Publication 597 |
2001 Tax Year |
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:
- The residents are present in Canada for no more than 183
days during the calendar year, and
- 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.
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