Easing short-term tax pain on U.S. workers

Importing talent from south of the border can be expensive, but close attention to tax rules can ease the burden
By Tim Verbic
|CHRR, Report on Payroll|Last Updated: 09/07/2006

Canadian organizations are becoming increasingly dependent upon foreign workers to help them remain competitive in the global marketplace. For example, petroleum companies in Alberta are importing professional white collar and skilled workers from the United States and other countries to address the boom in extraction and related development. As some of Canada’s top talent emigrates in search of global experience, employers in Canada are seeking the expertise of foreign workers to meet their immediate and future business development needs.

Importing employee talent to Canada can be an expensive alternative for an employer, especially in the absence of advanced tax planning and special attention to the tax rules on both sides of the border. This article is concerned only with such instances where the transferee maintains residential ties to the U.S. Significant additional complications arise when residential ties are established in Canada, and should be discussed with an income tax advisor.

The vast majority of U.S. employees that arrive in Canada are here on a short-term assignment basis — typically considered to last less than two years. In order to protect the short-term assignee from loss of home-country employee benefits, it is important to offer continuation of the employee’s U.S. payroll benefits and social security coverage while complying with Canadian laws. Also, since the family home may continue to be maintained, and the family may not relocate with the employee, temporary housing may be offered by the employer. These benefits, if planned properly, can be provided tax effectively.