Working for an American company, while living in Canada as an employee.

[arcticcat522]

Since work from home has become more of a thing, how dose it work if you work for an American company (no Canadian offices) get paid in American dollars, but live in Canada. I see lots that talk about this situation, but they all refer to being a contractor. I'm talking about being an employee. Has anyone done this? Would you be required to pay any American taxes? I doubt it, but don't know. Any insights?

[ExtraSlow]

Is this a big company? Their HR team, or payroll team, should have a process for this. If it's a small company, good fucking luck, it'll get fucked for sure.

[GenerationX]

In the stages of talking to a potential employer about this, and they have a Canadian company setup that they do payroll through. Not sure how it would work otherwise.

[ExtraSlow]

In the stages of talking to a potential employer about this, and they have a Canadian company setup that they do payroll through. Not sure how it would work otherwise.

This is the correct way to do it.

[npham]

I've only seen this as a contractor (is currently what I'm doing now). If the company has a Canadian office, they will pay you in CAD if you're an employee. I really haven't seen people do this who aren't contractors/expat contractors.

[sabad66]

You won’t need to pay American taxes, but you’d have to set yourself up as a sole prop/corp so that you can pay the proper Canadian taxes on the money they pay you.

This site has some good info:
https://www.mileiq.com/en-ca/blog/tax-tips-canadians-work-us-companies-canada

[ExtraSlow]

You won’t need to pay American taxes, but you’d have to set yourself up as a sole prop/corp so that you can pay the proper Canadian taxes on the money they pay you.

This site has some good info:
https://www.mileiq.com/en-ca/blog/tax-tips-canadians-work-us-companies-canada

No.

[sabad66]

No.

Why? He clearly states the company has no Canadian offices so this is a common workaround that many smaller companies use. Basically even tho he is “staff” they would have to pay him like a contractor since he’s lives here.

If they were a big company he wouldn’t be here asking these questions as they would have the means to open up an office in Canada and do it right.

[ExtraSlow]

you are right, I wasn't clear. the key phrase in that article you linked is this one:

As a Canadian freelancer or business owner living in Canada

So if you are an EMPLOYEE, you are not either of those. If you are an EMPLOYEE, then your company needs to withhold Canadian tax and your tax concerns are no different and you do not need to set up a corp or sole prop, and in fact you SHOULD NOT. If you are an contractor, then frankly it doesn't matter where your employer is located.

[pheoxs]

you are right, I wasn't clear. the key phrase in that article you linked is this one:


So if you are an EMPLOYEE, you are not either of those. If you are an EMPLOYEE, then your company needs to withhold Canadian tax and your tax concerns are no different and you do not need to set up a corp or sole prop, and in fact you SHOULD NOT. If you are an contractor, then frankly it doesn't matter where your employer is located.

I don't believe a US entity can do Canadian payroll though unless they register in Canada which I understood him to say they haven't. If they aren't registered then they won't be able to remit taxes and cpp.

If OP wants to be an employee I thought they'd have to go through a company like Randstad that would do Canadian payroll and taxes and then bill the US entity

[ExtraSlow]

Hmmm, you may be right. Although if they are a company of any size, opening a canandian subsidiary is not difficult and would be the common solution of they plan to have more than one canandian employee permanently.

Source, I started a Delaware LLC for my employer

[sabad66]

Fair enough. Using the strict definition of employee then youre right it’s impossible without a Canadian office to withhold tax. But someone using the contractor workaround could be considered as an employee for all intents and purposes I.e. paid vacation time, paid training, company credit card, health and wellness benefits (cash equivalent), promotions, etc but just not officially an employee and paid like a contractor.

[statick]

There are some good responses here... Yes, the typical scenario is for the US parent to set up a Canadian subsidiary to hire and pay the Canadian staff.

A CCPC (Canadian-controlled private corporation) can be used to receive contractor payments from a US company, but payments from a foreign entity can mean a little more corporate reporting, which is really just something for your accountant to worry about. It might also be worth noting the risk of being deemed to have a personal services business (PSB) which has tax implications, although I know the original question doesn’t have to do with deferral of Canadian taxes through a corporation. And, yes, I know everyone’s mother’s brother has corporation that gets around being taxed as a PSB.

If the situation is as the original question poses - a Canadian resident earning US-source employment income (and we’ll also assume no US citizenship) - then the individual would file a non-resident US tax return due to the US-source income, and would also file a Canadian tax return due to being a Canadian resident. There likely wouldn’t be any double-tax because of how the tax treaty works, the foreign tax credits would allow for this, and the taxes deducted directly from the paycheque would be the US taxes.

[03ozwhip]

Wife worked for a US based company here. They paid her in Canadian dollars and took off tax as an employee as usual. It was a big company.

[arcticcat522]

Thanks for all the replies, it's early in the process. Just want some questions ready. Biggest one seems to be clarity on how they actually pay. It's a big company, so I'm sure they have their poop in a group.

[ExtraSlow]

Wife worked for a US based company here. They paid her in Canadian dollars and took off tax as an employee as usual. It was a big company.
Its flawless if the company is big and organized.

If they have more than 5 employees here, or run an office or shop, I think you don't need to worry. It's actually more work for a big company to do this in anything but the right way.

[Toms-SC]

[QUOTE=arcticcat522;4962415] get paid in American dollars, but live in Canada. /QUOTE]

That would be one hell of a unicorn opportunity. The contractor approach would make sense and frame the relationship as a consultant.

[fayzed]

I'm in this exact situation, i'm currently working for an American company getting paid in USD, there is no Canadian office.

Until one is set up what i've been doing is billing them a "retainer" i.e. my monthly salary through my numbered corporation, so although i have an employee contract it's not really relevant until they create their Canadian presence, once that's done, then things change. similar to what people have said above.

[suntan]

That would be one hell of a unicorn opportunity. The contractor approach would make sense and frame the relationship as a consultant.

It's entirely possible. Only thing is I think you're required to pay withholding tax and there's no way around that in this relationship.

[prae]

One way that this can be done is through a professional employer organization. I spent some time working this way, and I submitted a timesheet to the PEO , who then invoiced my US-based employer (plus some percentage).

remote.com is a good example of a global PEO, and would give you insights into the type of things that an employer needs to have sorted in order to be able to properly "employ" people in a given country. CXC Canada is another PEO I'm aware of in-country.

A PEO obviates the need for you to incorporate and invoice as a contractor or consultant yourself, which can make things simpler for both sides.

Things to consider when you do this:

Benefits - if this employer doesn't have an established benefits plan, you should likely be looking for an additional monthly stipend to cover purchasing your own insurance (or just self-insuring, so to speak)

Equity - There are significant tax implications and complications with stock option plans and their tax treatment if you execute a grant agreement while not an employee of the organization or a non-arms length subsidiary of the organization. Consult a professional.

Getting paid in USD might be attractive but your comp will be subject to swings with FX. Given the direction things are moving it might be more advantageous to simply negotiate a CAD$ figure and justify it with our high FX ratio currently.