New Form for employer/employer joint waiver for non-resident employees

CRA recently announced a new form R02J Regulation 102 Treaty Based Waiver Application - Joint Employer/Employee.

You need to use this form if your employee will not be subject to final tax in Canada under a treaty (for the US normally less than $10,000 per year, for other countries $5,000).

Remember that this is an application, not yet an approval.  Until CRA approves a treaty waiver the regular withholdings for tax, EI and CPP must be withheld from your employees paycheque.

For more details on US residents working in Canada, see my E-publication "Who gets my tax dollars?" link on this page.

ETUG Workshop

Attended the Educational Technology Users Group (ETUG) Spring Workshop  this week.  Great workshops and networking opportunities.

The highlights of the workshop for me were:

 - the overall energy that was there - so many educators and instructional designers interested in technology

 - hearing Tony Bates at the keynote session tell everyone they should be looking at activity based costing to define their costs of technology in teaching (being an accountant hearing someone from outside the field talk about ABC made my heart warm)

 - being in the same workshop with Tony Bates as a participant (he was great as a keynote speaker as well but it was just so neat to be in the same workshop)

- seeing fellow MDE students making presentations on OER's (Open Educational Resources)

 - the iPad

US S Corporations

Article XXIX (Miscellaneous Rules) Paragraph 5 of the Canada-US Treaty discusses the special situation of S Corporations.  

Canadian resident shareholders of US S Corporations do not have the option of the new flow-through rules the same as US resident shareholders of those same corporations.  However, they do have the option of applying to the Competent Authority of Canada to have their income to be taxed similar to the US rules to eliminate the timing rules.  Basically what the rules will do is as follows.

- the S Corporation will be a considered controlled foreign affiliate

- all income will be foreign accrual property income (FAPI)

- the separate deduction from income for foreign property taxes paid will not be permitted (they will calculated under the FAPI rules instead of separately)

- dividends will be excluded from income and adjusted to the cost base of the shares

In many cases, it is a good idea to take this option.  But, you need to look at this option carefully before jumping in with both feet.  

There can be some unintended consequences such as the designation that "all income" will be FAPI.  Normally in Canada you pay taxes on ½ of the capital gain but if you select this option, 100% of the gain will be taxed.  (I'll write more about FAPI in another post).

Taking advantage of the special treaty rules for an S Corporation can be beneficial but be sure to look at the whole situation before making a final decision.  You may want to think about long term decisions and apply for the special designation only for those years where you are fairly sure of your type of income.