ipavlic

Hi, I'm new here!

I'll be moving to Canada for a couple of years with an open work permit and I'd like to continue working for my current company. The company has a subsidiary in the USA, and they are open to all options.

I'd like to find the one that is most beneficial for me before they decide for me.

We discussed:

• Contracting
• Establishing a Canadian payroll from the USA company
• Working through an umbrella company
• Starting my own company

From what I've read on IT contracting in Canada > Umbrella company required - British Expats, it might not be possible to work just for them as a contractor because I would be deemed an employee.

It seems that establishing a Canadian payroll is more complicated for them then just paying a company.

I will be living in Ontario and I don't think I can start a company without a Canadian director. Is there a way around that?

I talked with accountants over the phone already, and will definitely continue with that. However, since I don't have a solid grasp on my options I really don't know what to ask.

Can you give me some suggestions on what option would be most beneficial for me, tax-wise?

SchnookoLoly

I don't know all the specifics, but you are correct that you may well be deemed an employee. When we first came to Canada, my husband was hired as a contractor, but switched to permanent (payroll) after a few months, so he'd done some research into when he might be deemed an employee if we were to be audited. This is not an exhaustive list, but it's examples of the types of things that are looked at:
--Do you use your own equipment, or are you using the company's equipment?
--Can someone take over your job tomorrow, or is the position using specialist knowledge?
--Does the project you are working on have a defined end date, or is the job ongoing day-to-day operations? (Contractors generally would be hired for a specific project with a defined end date or end goal - e.g., you will work for us until the new system goes live, then the contract ends)
--Generally (but not in every case) once you pass two years as a contractor you would be considered an actual employee, just simply based on the amount of time you have been working for the company. So if you are planning on staying with your current company for the long haul, a contractor position is probably not going to fly.

In addition, since you already work for the company and would be essentially transferring, I don't think they can reasonably make a claim that you are a contractor, because by definition a contractor is a temporary position.

ipavlic

I understand. The situation is quite specific at the moment — we'll be in Canada for under a year and we'll then be returning home on a one-year break before coming back for a couple of years more.

I would own my own equipment. In reality, the project would not have a defined end date, but we might say that it's time-bounded in this first year. However, I understand the general sentiment of what you're saying though — it's quite unlikely to work for longer periods of time.

Thank you for your response!

Do you perhaps know anything about incorporation options?

SchnookoLoly

NO idea about incorporation, don't know anywhere near enough to even guess.

ipavlic

Thank you anyway!

dbd33

I'm a contractor and, excepting a short stint of actual employment, have been contracting and using subcontractors in Ontario (administratively, physically in various locations) since 1981.

Other "deemed employee" considerations are number of clients and distribution of billing between clients. In this case I understand the numbers to 1 and 100% so there's no case that you're operating a real business; you're an employee if the CRA chooses to say you are.

However, I'm not sure this matters any more. It used to be that the taxman was sticky about this because we long term contractors gained a lot of tax breaks from not being employees. Now there are less tax breaks and it's usual for contracts to run for many years (I had one for ten years, forty hours a week, I know dozens of contractors who've had one contract only for three years or more). Contracting has moved away from being professional consulting, as implied by the conditions described in the previous posts, to being a way of retaining workers on "zero hours" contracts. Most contractors are just employees without benefits.

All the contractors I deal with are incorporated and, since very many are fresh of the boat, it must be possible to incorporate either as yourself or through nominees without having a tie to Ontario. Most, like me, have a numbered company; the name of the company is just the next available number. It you want an actual company name then the trade style becomes
"nnnnnnnn Ont. Inc. o/a Khalistan Trucking" (or similar). My accountant set the companies up at the Ministry of Consumer Affairs (which may now be o/a something else).

Note that the insistence on incorporation is to protect the pimp, if the contractor is deemed to be an employee then the agency is an employer and has been derelict in dealing with various government fees (e.g. CPP and EHT) related to employing people. I expect employers are also supposed to check on the immigration status of workers, something which isn't a concern when dealing with an incorporated entity.

ipavlic

The general conclusion that I'm reading from your post is that it's better for me to just be an employee in this particular situation — as you've said, tax breaks are not as significant anymore.

Would you agree?

dbd33

Yes. I'd look to continue to be an employee of the UK company until, at least, the end of the stint back in the UK. One thing with corporations is that, like many other commitments, they're easier to get into than out of.

Something to consider with the coming and going is using up your "days out of Canada" for the purpose of permanent residence - you could, God forbid, run out of days and have to stay here for a whole winter.

Steve_

The most logical thing to do is to be self-employed if you're a one-off person in Canada.

Read the Wiki: Starting a business : British Expat Wiki

dbd33

It seems to me that this approach is fraught with problems. Assuming the OP is an employee now and so has benefits and is subject to employment legislation he'd be giving up a lot, paid holidays for a start, to be self employed in the same role. He'd need to be paid more to compensate for that. Presumably this venture in Canada is new and has the risk of failure; if it fails and the OP has given up his job in the UK he is, as they say here, ****ed.

When he moves back to the UK, is he to be self-employed there or go back to being an employee? If the latter does he take a pay cut? Is the company flexible enough to deal with the arrangement or do they have an HR department and the bureaucracy that brings? As a self-employed person in Canada he'd be tax resident here, is he to switch that to being tax resident in the UK for the year and then change it back to being tax resident in Canada? That would make him an interesting case to the taxman, and one never wants to be of interest to the taxman anywhere, never mind the taxman in two countries.

Simpler by far to be an employee working abroad for the first stretch, an employee back at home for the second and then to consider the options for the return to Canada, if it happens.

ipavlic

The venture is not new — basically, my spouse is coming to do a PhD in Canada. She'll be taking a break from her program for maternity "leave", and we'll be coming back to Canada after that break.

My company and I are just looking for the best way to continue my employment with them. My position will be put on hold and I'll go back to being an employee when we move back for the maternity. They are quite flexible.

stuabroad

Agree with that completely. Being incorporated is not fun from an administration standpoint. Save yourself the hassle the first time round, enjoy the country and let your parent company worry about the paperwork. Do your research while here and prepare for the second time round.

singingman

Forget IT Contracting in Canada it pretty much doesn't exist. Not like London.

Toronto is the best bet for IT jobs

dbd33

Oh. I believe I've been a contract programmer in Canada since the mid-80s. I believe that, at one time, I was pimping around a hundred contract programmers. I believe that, just now, I have a contract in a building with around a hundred other contractors. I do occasional contract work in London where the rates are higher (we just charge the usual dollar price but in pounds) but the terms and conditions are much the same.

I think there's a huge market for contractors in Canada, particularly in southern Ontario. In fact, I'd say that the position of permanent employee in the computer department of a company in another business than computing, is an endangered one.

singingman

Maybe if your a programmer but any other field it doesnt exist. Also the fact that you just say you hire your buddies basically means that what I thought was true is true. Its not about the skills you have in Canada its about who you know. Making for a market that promotes untalented individuals over the more skilled and experienced.