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Canada - Special considerations for short-term assignments

Canada - Special considerations

Taxation of international executives


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For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency rules

Are there special residency considerations for short-term assignments?

Individual are deemed under the Act to be residents of Canada for income tax purposes if they are physically present in Canada for 183 days or more during a tax year, and they are not otherwise residents of Canada (also referred to as the “sojourning” or “183-day” rule).

However, if the individuals are primarily residents of another jurisdiction that has a tax treaty with Canada and, under the residency tie-breaker rules in that treaty, the individuals are primarily resident in that other jurisdiction, they will be deemed, under a specific rule in the Act, to be a nonresident of Canada for tax purposes regardless of the sojourning rule described above or the other Canadian domestic residency rules. The Québec Taxation Act does not have a similar rule for Québec provincial tax purposes.

Payroll considerations

Are there special payroll considerations for short-term assignments?1

Employers, whether they are residents or nonresidents of Canada, are required to withhold and remit Canadian taxes with respect to all amounts characterized as employment income earned in Canada, even if those amounts are exempt from Canadian income tax under the provisions of an applicable income tax convention, unless a formal waiver letter has been obtained from the CRA. Identical Québec provincial withholding requirements apply to compensation earned by employees working in the province of Québec unless a formal waiver is obtained from Revenu Québec. Employers who fail to obtain waivers or to withhold taxes from Canadian source compensation are liable to pay those taxes themselves in addition to penalties (which range from 10 percent to 20 percent) and arrears interest that may be assessed on those taxes.

Non-residents need to declare their status when completing Form TD1 “Personal Tax Credits” to determine the correct amount of payroll withholdings. If less than 90 percent of the non-resident’s worldwide income for the relevant calendar year will be included when determining taxable income earned in Canada, the non-resident is not entitled to certain tax credits allowed for residents.

Taxable income

What income will be taxed during short-term assignments?

If the individual on a short-term assignment is considered a deemed resident for taxation purposes because the individual was physically present in Canada for more than 182 days during the calendar year and was unable to claim the befit of the residency tie-breaker rules in a tax treaty between Canada and their home country/jurisdiction, the individual:

  • must file a Canadian income tax return for that tax year
  • must report worldwide income (income from all sources, both inside and outside Canada) for the entire tax year
  • is subject to federal tax and provincial or territorial tax on the above income
  • may claim a foreign tax credit for any taxes paid to a foreign jurisdiction in respect of any income from that jurisdiction that is subject to Canadian tax
  • can claim all deductions and non-refundable tax credits that applies to them.

If the individual is considered to be a non-resident of Canada for taxation purposes, then only employment and self-employment income earned from performing services within Canada, gains realized from the sale of Canadian Taxable Property and any investment income, except for most types of interest, received from Canadian sources will be subject to Canadian taxes.

An employee who works at a special work site may have certain benefits that can be excluded from their income. These benefits include:

  • reasonable allowances for, or the value of, free board and lodging provided by the employer at the special work site
  • reasonable allowances for, or a reimbursement of, transportation expenses received for transportation to and from the employee’s principal place of residence, which must be a self-contained domestic establishment and may be outside Canada.
  • Certain conditions must be met to qualify for excluding benefits based on the special work site rules. These conditions include the following.
    • The individual is required to work at a special work site on a temporary basis (see commentary below).
    • The individual’s principal place of residence (his/her original home) must be available for their use throughout the period and not rented out.
    • The residence must be too far from the special work site for daily commuting.
    • The individual is required to be away from their ordinary residence, or at the special work site, for at least 36 hours.

The term "temporary" refers to the duration of duties performed by the individual employee rather than the project as a whole. The length an assignment may last and still qualify for the special work site exclusion is not defined in the Income Tax Act. However, as a general rule, duties will be considered by the CRA to be of a temporary nature if it reasonably can be expected, at the assignment’s outset that they will not continue beyond 2 or 3 years.

Subsequent extensions of the assignment may still qualify for the special work site exemptions, but this issue should be reviewed each year to assess whether to continue claiming the exemption.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Canada?

Employees should obtain proper work permits and immigration clearance before working in Canada.


All information contained in this publication is summarized by KPMG LLP, the Canadian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on The Income Tax Act (R.S.C., 1985, c.1 , 5th Supp.), The Excise Tax Act (R.S.C., 1985, c. E-15), the Immigration and Refugee Protection Act (S.C. 2001, c.27), and on current information for 2019 regarding personal income tax rates and thresholds, payroll taxes, sales taxes and income tax treaties and social security tax agreements provided by the official websites of the Canada Revenue Agency, the Canadian Department of Finance, Immigration, Refugees and Citizenship Canada, the Ontario Ministry of Finance, the Québec Ministry of Revenue, the British Columbia Department of Finance, the Newfoundland and Labrador Department of Finance, the Nunavut Department of Finance, the Northwest Territories Department of Finance, and the Manitoba Department of Finance.

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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