Employment outside Canada
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Employment outside Canada is insurable if:
- the employed person ordinarily resides in Canada (for more information, see The meaning of "ordinarily resident" in Canada)
- it takes place outside Canada, or partly outside Canada for an employer who is resident or has a place of business in Canada
- it would be insurable if it were in Canada
- it is not insurable under the laws of the country in which it takes place
Even if these conditions are met, employment outside Canada is not insurable when it takes place outside Canada or partly outside Canada on a ship that is regularly employed in voyages between ports outside Canada and has been chartered to a person resident outside Canada or has a foreign registry or licence.
The meaning of "ordinarily resident" in Canada
The concept of residence is an important element in determining whether employment outside Canada is insurable and/or pensionable. The basic principle is that a person is "ordinarily resident" in Canada if Canada is the place where the individual, in the settled routine of his or her life, regularly, normally, or customarily lives.
In making a determination of a person's residence status, all of the relevant facts must be considered, including residential ties with Canada and length of time, object, intention, and continuity with respect to stays in Canada and abroad.
Income Tax Folio S5-F1-C1, Determining an Individual's Residence Status, explains the factors considered in determining an individual's residence status.
Determination of residence status
A worker may request a determination of residence status by completing Form NR73, Determination of Residency Status (Leaving Canada), and sending it to the following address:
International tax and non-resident enquiries office
Post Office Box 20000, Station A
Sudbury ON P3A 5C1
The determination of residence status made by the International and Ottawa Tax Services Office will be used for the purposes of the Income Tax Act and will also be considered for the purposes of the Canada Pension Plan and Employment Insurance Act.
If you are a Canadian employer and you hire someone to work for you outside Canada, you should deduct CPP contributions if one of the following applies to you:
- the employee usually reports for work at your place of business in Canada
- the employee is a Canadian resident and is paid from your place of business in Canada
If the employment does not meet either of these conditions, the employment outside Canada is not pensionable. Do not deduct CPP from the employee's remuneration.
You have the option of extending CPP coverage for your employees and deducting contributions from employment outside Canada that is not usually pensionable employment if the conditions on Form CPT8, Application and Undertaking to Cover Employment Outside Canada Under the Canada Pension Plan are met. To extend coverage, fill out Form CPT8, and send two copies to your tax services office.
For more information on when employment outside Canada is pensionable, go to Employment outside Canada.
You have to deduct EI premiums from employment income an employee earns outside or partly outside Canada if all of these conditions apply:
- you, as the employer, reside in Canada or have a place of business in Canada
- the employee usually resides in Canada
- the employment is not insurable in the country where the employment is done
- the employment is not excluded from insurable employment for any other reason
For more information on when employment outside Canada is insurable, go to Employment outside Canada.
Income tax deductions
If an employee carry-out services for you outside Canada, you may have to deduct income tax from that employee's remuneration. The employee may be entitled to a foreign tax credit in Canada for taxes paid in the foreign jurisdiction. If so, the employee can request a letter of authority. If you are not sure if you should deduct income tax, call 1-800-959-5525.
Special deduction rules apply to employment on ships, trains, trucks, and aircraft. To find out more about these rules, send a written request to the CPP/EI Ruling Division of your tax services office.
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