Here are two situations:
A – Non-Resident Employees
. When you pay an employee in a foreign country – a non-resident – you as the Canadian employer need to deduct Canada Pension Plan contributions in the same way as you would for a resident employee, unless that employee comes from a country that has signed a Social Security Agreement with Canada.
The Social Security Agreements ensure that only one country covers an employee so as to eliminate double taxation if you will. At time of writing there are 53 such agreements. You can find out which countries have agreements with Canada at: http://www.esdc.gc.ca/eng/retirement/agreements/index.shtml
B – Non-Resident Employers
. Did you know that Canada Pension Plan contributions can be optional
for Non-Resident employers? This only applies when the foreign employer hires an employee in Canada, and the foreign employer does not have a place of business (Establishment) in Canada.
The definition according to the CRA: "Establishment in Canada", with respect to an employer means any office, warehouse, factory, oil well, gas well, mine, workshop, farm, timber land, pier, wharf, school, college, club, residence, hotel, motel, restaurant, tavern, bar or any other place or premises in Canada that is owned, leased or licensed by the employer and where the employer or one or more employees works or reports for work or from or at which one or more of their employees are paid.
Even if the foreign employer’s country does not have a social security agreement with Canada, the foreign employer can apply for coverage by completing Form CPT13
, Application for Coverage of Employment in Canada under the Canada Pension Plan by an Employer Resident Outside Canada.
Where the foreign employer does not make application, then the employee will not be eligible for Canada Pension Plan benefits which could have been created during the period of employment with the Foreign employer – something the employee should be made aware of.
- Bill Smyth CPA, FCGA, FCPA
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