Case Study: Temporary Assignment Of An Employee From Canada To The United States

This article is the first in a series of four parts that will examine the Canadian and U.S. income tax implications when an employee employed by a Canadian entity is assigned temporarily to work in the U.S. This first article focuses on the importance of the determination of "residency" for personal income tax purposes. Future articles will address personal tax liabilities based on different residency determinations, the concept of tax equalization, corporate payroll matters, and corporate tax matters.

Determination of Canadian residency status

The major determinant of an individual's liability for Canadian tax is the individual's residency status. Individuals are subject to Canadian tax on worldwide income if they are residents of Canada or are deemed to be residents of Canada. Non-residents of Canada generally are taxed only on Canadian source income.