Per diem question?

Question

I've been offered a job in the US by a US company. I'm Canadian and will need to fill out both a US and Canadian tax return. Its a 6 month to a year contract. The job offers to split my salary between a rate of $28/hr and $153/day (7 day) per diem. I know each state allows so much per day in per diem tax free and I'll fall well within that limit. I'll be keeping my house in Canada and will rent in the States while I'm working there. I'm alittle worried about the per diem getting taxed in Canada. It won't show up on my W2 because its tax free in the US. Should I worry about this and save some cash for taxes just in case. I know in Canada its really grey area stuff. What should I do?

Answer 1

Very generally, in the Canada - US Tax Treaty, if a payment isn't taxable in the originating jurisdiction, it isn't taxable in the other.

So, if the payments are not taxable in the US, they aren't taxable in Canada.

That being said, I don't have a copy of the treay handy. But I think you're fine just using the W2 amount to file your Canadian return.

Answer 2

If you are getting the per diem tax free in the US, similar to the Living Out Allowances provided in Alberta, you don't need to worry about claiming it on your Canadian taxes.

Check out the interpretation on special/remote work sites at http://www.cra-arc.gc.ca/E/pub/tp/it91r4/it91r4-e.html

I know various contractors and employees who receive allowances tax free to cover their $3000 a month rent, and they haven't had any issues. Make sure that you do get a copy of your lease, or the prices in the local paper to prove the the amount you received was "reasonable" in case you have to show that it wasn't out of touch.

Make sure that you meet the criteria outlined:
You can exclude from income the value of board and lodging that you provided to an employee who works at a special work site or the allowance the employee received if he or she worked away from home and all of the following conditions were met:

a) the employee must have worked at a special work site where the duties performed were of a temporary nature;

b) the employee maintained at another location a self-contained domestic establishment as his or her principal place of residence:

- that, throughout the period, was available for the employee’s occupancy, and the employee did not rent it to any other person; and

- to which, because of distance, we could not reasonably expect the employee to have returned daily from the special work site; and

c) the board and lodging you provided or the reasonable allowance the employee received must have been for a period of at least 36 hours. This period can include time spent travelling between the employee’s principal place of residence and a special work site. Also, the employee’s duties required him or her to be away from the employee’s principal place of residence or to be at the special work site.

Hope this helps.

Answer 3

don't report per diem in Canada