example, I live in Canada and if a US company hires me (ex: silicon valley), by working on US soil, even being Canadian, I won't have to pay a penny in taxes to the Canadian government, only pay taxes to the US gov because the work has been done on US territory.

Now, having a website design company, I can do the work anywhere I am connected online. So would it be possible and legal to incorporate my internet business offshore (ex: Bahamas) then move there once a month, do the work and then come back to Canada and not pay taxes because I worked outside the Canadian soil?

Thanks,


Richard

P.s.: Who's the best person to ask where I live? A lawyer or an accountant?

[tangor]

Legal advice we cannot give. You should talk to both your attorney and accountant! It is income to YOU and ultimately that has to be dealt with SOMEWHERE...

[LifeinAsia]

Check with your accountant. Not sure about Canada, but the U.S. taxes its citizens on worldwide income. So even if a U.S. citizen lives in the Bahamas full-time, he/she would still pay U.S. taxes on ALL income received, regardless of the source or location.

[piatkow]

These are things that get fiddled with every few years, you really need a professional advisor.

I haven't needed to know about the rules over here for about 30 years and I am sure that they are not the same as they were then.

[justrobin]

I believe that is the basic law of the land. You pay taxes to the land where you are working... But that is only one type of Tax of the many type of taxes that is being paid annually.

I agree that you should ask both your attorney and accountant for that. They know more than many of us here.

[wheel]

I heard that to pay taxes, you must do the work on the land of a country.

You heard wrong. (actually, I think you're implying that you only have to pay taxes in one country - that is false).

I (or my company) has paid taxes in at least two countries some years.

[Mtlinfo]

Thanks guys, will consult both attorney and accountant soon.

It's interesting to know that as a Canadian citizen, I could work in the US and pay taxes in both countries. This is nuts, I mean Canada should not tax a lot because the US is already eating a big chunk of the salary.

Any idea how much % the native country still taxes the citizen who works across. That shouldn't be too much, this doesn't make any sense. Why pay taxes for services we don't use.

Anyway, thanks for the advices.

Richard

[wheel]

This is nuts, I mean Canada should not tax a lot because the US is already eating a big chunk of the salary.

That's why you need an accountant not the internet on this one. I believe in the situation you've described that the US taxes will offset your Canadian taxes, meaning you're not really doubled taxed. So you're paying taxes in both countries, but not really twice. But I could be wrong.

[piatkow]

That is called "double taxation relief". It is an area where governments tweak the rules every few years so don't rely on anything you are told or find on the net, it may be out of date or apply to a different country. You need professional advice.

[koan]

This is nuts, I mean Canada should not tax a lot because the US is already eating a big chunk of the salary.

Logically, as a Canadian citizen, you enjoy many services provided by the Canadian government (infrastructure, health care, etc), it would make sense for you to pay your share just like any other, unless you move permanently to the US. But I doubt it would amount to double the taxes.

[Mtlinfo]

Logically, as a Canadian citizen, you enjoy many services provided by the Canadian government (infrastructure, health care, etc), it would make sense for you to pay your share just like any other, unless you move permanently to the US. But I doubt it would amount to double the taxes.

Yeah it makes sense to pay for basic services like passport and embassies but they can't be more than 10% of the salary made in the other country otherwise like you said, you become a US citizen and to hell with Canada :)

I wonder if anybody here did just that. Lived in another country and could tell us how much basic services cost them each year. I'm sure my lawyer and attorney will tell me the exact number but this is not something I plan to do very soon. I'm just starting up a business so I'm far from this point.

Thanks guys.

Richard

[tangor]

US and Canada do have a tax treaty (residents in one country can work in the other, resulting in tax credits applied across borders) but you'll still want to have an accountant take a look at this to make sure that all proper reporting forms are used.

[httpwebwitch]

When I worked for a US company, I was required to register with the IRS. I needed an IRS number and affadavit signed by a notary at the US consulate in Toronto. My employer (in New Hampshire) paid the IRS for a bunch of things I did (not sure what). But every April my Income Tax all went to Ottawa, so there's the majority of your taxation right there.

I think there was some portion of the US taxes that had to be declared and paid to Canada Revenue after it was collected by the IRS. I remember the paperwork hurdles, but not the details because I wasn't doing the accounting.

Your dream of not paying Ottawa "a penny" is fiction. it doesn't work like that.

[Mtlinfo]

When I worked for a US company, I was required to register with the IRS. I needed an IRS number and affadavit signed by a notary at the US consulate in Toronto. My employer (in New Hampshire) paid the IRS for a bunch of things I did (not sure what). But every April my Income Tax all went to Ottawa, so there's the majority of your taxation right there.

I think there was some portion of the US taxes that had to be declared and paid to Canada Revenue after it was collected by the IRS. I remember the paperwork hurdles, but not the details because I wasn't doing the accounting.

Your dream of not paying Ottawa "a penny" is fiction. it doesn't work like that.

I see your point but if you read my original post, it doesn't just talk about being an employee but ALSO and MOSTLY about incorporating a business in another country (ex: Bahamas).

As for people, you are right, we can jump from one country to the next and always be taxed because we maintain certain Canadian services but for a company that doesn't use those services and to be created from scratch in the Bahamas, I don't think that the income of that new business has to pay anything in Canada. Maybe I will pay taxes on what this company pays me but the beauty is to maintain the majority of the money IN the company bank account so that it doesn't get taxed or taxed as low as possible.

For example, if the business makes $1,000,000 and my salary is $100,000, then I don't mind giving away $50,000 to Canada Revenue as a Canadian citizen, as long as the other $900,000 in the company's bank account are not taxed.

Again, don't want to sound like I'm trying to play illegally here, I don't, I just want to know if having an internet business has this power of avoiding those taxations because it has the ability to be incorporated anywhere in the world.

The beauty of having a .com as a business and be able to be incorporated ANYWHERE in the world and be created and updated anywhere I access the net has to have some form of advantages. Maybe I'm dreaming, but we'll see.

Richard

[httpwebwitch]

ahh, so you're looking for a company tax haven not a personal tax loophole. Big difference. I misunderstood.

I'm sure it's possible because a former employer of mine did it, they were a Canadian company that kept some kind of presence in the Caymans. I didn't understand the complex logistics of it all, but the accountants made it work to their advantage.

Please write back and tell us what you learn. Though I'm not ready to start off-shoring my profits, my dreams are in sync with yours (working anywhere, traveling to places with palm trees, earning $ from multiple sources & putting it in a safe, lightly taxed piggybank)

Being not the first person to try this, there's got to be a Dummies book or a website or something that explains how to pull it off. ?

But when it comes time to engage the gears, piatkow's right - you'll need pro advice

[Mtlinfo]

I'm sure it's possible because a former employer of mine did it, they were a Canadian company that kept some kind of presence in the Caymans. I didn't understand the complex logistics of it all, but the accountants made it work to their advantage.

Alright, thanks, this means that it is possible and still being legal.

Please write back and tell us what you learn. Though I'm not ready to start off-shoring my profits, my dreams are in sync with yours (working anywhere, traveling to places with palm trees, earning $ from multiple sources & putting it in a safe, lightly taxed piggybank)

This is strange that you guys haven't seen or heard about it on this forum which is loaded with webmasters and entrepreneurs who work with PayPal. Anyway, I'll keep you in touch but it won't be in 2011 unless the business explodes in sales.

Being not the first person to try this, there's got to be a Dummies book or a website or something that explains how to pull it off. ?

Yeah good point, anyone did that or know about such websites?

Richard

[youtube.com...]

[tangor]

The chickens always come home to roost... in most of these "successful" cases, the monies maintained off-shore have to work off-shore (ie. you can't bring it home or use it at home... becomes TAXABLE at that time). And some countries, the USA for example, are looking to seal these present "loopholes" in the tax code to get some of that revenue from so-called overseas investments. How it all plays out in coming years is anyone's guess, but I'll bet on governments figuring out a way to get their hands on it. What works now may not work in the future. Plan accordingly.

[HuskyPup]

This is strange that you guys haven't seen or heard about it on this forum which is loaded with webmasters and entrepreneurs

Ok, I'll come in, we've discussed this many times over the years here, we even invented a Googleisland at one time:-)

The short answer - yes, it's not a problem.

The slightly longer answer:

There are many here who know about this, and are doing it, however EVERY case is different therefore you NEED expert tax AND legal advice and, believe this or not, even IF it is worth your while to do this.

Quite simply it's a numbers game under your current jurisdiction and only local professionals will be able to give you suggested guidelines whereby you could be better off using alternative accounting procedures. Trust me on this, do not use a traditional practice, this is serious specialised knowledge and you will have to pay handsomely for it since these people are specialised.

Tread carefully, do not rush, plan carefully what you want to do...even relocate your business base if necessary, however do make sure that what you do you can continue, a couple of years sideways and then returning to where you were may raise awkward questions.

To sum up, professional advice is not cheap however IF you are earning serious money then huge savings could be made.

And stop listening to hearsay or forum speculation(s), get the real answers.

[Mtlinfo]

And stop listening to hearsay or forum speculation(s), get the real answers.

Yeah I know and I'm doing just that. I always start lightly to gather info on internet forums, Youtube videos and websites and then ask the real guys but like you said, it's not cheap and besides, it's not for next week.

[youtube.com...]

Check out this Asset Protection Expert's Youtube channel. I did a trade a few years ago to incorporate my business in Nassau with an Attorney in exchange for a website and the guy created me an IBC (International Business Corporation) but thanks to this guy on Youtube, I learn that LLCs and Trusts are a lot safer than IBCs.


Richard

[tangor]

At some point, Mtlinfo, conventional wisdom suggests that one does not create a paper trail (or forum mail, or any other kind of trail) in public when discussing tax strategies! Sometimes these things can come back to bite one in the a$$.

[Mtlinfo]

one does not create a paper trail (or forum mail, or any other kind of trail)

Hahaha, that sounds a bit like paranoia to me :)

Remember, I have nothing to hide to the government or anybody, I want the best asset protection not do tax evasion even though some may think it's the same thing.

Tax avoidance is legal, tax evasion is not, don't confuse the 2.

Richard

[tangor]

I'm not... but I have had experience with several governments over the years and all of them have surprised me. Ha. Ha.

Pick and choose, go from there. Again, we can't offer legal advice, but we can strongly urge one seeks appropriate legal advice from a local attorney (or in the case) a certified public accountant, and additionally suggest either or both are qualified for international tax law. Chuckles aside, this is serious business and one should do it right, with EYES WIDE OPEN, because the downside can be catastrophic.

[Mtlinfo]

Yeah I know, thanks to the guy on Youtube, I remembered that the best advices on this won't come form any accountant or lawyer but from a specialized "Tax attorney". They are the ones who specialize in this field and learn all the latest changes in tax laws.

Richard

[tangor]

And those persons should be vetted out the wahzoo before you give a thumbs up. Seriously, DO YOUR HOMEWORK!

[Andem]

Mtlinfo, contrary to the advice given here: Do not hire a lawyer and do not rely on American tax law.

Canadian tax law (and infact most International tax law) is very different to that of the U.S. Canadians are not required to pay or file taxes if living abroad. Forget about where the income is coming from. You could live in Buffalo and provide a product or service exclusively to Canadians and not have to pay a penny to Revenue Canada.

Sorry if I was late on answering this question, but if you live outside of Canada for half the year (+1 day), you have no tax obligations to Canada. A quick search of the CRA-ARC site will confirm this.

Be careful though, even having a drivers license can prove you still live in Canada under the watchful eye of the law and thus make you liable to pay Canadian taxes.

[wheel]

You could live in Buffalo and provide a product or service exclusively to Canadians and not have to pay a penny to Revenue Canada.

And as always, I can provide specific cases where what you've just proclaimed are blatantly false.

I believe US corps. shipping products into Canada are supposed to remit Canadian goods and services taxes. Many perhaps most don't, but I believe they're supposed to, and that further the Canadian gov't can actually reach down into the US and enforce this. That's exactly the opposite of what you just said was fact.

So if you're a smart guy, move to Buffalo and start shipping to Canada, the gravy train lasts until you get reported to the Canadian gov't by your competitors for not charging taxes.

Second example, American companies advertising in Canada that is targetted at Canadians must also pay Canadian sales tax on the advertising. So smart guy in Buffalo who decides to advertise their product in a Canadian magazine or Canadian website? They're going to pay Canadian taxes on that advertising.

That's two examples of entities in the US that have to pay Canadian tax. And that's why you do need a lawyer or accountant that knows what they're talking about. Frankly it's like brain surgery - there's some things where reading up on the internet isn't going to replace an offline specialist.

[Rugles]

And that's why you do need a lawyer or accountant that knows what they're talking about. Frankly it's like brain surgery - there's some things where reading up on the internet isn't going to replace an offline specialist.

Exactly. It is one of those cases where if you make a mistake or misunderstand something. It could cost you greatly in the future.

Get real advice from people who practice this stuff everyday in the real world. That is what we do, we have lawyers and accountants on both sides of the border.

[Rugles]

I wonder if anybody here did just that. Lived in another country and could tell us how much basic services cost them each year.

Citizenship and taxes are not Ala Carte.

You cant say .. I want that nice Canadian passport and would really love to be able to call the Canadian Embassy if I get into trouble abroad, but I certainly do not want to pay for schools, healthcare, infrastructure and policing in Canada. I know people with this kind of thinking and as soon as they get hurt or sick (or one case they were going to have a baby!) in the USA they coming running back up here for the "free" healthcare because they do not want to max out their credit cards. Not very moral IMO.