Does Germany tax my salary before Canada does?
If the work is done in Germany and a German employer or a German payroll pays it, Germany generally taxes it at source, and it does so through withholding on the payslip. Canada's position then depends on whether you remained a Canadian resident. If you did, Canada taxes the same income and gives credit for the German tax on it, which is the ordinary pattern on the long assignments in this corridor. If your Canadian residence ended, Canada's claim is limited to Canadian-source income. Getting that order the wrong way round is what produces double taxation on paper, because a credit claimed in the wrong country is simply denied.
Are the social security deductions on my German payslip creditable in Canada?
Generally not, and this is the most common error in this corridor. A foreign tax credit is available for foreign income tax. Much of what reduces a German payslip is not income tax: contributions for pension, health, unemployment and long-term care are payments into a benefit system, not taxes on income. They may matter under a social security agreement, and they may be deductible in some circumstances, but they do not belong in the credit calculation. The creditable amount has to be separated out of the payslip line by line before anything is claimed, and the German assessment is the document that settles what it was.
Why do I still owe Canadian tax after paying German tax?
Because the credit is capped. Canada gives credit for foreign tax on that income up to the Canadian tax on the same income, and no further. Where the German tax is the lower of the two, the credit absorbs part of the Canadian liability and the difference is payable here. Two things make that gap wider than people expect. Only the income tax component of the German deductions counts, so the credit is smaller than the total taken off the payslip. And the two countries may measure the income differently, while the credit is computed on Canada's measure of it. The balance is real cash, and it drives instalments in later years.
Which country do I claim the foreign tax credit in?
The country where you are resident for treaty purposes, because that is the country giving relief for the other one's tax. The source country taxes first and does not credit. The residence country taxes and credits. So an outbound Canadian on a German assignment who remains Canadian-resident claims in Canada for the German tax borne. A German national who has become Canadian-resident also claims in Canada, for tax Germany levies on German-source income. If residence changed during the year, the direction of relief can change with it, and each part of the year is treated on its own footing.
My German payslip has several deductions — which one is the income tax?
The wage tax withheld by the employer is the income tax component, and a surcharge computed on it belongs with it. If you are registered with a church, a church levy is collected through the payslip as well. The remaining lines are social insurance contributions, split between you and the employer. For Canadian purposes you need the first group, separated from the second, and you need it on a document Canada will accept: the annual wage statement and, better still, the German assessment, rather than a single month's payslip. Ask for both when the assignment begins. Collecting them years later from a former employer is the hard way.
Is my German pension taxable in Canada if I live here?
Probably, and the more useful question is how it is characterised. German retirement provision comes in several forms — statutory pension, occupational arrangements and private contracts — and they are not all treated the same way once the recipient is Canadian-resident. What has to be settled is which country may tax the payments under the treaty, whether any part of what is paid represents a return of your own contributions, and whether the arrangement itself falls inside Canada's foreign property reporting before anything is ever paid out. Inbound German nationals are well advised to settle this in their first Canadian year rather than in the year the pension starts.
I work remotely from another country for a company back home — who taxes me?
Usually the country you are physically in, because employment income is generally sourced where the work is done, with your residence country taxing it as well if you are resident there and giving credit. Three things follow: your employer may acquire withholding and social security obligations where you sit, a treaty tie-breaker may be needed if both countries call you resident, and a short trip that becomes a long stay can cross a residence threshold nobody was watching. See remote workers and digital nomads.
What is double tax relief and how is it given?
Three mechanisms, and which one you get depends on your residence country's law and the treaty. Exemption leaves the foreign income out of the residence-country base. Credit taxes it and then subtracts the foreign tax, capped at the residence-country tax on that income. Deduction merely reduces taxable income by the foreign tax, and is usually the weakest. Canada and the United States lead with credit; several treaties give exemption for specific income types. See claiming the credit.
