Canadian source income - how to avoid double taxation?

Hi! I am a UK resident and Canadian citizen. I am starting a new full-time job as an independent contractor working remotely for a Canadian company. I will be paying UK tax on that income, but I am confused about how to handle my Canadian taxes. I will need to file a Canadian tax return as it is Canadian source income, but I don't understand how to invoke the UK-Canada tax treaty to avoid double taxation. I know this a question that the Canada Revenue Agency would be better placed to answer, but as they don't have a forum like this, I thought I would try here first. Thanks so much! - Stephanie

Hi,

Please have a look at Article 15, Dependent Personal Services, of the UK / Canada double taxation agreement. In general, it advises that a UK resident, who has employment income in Canada, is taxable only in the UK on this income, unless, the individual is in Canada, undertaking the work. Paragraph 2(a) states the circumstances, that would allow the income to be taxed in Canada:

1978 Canada/UK Double Taxation Convention (2014 consolidated version

If your employment income is not taxable in Canada, you will need to request a Certificate of Residence from HMRC, which you would need to send to the Canadian Revenue Service, to request no tax is deducted from your employment income, which you will declare on a Self Assessmen tax return. You can see guidance here: 

How to apply for a certificate of residence to claim tax relief abroad

If tax is deductable in Canada, you would need to claim Foreign Tax Credit Relief in your Self Assessment tax return for up to 100% of the tax deducted, so that you do not have to pay the tax twice.

Thank you.

Thank you - this is incredibly helpful. According to paragraph 2a, my income should only be taxable in the UK. If my personal tax rate is higher in Canada than in the UK, will I have to pay the difference to the Canada Revenue Agency? Or does submitting a Certificate of Residence mean that I won't be liable for any Canadian taxes on this income? Thanks!

Hi,

That would be for the Canadian tax office to confirm.

Thank you.

Hi - what if we have already filed our tax return for the year in Canada and have been taxed in Canada?

Hi,
You should contact the Canadian Revenue Service with a view to amending  your tax return for that year.
Thank you.