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Are foreign workers subject to our tax laws?
Yes, in the majority of cases. Anyone who earns a salary from a company based in Canada must comply with Canadian tax laws. Exceptions exist, however, and some workers do not pay taxes legally.
Tax agreements between Canada and most countries around the world govern the payment of taxes for Canadians who earn their living abroad and, vice versa, for foreigners who work in Canada.
Whether they involve Tunisia, the Philippines or Mexico, bilateral agreements generally establish that a person “is considered a resident only of the Contracting State where he or she habitually resides.” In other words, everyone who lives in Canada year-round, regardless of their status, can be considered “a resident” and is included in Canada’s tax system. They therefore pay their taxes like any Canadian, even if they have to leave the country after the end of their contract.
This tax windfall is impressive. In Quebec alone, Statistics Canada recorded at the start of the year no less than 284,270 non-permanent residents holding a work permit.
Even a temporary worker “who does not reside in Canada for the entire year” will pay tax in Quebec, “on his income earned in Quebec,” confirms Revenu Québec in a written communication.
Temporary workers can benefit from several advantages that come with their taxpayer status, including access to the Régie de l’assurance santé du Québec card.
Exemptions
Exemptions from the Canadian tax system also exist. “A foreign expert” can benefit from a total or partial tax exemption for five years. Even if this researcher, this professor or this other highly qualified professional physically remains in Quebec, he can be classified as a non-resident in the eyes of the law and therefore obtain an exemption. Claiming to be part of this category of specialized immigrants can therefore enable tax optimization.
A tax exemption is also granted to employees of certain international organizations based in the country, such as the International Civil Aviation Organization (ICAO), which has its headquarters in Montreal.
In complete contrast to these knowledge workers, agricultural workers also benefit from tax exemptions. Any seasonal employee who earns less than $36,112 per year does not have to pay taxes. Some international tax agreements also provide that a foreign worker who spends less than half the year in Canada does not have to pay taxes in Canada. This last exemption remains very rare.
In short, barring exceptions, salary earned in Canada is taxable in Canada, “whether the person is considered resident or non-resident for tax purposes,” in the words of Lyne Latulippe, principal researcher at the Research Chair in Taxation. and in public finance from the University of Sherbrooke, who contributed to this response.
This report is supported by the Local Journalism Initiative, funded by the Government of Canada.