Employee Benefits in a Tax Free Country

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.

You 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.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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