Employee Benefits in a Tax Free Country

Allan Madan, CA
 Jul 27, 2015
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If you temporarily relocate abroad for work, you may be entitled to numerous employee benefits. Some of these benefits include costs related to living and transportation.

businessman-md1You have just been offered a job somewhere in the Middle East – your first step is to move there! If you receive a relocation allowance from your employer, the first $650 can be received tax free and the remaining amount of the allowance is taxable to you.This applies to both residents and non-residents of Canada.

Additional benefits that you receive from your employer will be taxed differently if you are a resident or a non-resident of Canada. Let’s breakdown the differences.

Canadian Non-Residents:

Receives all employer provided benefits and allowances on a tax free basis. Including transportation, living, flights and housing.

Canadian Residents:

Transportation allowances are fully taxable. However, the CRA allows for some special tax free benefits for residents of Canada when they are working at a special work-site abroad.

  •  One of the conditions is that employment at the special work-site must be temporary; which is considered to be a maximum of 3 years with a possible 1 year extension.
  • Second, your employer may give you a living allowance, yearly flights to Canada to visit family, and housing.

These amounts are tax free up to a reasonable amount, specified yearly by the CRA. To be eligible to receive these benefits, tax free, you must complete a CRA TD4 Declaration of Exemption to verify your temporary employment status at the special work-site.

As a resident of Canada, if you choose to stay beyond the temporary 3 to 4 year period, any benefits or allowances you receive will then become taxable to you. However, if you have children for which your employer pays for school fees, these amounts can still be received tax free beyond the temporary 3 to 4 year period.

So Here’s the Tip:

Complete the TD4 Form if you’re under temporary employment aboard OR apply for non-residence status if you meet the requirements.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 2

  1. Hi Allan,
    First of all great presentation. Thanks

    I plan to move to Egypt for a employer their. I own my house in Canada. My daughter will be in Canadian university and my wife and son will move 2 months later.

    Do I pay tax here? I will be back in Canada in 4 years. Can I send money to Canada without any redflags?
    Regards,
    Santanu

    1. Hello Santanu,
      Thank you for contacting me. Canada has a tax treaty with Egypt. According to the treaty, you will be a resident of the country where you have a permanent home. A permanent home can either be rented or owned. If you have a permanent home in both countries, then you will be a resident of the country where your personal and economic ties are strongest. Residents of Canada must pay tax to the CRA on their worldwide income.

      It appears that you plan on keeping your home in Canada while you live in Egypt. If this is correct, then you must examine all of your ties (personal and economic) to Canada and all of your ties to Egypt, as discussed above. Only after careful examination, can you determine where your ties are strongest.

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