Audit Notes
CHAPTER 19
International Taxation in Canada
Problem 1 (Basic)
Andrew English has agreed to play professional soccer with the Toronto Metros of the Canadian Soccer League. Andrew lives in England and will be resident in Canada only for the five months of the soccer season. His three-year contract calls for an annual salary of $35,000. At the time of signing this contract in England, the Metros gave Andrew a signing bonus of $25,000. Andrew's agent was paid $3,000 to represent him in negotiating the contract. Andrew will earn C$100,000 playing soccer in England during the other seven months.
—REQUIRED
Determine Andrew's Canadian income tax obligations. What deductions/credits may he claim against Canadian income?
Solution 1 (Basic)
Andrew will be taxable on taxable income earned in Canada because he will be employed in Canada. This taxable income earned in Canada will be computed under subsection 115(2) and taxable under Part I. He will need to file a Canadian income tax return to report the employment income earned in Canada. He will be entitled to the personal tax credits for CPP and EI. He will not be entitled to personal tax credits available to residents, such as the basic personal amount, since less than 90% of his world income is from a Canadian source.
Employment income for Canadian tax purposes will consist of the $35,000 salary from the Toronto Metros and the $25,000 signing bonus received under subsections 5(1) and 6(3), respectively. The $3,000 paid to the agent is not deductible for Canadian tax purposes, as there is no provision for such a deduction in section 8 of the Income Tax Act. The $100,000 earned in England will not be subject to any Canadian tax.
In addition to federal income taxes, he will also be liable for provincial taxes in Ontario.
Problem 2 (Advanced)
Kresna Dubchuk lives in Kenya and is in the process of selling her Canadian real property, situated in New Brunswick, which has been rented to various tenants over the last 10
International Taxation in Canada
Problem 1 (Basic)
Andrew English has agreed to play professional soccer with the Toronto Metros of the Canadian Soccer League. Andrew lives in England and will be resident in Canada only for the five months of the soccer season. His three-year contract calls for an annual salary of $35,000. At the time of signing this contract in England, the Metros gave Andrew a signing bonus of $25,000. Andrew's agent was paid $3,000 to represent him in negotiating the contract. Andrew will earn C$100,000 playing soccer in England during the other seven months.
—REQUIRED
Determine Andrew's Canadian income tax obligations. What deductions/credits may he claim against Canadian income?
Solution 1 (Basic)
Andrew will be taxable on taxable income earned in Canada because he will be employed in Canada. This taxable income earned in Canada will be computed under subsection 115(2) and taxable under Part I. He will need to file a Canadian income tax return to report the employment income earned in Canada. He will be entitled to the personal tax credits for CPP and EI. He will not be entitled to personal tax credits available to residents, such as the basic personal amount, since less than 90% of his world income is from a Canadian source.
Employment income for Canadian tax purposes will consist of the $35,000 salary from the Toronto Metros and the $25,000 signing bonus received under subsections 5(1) and 6(3), respectively. The $3,000 paid to the agent is not deductible for Canadian tax purposes, as there is no provision for such a deduction in section 8 of the Income Tax Act. The $100,000 earned in England will not be subject to any Canadian tax.
In addition to federal income taxes, he will also be liable for provincial taxes in Ontario.
Problem 2 (Advanced)
Kresna Dubchuk lives in Kenya and is in the process of selling her Canadian real property, situated in New Brunswick, which has been rented to various tenants over the last 10