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Assignment Tax Calendar 2005/2006: Key Deadlines, Action Steps and Helpful Hints for International Assignment Managers and Assigned Employees with Canadian Companies
CompassGUIDES - Dec 2005
1.0 INTRODUCTION
Our CompassGUIDES™ International Assignment Tax Calendar – 2005 / 2006 assists both the International Assignment Program Manager and the assigned employees of Canadian Companies to meet key 2005 / 2006 Canadian tax reporting deadlines. Due to the increasing number of Canadian companies sending employees to the United States, we have also included US deadlines as well. In recent years, both Canada Revenue Agency (“CRA”), the International Revenue Service (“IRS”) in the United States, and tax authorities in many host countries have sharply increased the number and severity of penalties for failure to meet reporting deadlines. At CompassGUIDES™, we work with Canadian companies to minimize compliance costs and implement assignment tax programs. Should you have any questions, please call our office or visit our online International Assignment Planning Helpdesk.
2.0 INCOME TAX CALENDAR FOR INTERNATIONAL ASSIGNMENT MANAGERS WITH CANADIAN COMPANIES - 2005/2006
| DATE |
ACTION STEP |
HELPFUL HINTS |
| Sept 30, 2005 |
Review levels of current year tax withholdings to determine if withholdings are sufficient. |
Some employees may become subject to Alternative Minimum Tax (“AMT”) on income earned in the latter part of the year and withholdings may need to be increased for the remainder of 2005. |
| Sept 30, 2005 |
Where employees are working in the United States, ensure that the appropriate tax withholding are sent to the IRS (and States, if applicable). |
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Review remuneration earned by expatriate employees to determine if taxable benefits should be included in income for the year. |
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The CRA lately seems to be interested in taxable benefits. Companies should re-check if all relevant benefits will be included for 2005. |
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Ensure all employees working in the United States have obtained Social Security Numbers (“SSN’s”). |
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It is becoming a more difficult process to obtain US Social Security Numbers. |
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Seek approvals from the CRA for reductions of levels of tax withholdings for 2006. |
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Approval should be obtained before paying out salaries for January, 2006. Our CompassTax publications can help with this process.
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Send reminders to expatriate employees to ensure they are maintaining a record of days worked outside Canada, as this will be needed for completion of Form T626 Overseas Employment Tax Credit. |
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It is often difficult to have expatriate employees keep such a record. Record-keeping is simplified with CompassTax’s Client Forms. |
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Obtain Form TD1 2004 Personal Tax Credits Return from expatriate employees, where applicable. |
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Companies with expatriate employees should request this form annually as a matter of course, as the personal circumstances of expatriate employees seem to change more often than that of domestic employees. |
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Obtain Form TD4 Declaration of Exemption – Employment at a Special Work Site from employees, where applicable. |
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Companies should obtain this form each year, again because of potential changes in circumstances. |
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Adjust payroll system to reflect lower levels of new year withholdings for those expatriates who will be claiming the OETC. |
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Once CRA approval to lower levels of withholdings has been obtained, the level of withholdings should be checked to comply with the method set out in the CRA approval letter. |
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Consider Implementing a formal Assignment Tax Program (ATP ) for 2006 |
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ATP’s enable your assigned employees to be more productive, motivated and retained if they know their tax filings are taken care of by CompassTAX. |
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Review current year (2006) eligibility for the OETC, paying attention to all the relevant conditions. |
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Eligibility conditions are many in number and subtle. For assistance, please contact our office. |
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Last day for employees to file or revoke designations to defer benefits or stock options received in 2005. |
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Last day for employees to pay interest on loans from employer to reduce interest benefit. |
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Determine which employees are eligible to receive Form T626 OETC for 2005 and to claim the tax credit in their 2005 income tax return. |
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This determination should not be taken lightly. At CompassTax, we assist companies with reviews of employee eligibility. |
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| Jan. 31, 2006 |
Obtain evidence of foreign tax paid by / on behalf of expatriate employees. Review 2005 income analysis and ensure proper information will appear on T4 supplementaries. |
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Due to non-calendar tax year-ends in some foreign countries and more leisurely annual tax reporting deadlines, this information can often be difficult to obtain on a timely basis. |
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Provide 2005 Expatriate Employee Remuneration information. |
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For expatriate employees working outside Canada, this information may consist of:
- T4 Supplementary
- Form T626 Overseas Employment Tax Credit
- Foreign tax returns/receipts
- T2200 Declaration of Conditions & Employment
- CompassTAX Rotational Employee Report - Days Worked Outside Home Country
- Details of Assignment Tax Program (if applicable)
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File Form T4A-NR for foreign-based consultants working temporarily in Canada. |
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Filing deadline for NR4 summary and suppplementaries for payments to non-residents |
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3.0 INCOME TAX REPORTING CALENDAR FOR INTERNATIONALLY-ASIGNED EMPLOYEES WITH CANADIAN COMPANIES 2005/2006
| DATE |
ACTION STEP |
HELPFUL HINTS |
| Nov. 30, 2005 |
If the level of 2006 withholdings needs to be reduced for the impact of foreign tax paid, ensure your employer has sought approval from the CRA. |
Reduced withholding levels means more net income in your pocket and you have the use of those funds in 2006. |
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If you are a non-resident with Canadian rental income, ensure your property manager has you sign Form NR6 and submits this form to the CRA. |
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We find that many property managers do not understand their tax reporting responsibilities or are unwilling to handle the reporting. |
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Final Canadian quarterly installment of tax due. |
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Final trading day on which to settle a trade or a Canadian stock exchange for 2005. |
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Three trading days required to settle a trade. |
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Final payment date for a 2005 tax deduction or credit for a variety of payments such as alimony, donations, tuition fees etc. |
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Taxpayers normally report on a ‘cash’ basis. |
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Review what tax information you will need to include with your Canadian tax return. |
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Ensure tax receipts will be sent to the correct address, and advise employers, banks, etc. |
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If you are a non-resident with Canadian rental income, ensure your property manager has received approval from the CRA to reduce the level of your tax withheld from rental income. |
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Form NR6 must have been filed by the property manager well in advance in order to receive the necessary approval by this date. See Action Step for Dec 1, 2005. |
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Stock option benefits – last day for employees to file or revoke designations to defer benefits on options exercised in 2005. |
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Provide a detailed record to your Canadian employer of all days worked outside Canada. |
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We provide an organizer to assignees to help them track days worked outside of Canada. |
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Make the fourth payment of your 2005 US estimated tax if applicable. |
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At CompassTAX we can help you with your US filings. |
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Pay interest on loans from employer to reduce interest benefit |
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If you worked in the US in 2005 your employer should provide you with Form W-2. |
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Last day to reimburse employer for costs to reduce operating cost benefit. |
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Last day to reimburse employer for costs to reduce operating cost benefit of employer – provided automobile. |
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If you were exempt from US withholding for 2005, file a new form W-4 by today to continue your exemption for 2006. |
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Contact us at CompassTAX for assistance in determining exemption. |
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Regular 2005 contribution deadline and Home Buyer’s Plan repayments due this day. |
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First 2006 quarterly installment of Canadian income tax due. |
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If you are a non-resident with Canadian rental income, your property manager should file Form NR4 by this date and give you copies. |
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Property managers are often not familiar with NR4 filing procedures or the need to do so. Contact our office if you require assistance. |
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US individual tax returns due by today (an extension may be available). Final 2005 and 2006 estimated tax payments for individuals due today. |
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Last day to get automotive 4-month extension on your taxes. Tax owing is however due. Last day to get additional two month extension. |
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Canadian personal tax returns due today, except for returns where individual or spouse had business income (June 15 due date). |
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International assignees with significant ties to Canada (and therefore considered residents of Canada) are taxed on their foreign income. |
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Canadian tax returns due today where individual or spouse had business income. |
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Second 2006 quarterly installment of Canadian income tax due. |
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Tax return for non-resident reporting of rental income due today. |
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Third 2006 quarterly installment of Canadian income tax due. |
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4.0 CONTACT US
At CompassTAX™, we develop cost-effective assignment tax programs for Canadian companies sending employees around the world and bringing international consultant/employee expertise to their Canadian projects. These Assignment Tax Programs provide detailed advanced tax planning, including policies, procedures and employment contracts, which serve to minimize costs and mitigate any risk of litigation. CompassTAX™ also offers clients with international assignees pre-departure and re-entry tax planning with a view to minimizing tax and providing experienced tax representation with the Canada Revenue Agency (CRA). CompassTAX™ specializes in all areas of cross-border taxation for consultants/employees coming to Canada temporarily, Canadians moving back to Canada, and individuals living outside Canada with Canadian business ties.
Our International Assignment Planning HelpDesk is your quick link to answers to international assignment tax planning questions.
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Tel: (403) 531-2200
Fax: (403) 263-1826
Web: www.compasstax.ca
Suite 600, 1333 8th Street SW
Calgary, Alberta Canada T2R 1M6
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Tel: (403) 531-2200
Fax: (403) 263-1826
Web: www.compassguides.ca
Suite 600, 1333 8th Street SW
Calgary, Alberta Canada T2R 1M6
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