Do we need Canadian payroll for one employee working in Canada?
Generally yes. Registration, source deductions and reporting follow the place where the work is physically done, not the place the employer sits or the currency the salary is denominated in. One employee working days in Canada is enough to bring a foreign employer inside the Canadian withholding and reporting system for those days. The relief that exists — a waiver, or certification as a qualifying non-resident employer — has to be arranged in advance, which means before the workdays begin rather than at the year end. Social security is a separate track and follows the totalization agreement rather than the treaty, so the two questions are answered separately and can answer differently.
Our employee is exempt under the treaty — must we still withhold?
Yes, unless relief has been obtained for the employer. These are two different obligations resting on two different people. The treaty may relieve the employee from Canadian tax on the employment income; it does not by itself relieve the employer from registering, withholding and reporting on the workdays performed here. The employer's route out is a waiver or certification as a qualifying non-resident employer, arranged in advance. Until one of those is in place the withholding obligation stands, and the employer, not the employee, is the one exposed for what was not withheld. It is a common misunderstanding when an assignment has been arranged quickly.
How do we get relief from Canadian withholding before payroll starts?
By applying for it in advance. There are two routes: a waiver for the particular employee and engagement, and certification as a qualifying non-resident employer, which covers qualifying employees on a continuing basis. Both are arranged before the workdays they relieve, and neither is retroactive in the way employers hope when they discover the obligation late. Choosing between them is a question about how often you send people here: a single assignment usually points to a waiver, a recurring pattern to certification. Either way the application needs the assignment facts — who, where, which days, under whose direction — assembled before it is filed, so the lead time is real.
Does our employee's home social security keep covering them in Canada?
Often, but on a different instrument from the one that governs income tax. Coverage is decided by the totalization agreement between the two countries, not by the tax treaty, and the two can point in different directions on the same facts. Where an agreement applies, a certificate of coverage keeps the employee in the home scheme for a defined assignment and relieves the Canadian contributions that would otherwise be due. Where no agreement applies, contributions generally follow the place of work whatever the treaty says about the income tax. The certificate is obtained in advance, and it is administered separately from any withholding waiver.
We did not withhold on a secondment to Canada — what now?
The obligation and the liability both sit with the employer, which is the uncomfortable part: the amounts that should have been withheld are recoverable from you, along with the consequences of late remittance and late reporting. The work is to establish the facts first — which employees, which workdays, under whose direction, on what remuneration — because the exposure is measured on the days actually worked here. Registration comes next, then the reporting for the periods concerned, then, if the pattern will continue, an application for certification so the same gap does not reopen. Coming forward with the days reconstructed and the remuneration allocated is a materially better position than being asked for them.
How do we split withholding when the employee works in two countries?
On the workdays, documented. Where the obligation follows the place of work, the allocation that matters is the count of days actually worked in each country in the period and the remuneration attributable to them. That means travel records, calendars and assignment letters kept as they happen rather than reconstructed afterwards. Both payrolls should then be run off the same allocation, because the exposure appears when the two report different figures for the same employee and the same period. Social security may not split the same way, since it follows the totalization agreement, so one employee can sit in a single scheme for contributions and be split between two systems for income tax.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
