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Tax consequences for multinationals sending employees to Canada

US-and-Canada-flag-puzzle

Multinational corporations sending employees to foreign countries on business must be alert to the legal responsibilities that can arise from such transfers. Dentons partner Emmanuel Sala clarifies the Canadian and Quebec fiscal rules and mechanisms that govern US parent corporations with US employees employed in Canada. His article covers both Canadian federal and Quebec provincial payroll tax obligations. Regarding Canadian federal tax obligations, Emmanuel notes that if a US parent corporation is determined to have a “permanent establishment” (PE) in Canada, business profits attributable to the PE would be subject to Canadian federal income tax and various forms of tax relief would become unavailable. He provides an in-depth review of the most common situations that might give rise to a PE determination, including fixed-base, agency, construction-site and service. Emmanuel also discusses the possibility of implementing secondment arrangements to mitigate the risk of a PE determination.

Click to read article.

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Tax consequences for multinationals sending employees to Canada

Dual nationality may be an option for Brits who live or work in the EU

EU passport GBThe German vice chancellor has called on certain EU countries (including Italy and France) to offer young British citizens who live or work in those countries the opportunity to apply for dual nationality. This follows the speculation and confusion after the UK referendum to leave the European Union. This would allow those British citizens a chance to remain EU citizens.

Some countries (EU and otherwise) permit dual nationality, sometimes under limited circumstances, while others do not. France allows naturalization without renouncing foreign citizenship, as does Italy. The UK, US and Germany, on the other hand, generally does not and only fairly recent created an exception that requires German citizens to apply for a waiver before naturalizing in another country.

Recent opinion polls showed that more than 70 percent of UK young citizens voted to remain in the EU and there is increasing concern from UK citizens about their long-term status in other EU countries. Many fear the UK’s exit from the EU will remove the existing free movement of people, or make this ability limited with excessively burdensome and restrictive procedures. Therefore, it is likely that many Britons will want to explore this alternative and hold on to the opportunity to live and work in the other 27 countries that form the EU.

Residents of Germany can apply for citizenship after eights years on the condition that they pass a German language skills test and a naturalization assessment (among other things). Further, German law requires non-EU citizens to give up their existing nationality when applying for German citizenship. However, the German ministry has suggested that it would like to allow British individuals to hold on to their UK citizenship even if they apply for naturalization after the UK subsequently leaves the EU.

For all of the positive aspects of dual nationality giving the right to live and work in an EU country, it is worth pointing out that there are obligations that may accompany taking on another country’s citizenship. Some EU countries have mandatory military service that would probably be more likely to impact the “young” Brits. And while tangential to the topic of dual citizenship, it should be noted that many EU countries have exit taxes on unrealized capital gains that might be imposed if an individual changes their residence for tax purposes or moves taxable assets from one country to another.

For now, while leaders negotiate the exit strategy, the UK remains part of the EU and British citizens still have full rights to work or study in other EU countries. Only time will tell whether they will continue to have this opportunity in the post-Brexit world.

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Dual nationality may be an option for Brits who live or work in the EU

Changes to Canadian Work Permit Categories for Television/Film and Performing Arts

Film photo

The Canadian Department of Immigration, Refugee and Citizenship Canada (“IRCC”) has announced two new Labour Market Impact Assessment (LMIA) exempt work permit categories for foreign nationals working in television and film or the performing arts.

Starting on February 17, 2016, the two new LMIA exemption categories will allow for certain foreign nationals to apply for a work permit without first having to apply to the Temporary Foreign Worker program for an LMIA. These work permit categories will now be governed under the International Mobility Program.

Television and Film (C14 Exemption – Significant Benefit)

Foreign nationals working in the TV and Film industry who hold positions that are essential to a TV or film production may be eligible to apply for a work permit directly at the port of entry (for TRV exempt nationals) or to a Canadian visa office abroad without first obtaining an LMIA. This new exemption will allow Canada to continue to attract high value TV and film productions to Canada, creating significant economic benefits and opportunities for Canadians. This exemption will apply to both Canadian productions and foreign productions.

To qualify, the positions must be considered to be “high wage” and are often unionized. In British Columbia a high wage position is considered to be an amount above $22.00 /hour and in Ontario, high wage is an amount over $21.15. See all provincial wage thresholds at: http://www.esdc.gc.ca/en/foreign_workers/hire/median_wage/index.page

Employers will be required to file an “Offer of Employment for LMIA Exempt Work Permits” with IRCC and pay a compliance fee of $230 before the work permit application is made. The Offer of Employment must be filed in advance and proof of filing will be required for the foreign national to make their work permit application.

To support the work permit application, the production must provide a support letter outlining some general information in relation to the production, a statement that the foreign worker and the position to be held by the foreign worker is essential to the production, and details on the economic benefit of the production to Canada (including the number of Canadians created by the production, the estimate budget to be spent in Canada and a statement confirming that the production satisfies the criteria for federal or provincial tax credits or is the recipient of federal or provincial funding). The production must also provide a letter of support from the applicable union.

For further details, please see: http://www.cic.gc.ca/english/resources/tools/temp/work/opinion/imp-c14.asp

Performing Arts (C23 – Reciprocal Employment)

Foreign nationals working as key creative personnel and talent associated with non-profit performing arts organizations involved in theater, opera, orchestras, and dance may be eligible for this LMIA exempt work permit. This new exemption will allow for foreign nationals to apply for work permits in the performing arts if they can demonstrate reciprocal opportunities for Canadians outside of Canada in the same discipline. A one to one ratio of reciprocity does not have to be proven, rather a general statement affirming that reciprocity has been known to exist with an explanation of how the organization plans to allow for opportunities for Canadians outside of Canada.

Employers will be required to file an “Offer of Employment for LMIA Exempt Work Permits” with IRCC and pay a compliance fee of $230 before the work permit application is made. The Offer of Employment must be filed in advance and proof of filing will be required for the foreign national to make their work permit application.

To support the work permit application, the performing arts organization will be required to provide a support letter outlining the reciprocity for Canadians abroad in the specific discipline, a copy of the job offer to the foreign national, and confirmation of the organization’s funding support from the Canadian government or applicable parliamentary council for the arts.

For further details on the performing arts LMIA exemption and reciprocity letters, please see: http://www.cic.gc.ca/english/resources/tools/temp/work/opinion/imp-c23.asp

Foreign Funded Commercials Filmed in Canada – Business Visitor

Another change that IRCC announced this week applies to essential personnel (including producers, directors, actors, technicians, etc.) entering Canada to shoot a foreign funded commercial or advertisement in Canada. This exemption falls under the Business Visitor category and therefore does not require an application for a work permit. The entry as a Business Visitor for filming commercials (or print advertising) is limited for entry to Canada for a very short duration (under 2 weeks).

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Changes to Canadian Work Permit Categories for Television/Film and Performing Arts

New year, no passport—New provisions in Highway Bill revoke US passports for unpaid taxes

no passport

Buried in the 1,300 pages of last Friday’s new five-year, $305 billion Highway Bill is a provision that will affect more than transportation or infrastructure—a tax provision would allow the State Department to revoke or deny passports and international travel for tax debts of $50,000 or more where there is non-payment. Those affected will need to litigate in the Tax Court or District Court to get their privilege back. There is the potential for this to be fraught with problems—for example, in cases were federal tax liens are erroneously issued and the like. For the millions of US citizens living abroad, this could potentially restrict their freedom of movement (to say nothing of putting a crimp in their holiday travel plans).

New year, no passport—New provisions in Highway Bill revoke US passports for unpaid taxes

Global Employment Lawyer – Issue 3

Summer 2015

Global Employment Lawyer

The third edition of the Global Employment Lawyer provides you with practical content to keep you current on developments that effect your business goals around the globe. Our lawyers look at questions of religious accommodation as well as the unpleasant income tax consequences of temporary visas in the US; managing “difficult employees” in Canada; reducing workforce due to redundancies in China; imminent changes to Polish labor law; recruitment of non-resident foreign workers in Angola; employing foreign workers in Israel and whistleblowing in the UK.

Read more

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Global Employment Lawyer – Issue 3

Global Mobility Effectiveness Survey

Ernst & Young released their 2013 report on the increasingly critical role of global mobility functions at multinational firms.  The report discusses the importance of compliance control to manage risks related to payroll tax and social security compliance, with 64% of companies reporting they incurred avoidable penalties for noncompliance and only 30% reporting they have a system in place to track business travelers.

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Global Mobility Effectiveness Survey