Personal Services

A U.S. citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below.

Compensation for personal services (Articles XIV, XV, and XVI). Under the treaty, the exemption from Canadian tax for personal service income of a U.S. resident depends on whether the services are performed as an employee (dependent personal services) or as an independent contractor or self-employed individual (independent personal services).

Income U.S. residents receive for the performance of independent personal services in Canada (except as public entertainers) is exempt from Canadian tax if they do not have (or have not had) a fixed base regularly available to them in Canada for the purpose of performing the services. If the U.S. residents have (or had) a fixed base available in Canada, under the treaty they are taxed by Canada only on the income attributable to the fixed base.

Income U.S. residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. If it is more than $10,000 for the year, it is exempt only if:

1. The residents are present in Canada for no more than 183 days during the calendar year, and
2. The income is not borne by a Canadian resident employer or by a permanent establishment or fixed base of an employer in Canada.

For example, assume that you are a U.S. resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. During the calendar year you were physically present in Canada for 179 days and were paid $10,120 (Canadian) for your services. Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was borne by a Canadian employer and was more than $10,000 (Canadian) for the year.

Pay received by a U.S. resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U.S. resident is exempt from Canadian tax.

Public entertainers. The exemptions for either dependent or independent personal services do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who derive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. However, the exemptions do apply, regardless of this $15,000 limit, to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada.

Compensation paid by the U.S. Government (Article XIX). Wages, salaries, and similar income (other than pensions) paid to a U.S. citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax.

The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions.

Students and apprentices (Article XX). A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. The recipient must be or must have been a U.S. resident immediately before visiting Canada.

Previous| First | Next

Publication Index | IRS-Forms Main | Home