Korean Job Discussion Forums

[KoreanAmbition]

Income tax question...


I'm curious to hear from Canadians since our laws are different than other countries.

When I go to Korea, what taxes do I have to pay back in Canada?

Thanks.

[schwa]

Canada Revenue will want to take a sizable chunk of your Korean earnings (the Canadian tax rate minus the small amount deducted here) unless you qualify as a nonresident of Canada.

A good primer on this issue can be found here: http://wiki.galbijim.com/Tax_issues_for_Canadian_expats

[polonius]

You have to apply for Non-residency. Once you are approved, really it is just an opinion, and not set in stone. When you finally return to Canada, you can file stating that you were a non-resident for x number of years, and thus, pay no tax. If you don't apply for non-residency, you can be subject to paying the difference between the Canadian tax rate and the Korean tax rate on your world income. Here is the link for the form you will have to fill out. You need to have as few ties to Canada as possible i.e. no car, property, dependents... if you right things like banks and credit cards, give reasons such as paying off student loans. Driver's license in order to get your Korean license. You must cancel your health insurance, and decline the GST rebates. If you have any questions about filling in the form, shoot me a line.

Also, it is retroactive, so you can do it when you return.

http://www.cra-arc.gc.ca/E/pbg/tf/nr73/README.html

or,

http://www.cra-arc.gc.ca/E/pbg/tf/nr73/nr73-07e.pdf

[chachee99]

I phoned Revenue Canada about this and they told me that applying for non residence status isn;t necessary because you are approved if you are out of the country for two years as long as you don't have any primary ties to Canada.

[yuria]

I sent in my papers and was told that I was considered a non-resident of Canada. Do I have to fill out tax forms while in Korea even though I'm considered a non-resident?

[cruisemonkey]

[KoreanAmbition]

So i guess the only way you get screwed on this is if you return to Canada and then find out you didn't meet their requirements of a non-resident right?

Just being out of Canada for 2 years is not sufficient. I read over the entire government website regarding this matter and there are in fact things you have to meet if you want this non-resident status.

If for some reason you don't satisfy enough of the secondary conditions, they can deny you the status. THe problem is that it is not black and white for which secondary issues you must meet. One condition alone will not deny your status, but a combination of them can.

If I have to pay taxes in Canada it's pointless to go to Asia. LOL

[Lilo's Mum]

None...there's a tax treaty between Canada and Korea therefore you don't have to pay taxes on what you earn in Korea. I don't know why you would get a different response to this since I've had my taxes done 3 years in a row with the same outcome.

You can check it out yourself or call Revenue Canada.

You aren't double taxed in Canada.

take care

[Bryan]

^ Yeah a tax treaty was made a few years ago. A lot of online information saying there is no tax treaty is out of date.

[schwa]

The last two responses above got me curious so I did a bit of digging. There was in fact a new tax treaty signed sept 5 2006 & you can view the whole text here: http://www.fin.gc.ca/treaties/Korea_2e.html

Article 14 seems to back up Lilo's Mum's assertion. It states:

Independent Personal Services
1. Income derived by an individual who is a resident of a Contracting State in respect of professional or similar services of an independent character shall be taxable only in that State unless the individual has a fixed base regularly available in the other Contracting State for the purpose of performing the services. If the individual has or had such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base. For the purposes of this Article, when an individual is present in that other State for the purpose of performing such services for a period or periods exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned, the individual shall be deemed to have a fixed base regularly available in that other State and the income that is derived from the services that are performed in that other State shall be deemed to be attributable to that fixed base.

2. The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Okay, that seems fairly unambiguous & reassuring to temporary teachers & also seems to put to rest the vague notion of "non-residency," which isnt mentioned at all in the new convention.

However, in Article 22, it says:

In the case of Canada, double taxation shall be avoided as follows:

(a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Korea on profits, income or gains arising in Korea shall be deducted from any Canadian tax payable in respect of such profits, income or gains.

So which is it? I'm certainly no tax expert. Anyone with more knowledgeable interpretative skills care to weigh in?

One more note of interest. Article 25 enables an "Exchange of Information" between the tax offices of Canada & Korea, which I believe is new.