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  • Canada Tax Treaty

    Thanks for reading my post.

    I've read several other posts on the subject, but I can't seem to find a consensus regarding Canadian income tax on income earned in Japan.

    I live/work in Japan and my company withholds income tax from each paycheque. How do I declare this income to Revenue Canada? Can I claim a credit for the entire amount (citing the Canada-Japan tax treaty) or do I only claim the Japanese tax paid as a tax credit?

    If I'm missing something else, please let me know.

  • #2
    Resident in Japan?

    Originally posted by victorWard
    Thanks for reading my post.
    If I'm missing something else, please let me know.

    If you are a resident in Japan and a citizen of Canada then you should declare your taxes in Japan and don't need to declare that income in Canada.

    You can have yourself declared a non-resident by filling out some forms, but a lot of people don't bother with that step.

    If you are a short term expat and planning to be out of Canada for less than a year then your tax situation gets a bit more complicated.

    Comment


    • #3
      What in the Sam Hill is wrong with you people?

      Originally posted by victorWard



      Thanks for reading my post.



      I've read several other posts on the subject, but I can't seem to find a consensus regarding Canadian income tax on income earned in Japan.

      I live/work in Japan and my company withholds income tax from each paycheque. How do I declare this income to Revenue Canada? Can I claim a credit for the entire amount (citing the Canada-Japan tax treaty) or do I only claim the Japanese tax paid as a tax credit?

      If I'm missing something else, please let me know.
      Why are you thanking me for reading your post before I read it?

      Why don't you guys do yourselves a favor and just join us down here in the Lower 48? The IRS would take good care of you, treat you just fine.

      Comment


      • #4
        From tax treaty between Japan and Canada

        The tax treaty, Article 15 mentions that "salaries, wages and other similar remuneration derived by a resident of a contracting state in respect of an employment shall be taxable only in that contracting state unless the employment is excised in the other contracting state. If the employment is so excised, such remuneration as is derived therefrom may be taxed in that other contracting state."

        Article 15 is for employed persons except directors.
        For directors, Article 16 is prepared.

        Regarding your case, if you are a resident in Japan, The contracting state will mean Japan.


        -------------------------------------------------------
        Before tax filing due at March 17, we are opening the 60 minutes free consultation for 2007 individual income tax return (only one time per person) on every Wednesday in our office. If you have further questions, please email to us for the reservation. Our office is in Ginza/Tsukiji area, Tokyo. http://www.nxainc.jp
        Last edited by Maxintyo; 2008-03-04, 11:40 AM.

        Comment


        • #5
          Originally posted by Maxintyo
          The tax treaty, Article 15 mentions that "salaries, wages and other similar remuneration derived by a resident of a contracting state in respect of an employment shall be taxable only in that contracting state unless the employment is excised in the other contracting state. If the employment is so excised, such remuneration as is derived therefrom may be taxed in that other contracting state."

          Article 15 is for employed persons except directors.
          For directors, Article 16 is prepared.

          Regarding your case, if you are a resident in Japan, The contracting state will mean Japan.

          plain english please

          Comment


          • #6
            Thanks again

            Ok, so how do I know if I'm a resident of Japan? I live/work in Japan. However, I have bank accounts in Canada which pay interest. I haven't changed my mailing address to Japan, so the banks don't withhold any tax.

            So, if I have income in Canada and Japan how does that effect my residency? Can I report Canadian income in Canada and Japanese income in Japan?

            Thanks!

            Comment


            • #7
              Originally posted by victorWard
              Ok, so how do I know if I'm a resident of Japan?
              http://www.nta.go.jp/taxanswer/english/12001.htm

              Comment


              • #8
                old thread yeah, but it's that time of year

                Originally posted by YokohamaYamate View Post
                That's probably the most cryptic thing I have read all day.

                Comment


                • #9
                  plan english

                  Originally posted by vancitylove View Post
                  plain english please
                  Money you earned in Japan is only taxed in Japan if you are below the level of a Director.

                  Comment


                  • #10
                    I was under the impression that you need to pay the difference in Canada.

                    If you pay 15% tax in Japan and 20% in canada you will be required to pay the remaining 5% tax to canada.

                    Just apply for non resident status. I did that and had it effective from the time I left Canada so I actually got a refund for that year.

                    A brief history:

                    I worked in japan for one year in 1999 and when i came back I applied for student loans... Some BS happened after that and the court told me that I had to file taxes for the year I was gone and ended up paying a semesters worth of tuition to the govt... It sucked.

                    Comment


                    • #11
                      Originally posted by 91Coupe View Post
                      I was under the impression that you need to pay the difference in Canada.

                      If you pay 15% tax in Japan and 20% in canada you will be required to pay the remaining 5% tax to canada.

                      Just apply for non resident status. I did that and had it effective from the time I left Canada so I actually got a refund for that year.

                      A brief history:

                      I worked in japan for one year in 1999 and when i came back I applied for student loans... Some BS happened after that and the court told me that I had to file taxes for the year I was gone and ended up paying a semesters worth of tuition to the govt... It sucked.
                      Sounds like you were out of the country for less than 12 months. If the stay is longer then there is no problem with the dual taxation.

                      Comment


                      • #12
                        Originally posted by Jakebullet View Post
                        Sounds like you were out of the country for less than 12 months. If the stay is longer then there is no problem with the dual taxation.
                        Yea it was about a week less than a year.

                        Comment


                        • #13
                          Taxxxman

                          ugh so it looks like you DO have to pay tax on income earned abroad while still a Canadian Resident. Should have filed for non-resident status before I left as this affects me. ____ beans.

                          http://www.cra-arc.gc.ca/tx/nnrsdnts...mprry-eng.html

                          So 91coupe was right in that you end up paying the difference on what you are taxed abroad vs at home. You claim a tax credit on the lower of the two:

                          the foreign income tax you paid; or
                          the tax otherwise due in Canada on your net income from that country.

                          The lower likely being Japan.

                          On that note, anyone not filed taxes on Japanese Income? What's the worst that could happen? My employer isn't doing it for me as, in effect, I'm a contracted and independent. I'll be leaving within a year and likely not coming back...

                          Comment


                          • #14
                            Originally posted by LeftVanCity View Post
                            ugh so it looks like you DO have to pay tax on income earned abroad while still a Canadian Resident. Should have filed for non-resident status before I left as this affects me. ____ beans.

                            http://www.cra-arc.gc.ca/tx/nnrsdnts...mprry-eng.html

                            So 91coupe was right in that you end up paying the difference on what you are taxed abroad vs at home. You claim a tax credit on the lower of the two:

                            the foreign income tax you paid; or
                            the tax otherwise due in Canada on your net income from that country.

                            The lower likely being Japan.

                            On that note, anyone not filed taxes on Japanese Income? What's the worst that could happen? My employer isn't doing it for me as, in effect, I'm a contracted and independent. I'll be leaving within a year and likely not coming back...
                            Thats what I thought. Thats why I applied for non-resident status. The good thing is they will back date it to the day you left canada, so you will only have to pay taxes for the time you were in canada. If you were working and paying taxes until you left, that should mean a refund.

                            Comment


                            • #15
                              Originally posted by LeftVanCity View Post
                              ugh so it looks like you DO have to pay tax on income earned abroad while still a Canadian Resident. Should have filed for non-resident status before I left as this affects me. ____ beans.

                              http://www.cra-arc.gc.ca/tx/nnrsdnts...mprry-eng.html

                              So 91coupe was right in that you end up paying the difference on what you are taxed abroad vs at home. You claim a tax credit on the lower of the two:
                              This is the same with virtually every country in the world now.

                              But also there's probably nothing to stop you applying for non-resident tax status now (I don't know Canadian law, but most countries have similar arrangements and procedures in this mater).

                              To get non-tax resident status in most countries you just have to provide a bit of proof like:
                              • showing you don't have permanent ties to your old country - like a house (even if it's only been a rental and you've never lived in it), a tenancy agreement, a wife still there, a business, or a job contract etc.
                              • That you're out of the country for a certain amount of time (eg 325 days out of the last 12 months).
                              • It helps if you can show long term employment contracts from your new tax residency country (Japan), marriage certificates, tenancy agreements - that kind of stuff.
                              • Sometimes even if you don't fit all of these requirements you can still get it (the place of abode and the time out of country are normally not negotiable though).
                              And as long as you're not retarded and tell them you plan to return to Canada or something stupid like that, then you should get non-tax residency status.

                              And once you've got the status, the Canadian tax department will usually back date the status to when you first left the country permanently - so no auditing your Japanese income for Canadian taxes at a later date - or penalties for not filing your Canadian returns on time [late filing penalties] - or for not paying the tax owed, the amount that you did not even know you owed, when you should have [late payment penalties].

                              But it can also happen that you just never show up on the Tax man's radar (which has usually been the case as up to now as there is/was no automatic sharing of this information without a manual request by one of the tax agencies). Up to you if you want to take the risk or not.

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