Canadian Taxes while working Overseas

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SkyHawk
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Canadian Taxes while working Overseas

Postby SkyHawk » Fri Feb 08, 2013 12:30 pm

I worked for a Canadian Company that got a contract to work overseas, which was good.

The Country I was in had a foreign worker tax. The company paid this tax. No one knew about this tax, and was surprised when we a letter from the company (explained below).

When it was time to do my Canadian Taxes and received my T4 from the company, I got a letter with my T4 telling me that the company paid that Tax on our behalf and now they want their money back, There was two ways to go. Pay the company, which they outlined how much they paid in Canadian for you, or they will issue a new T4 (Amended) and they will add that to your Taxable income Benefits.

Talking to the company, they said they didn't want the entire amount back, only what we would receive back through our Tax Credit. Of course I didn't pay the company back and they did issue that new T4 to me 8 months later. I guess they wanted to see who wanted/would pay the company back. Now after doing my taxes, I have to redo my taxes and guess what, because of the increase of Taxable income benefits, I have to pay the Tax Man back...lol. I already knew this was going to happen, it’s not as much as I estimated but still too much.

When the company got this work overseas it was their only work. After being laid off for the winter then returning back to work, I was just told what boat I was working and what I was doing. I was not given any choice to accept any other work, the company has other work in Canada, but it is a different division and therefore, we cannot choose that option. It was not the company's first year operation in this country, it was their second and should have all the bugs worked out by now, but they didn't as they are still screwing with the following years crews Taxes (T4's). The company never told us about this foreign Tax and they were going to pay it on our behalf, but then wanted it paid back.

Yes, what the company did was right by issuing a new T4 Amended, and adding the amount to a Taxable income benefit, but its the way they went about it.

What do you think? Do you think that a company should be allowed to do this?? If they do not give you the option with other work in Canada, and basically tell you work here or don't accept the job because of this overseas tax (which we had no idea of this tax and the company never told us), should they be allowed to add it to our Taxable income benefits amount, when it really wasn't a benefit to us as it was work of get laid off???

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Big Pete
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Re: Canadian Taxes while working Overseas

Postby Big Pete » Sat Feb 09, 2013 8:34 am

This is a very complicated issue that effects many Seafareres.
Some Countries insist that Seamen working in their Territorial Waters have to pay Tax to them, regardless of the Nationality of the Seafarer or the ship he is sailing on.
Where that Country has a reciprocal tax agreemment with the Country where the seafarer normally pays tax then that seafarer will usually be able to "Offset" the Tax paid to the Foreign Country against the Tax paid to their own Country. However, if the Tax rules require both sets of Tax to be taken off your pay packet at the end of the month that could be a bit painfull and it could be a long wait until the end of the Tax year when you can claim back any overpaid Tax.
I think your employers did the best they could by paying your overseas Tax for you, however, effectively that increased your taxable income for the Canadian Taxman although I assume you would have been able to offset the amount paid on your behalf to the foreign Country against your Taxable income.
As a British Citizen I am not sure exactly how the Canadian Tax system works, but I am sure someone from Canada can give you more detailed advice.
At least you have a job and are gaining Sea Time and experience, while being paid for it, surely that is better than sitting at home without a job or pay??

BP
It is always better to ask a stupid question than to do a stupid thing.

EL
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Re: Canadian Taxes while working Overseas

Postby EL » Sat Feb 16, 2013 9:51 am

If you can get a form from a country you payed taxes, you can apply that against your canadian taxes as a foreign tax credit. You can try to get a consultation from a accountant on that matter, but I would not go to H&R Block or similar.

Brad
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Re: Canadian Taxes while working Overseas

Postby Brad » Tue Feb 19, 2013 3:30 pm

I've been working International since my cadetship over ten years ago. When I returned from my first trip, I went and saw a tax lawyer for advice. The main topic of discussion was obviously; "How do I keep the most amount of money?"
The reason I went to a lawyer before an accountant, is that all discussions were confidential, where as a certified accountant has to report to Revenue Canada any form of tax avoidance or wrongdoing. This is not to say I have done any wrong doing, but the discussion with the Lawyer at least was free of worry and we were able to discuss all options, including incorporating oneself, offshore accounts, non residency, OETC, socks full of cash, etc.
He also was able to recommend a few top accountants that would know how best to handle my taxes. Thus avoiding me going out and getting some accountant/bricklayer off the street.
The lawyer was about $400 for the hour, but over ten years, his advice has easily saved me thousands.
The end result for my individual situation was to go after the OETC, to which I did. Looks like I'll be going back to see him now that it's getting fazed out...
B

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The Dieselduck
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Re: Canadian Taxes while working Overseas

Postby The Dieselduck » Tue Feb 19, 2013 7:20 pm

Excellent insight Brad.
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JollyJack
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Re: Canadian Taxes while working Overseas

Postby JollyJack » Sun Feb 24, 2013 8:07 pm

The Canadian tax system as regards to seafarers is quite simple Pete, if you earn money anywhere in the world and you are a resident of Canada, you pay Canadian tax at the full rate. When I worked for Maersk through a Canadian agency in St Johns, there was a "tax reduction" for work in the oil exploration and exploitation field when working outside of Canada for an approved Canadian company. You had to be out of the country for 6 months of the tax year, 1st January to 31 December, in order to be eligible for it. The seafarer, however, never saw that allowance.

Lets keep things simple. The tax payable while overseas was reduced to 20% of taxes payable if you were working in Canada. In other words, if you were employed on a Canadian ship in normal trading and paid $100 in taxes, the amount owing while working for an approved Canadian company in the approved fields (oil exploration, etc) would be $20.

So lets say your salary was $100,000 and your tax payable normally 25% or so of that, or $25000. The "tax break" would drop payable taxes for eligible seafarers to 20% of this, ie, $5000. The Maersk bunch thought this was a great idea and waved the "tax break" in front of seafarers to lure them to "big, taxfree paycheques". Just one problem, THEY took the tax break and paid you the lower salary, in this case $80,000. If you did not complete 6 months of the tax year (Jan 1 to Dec 31 in Canada) out of the country, you were not eligible for any "tax break" and you paid full tax on every penny earned. For $40,000 paid for the 3 trips out of Canada in the 6 months between July and December, you still paid the full rate, ie 10,000, so the take-home was 30,000. This bound you to Maersk just as sure as if they had bought and paid for you. The taxman's whip was waved often. Remember, it's 6 months out of the country, with an approved company on an approved operation, between 1 Jan and 31 Dec. 6 months between 1 July and 30 May is just 3 months out of the country in either tax year, when one works day-for-day. (1 July to 31 December, and 1 January to 30 June) We were not, of course, paid for time off the ship, strictly flat rate for days on board. It meant, of course, that the Maersk agency were, in effect, paying lower wages than anyone else, and making profits by exploiting seafarers. Maybe it's not illegal, but it sure as hell is unethical and immoral.

Perhaps things have changed, but I don't believe the bandits, con artists, wide boys, spivs and exploiters of the shipping world have gone very far into the shadows.
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The Dieselduck
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Re: Canadian Taxes while working Overseas

Postby The Dieselduck » Mon Feb 25, 2013 8:56 am

Jolly Jack is referring to the Overseas Employment Tax Credit or the OETC. In last year's budget, the conservative government announced it is removing this tax credit, starting this year and I think by 2015 its all gone.

The province of Quebec has its own similar program, with similar set up as describe by jolly Jack. The "tax breaks" were "cool" to say, but only truly benefited the company, as wages drop while these "breaks" were supposedly applicable - like JJ says, may not be illegal, but certainly of questionable integrity.

I have an income tax page, although a bit dated... it may still provide some insight on these two programs. www.dieselduck.net/taxes/
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