Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Dear XXX
We have received your facsimile transmission of November 2, 1990. Unfortunately it was misdirected.
In response to your question on tax liability, we should note that Canada taxes on the basis of residence, so that a person resident in Canada pays tax on world income. A person not resident in Canada would pay tax upon taxable income earned in Canada. In the case of an individual employee, it would be income from employment in Canada which would be subject to tax. A person carrying on business would be taxable in the income from carrying on business in Canada.
The tax convention with Australia stipulates in Article 7 that the profits of an enterprise of one state shall only be taxable in the other if it carries on business there through a permanent establishment situation therein. The profits are taxed to the extent that they are attributable to that permanent establishment.
Permanent establishment is defined in Article 5, and for most enterprises would mean a place of management, a branch or an office, but can include such other things as a factory or workship.
In regard to employees, it would depend upon location and income. Should employees become resident in Canada, it is irrelevant from where they are paid in so far as taxation in Canada is concerned. A resident would be fully taxable on all sources of income.
If an employee were present for less than 183 days in a year, and either received no more than $3, Canadian or the salary was not attributable to the permanent establishment in Canada, he would not be taxable in Canada. If the employee was present for 183 days or more he would likely be deemed to be a resident of Canada.
In so far as sales tax is concerned, we have a Goods and Services Tax, newly introduced, which is levied at the federal level on sales at 7%. It is essentially a value added tax. Each province, with the exception of Alberta, levies a sales tax in the range of 8% to 12%. Goods that your purchase in Canada will be subject to those taxes and goods which you sell will require collection of those taxes by you. Some purchasers may be exempt, partially or totally.
We hope that these comments are of some assistance to you.
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