Here’s my situation: I’m a dual citizen of Canada and the US. I moved to the US in 2012 and have been here for over 8 years. I currently work for a US Company. I recently made a request to work remotely full-time from Canada (Toronto, Ontario) to take care of my mom.
Our fast food company opened up two franchise locations in Canada for the first time ever - one in 2019 and one in early 2020. Prior to opening in Canada, there was a lot of concerns around Permanent Establishment for our company in Canada. There were limitations in terms of how many of our US employees could work in Canada at any given time and they had to watch it.
We also have a Canadian ULC for our US company. There’s one employee in that structure that was hired in March 2020.
I was hoping to keep my current role when going remote, in my current department. I guess I’d be really serving our US company and doing US work, not for the Canadian one.
I found out that internally, the US Company HR team doesn’t think this is possible. I’m not sure what the roadblocks are. My boss said he believes it’s bigger than a taxation issue and that it might have something to do with Permanent Establishment. They’re going to external counsel for advice because they’re trying to make this work.
This is completely new ground for my company so none of us know how this works.
I’m trying to learn more about this and was wondering if you had thoughts/advice or knew of people/companies I could talk to about this. I don’t know if this is a tax lawyer, an immigration lawyer or something else?
Thanks for your thoughts! Surely working remote for a US company while being located in Canada could be a possibility? I don’t see why it wouldn’t work?
Permanent establishment: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/permanent-establishment.html
I found out that internally, the US Company HR team doesn’t think this is possible
I’m pretty sure it’s possible to move people around, however your HR may be more concerned about the legal limit of # people that you mentioned. You should get this clarified with them/your boss and know exactly what the issue is, if possible. There could be some implications on reporting requirements etc., the amount of additional paperwork needed.
This is completely new ground for my company so none of us know how this works
My former US employer was a small company who had never done the H1B, GC before; I had to do almost everything myself. In such cases the onus is on you to do required research, with the help of your HR of course and find out the best course.
if you had thoughts/advice or knew of people/companies I could talk to about this
I’m not sure since I’ve never researched this before, but there maybe some PEO-type companies for businesses who consult on trans-border businesses. They would be your best bet, in addition to anyone on this forum who might have experience.
I don’t know if this is a tax lawyer, an immigration lawyer or something else?
Immigration shouldn’t be much of an issue, it’s pretty straightforward, you can find all information on work permits etc on IRCC website. This might be more related to the ULC (Unlimited Liability Corporation) or tax-related obligations. As I said before, it could be a PEO-style consulting company, or a corporate tax lawyer who is willing to advise.
Thanks for the reply. I don’t understand Permanent Establishment. I did look at the link you sent, but it’s too legal for me I just remember it’s something about employees being in Canada/ working a certain amount of hours before the US company would owe tax to Canada… but that’s all I know about it and nothing more than that.
My boss seemed to think it was more complex than just a tax issue, but he wasn’t sure either.
I don’t know if it’s a pro or a con that I’m a dual citizen
I think it’s about multinational company/franchisee/corporate tax thingy, I don’t know either. Better consult with a tax rep.
Keeping aside the dual citizenship, while moving to Canada my wife wanted to continue to work for her employer and the same team. According to her HR she couldn’t be on the US payroll (because here visa status wouldn’t be the same; this might not apply to you) after moving to Canada. The plan was for her US employment to terminate and for her to be hired by the Canadian subsidiary on the next day, the internal systems would still keep tenure etc.
There are many reasons why your employer won’t be keen to keep you on the US payroll and there are also a few reasons that it’s not in your interest either. Some of these have been discussed in other threads on this forum, so I will not delve into details but just lay out some of the bullet points.
From an employers perspective, the main issue is that they wouldn’t be compliant with Canadian Employment laws and standards. They wouldn’t be making your CPP contributions and would be liable to a heavy penalty. Also the employment contracts between US and Canada are quite different with Canada having significantly more employee friendly terms when it comes to termination of employment. So your employer may not be able to part with you at-will.
From your perspective, the main thing to understand is that Employment Insurance (EI) in the US is managed by individual states, so depending on the state of your residence you could be eligible for a particular amount and duration. In Canada EI is federally managed and if you’ve not made contributions as a part of your paycheck you’re not eligible. Since you’re not a resident of any US state and have not made contributions in Canada; you’re screwed.
Since your company already has a presence in Canada, I think the most straightforward path is for your US employment to be terminated and for you to be hired by the Canadian subsidiary. Being a US citizen you are still responsible for paying and filing taxes with IRS irrespective of your country of residence. There is a tax treaty between US and Canada, so you will avoid double taxation. But in simple terms on your income x, you pay
max(Canadian Taxes(x), US Taxes(x)). In practice Canada has higher taxes than US on most moderate to higher income brackets so you won’t have anything to pay to Uncle Sam, but you should do your own due diligence or consult a professional when it comes to taxes.