Global Watch Canadian Federal 2012 Tax Budget International Assignment Services

www.pwc.com
Global Watch
International Assignment Services
April 4, 2012
Canada
Canadian Federal 2012 Tax Budget
An International
Assignment Services
(IAS) Network
Publication.
This article is intended
to highlight general
issues and is not a
comprehensive
statement of the topic
or the laws of that
country.
In Brief
On March 29, 2012, the Federal
Minister of Finance, Jim Flaherty,
presented the majority government’s
budget.
From
a
personal
tax
perspective, the budget did not include
many changes to personal income tax
and did not change the income tax
rates. However, it proposes to eliminate
the Overseas Employment Tax Credit
(“OETC”). This may have a negative
effect on the cost and attraction of
Canadians in some industries to take
outbound assignments.
What is the OETC
The OETC is a special tax credit
available to an individual resident in
Canada working abroad for six
consecutive months or longer in
connection
with
a
resource,
construction, installation, agricultural
or engineering project.
It could
effectively eliminate 80% of the
Canadian income tax on the first
C$100,000 of salary, wages and other
remuneration
earned
overseas,
allowing a tax savings upwards of
C$30,000 for qualified individuals.
The Proposed Changes
to the OETC
Commencing 2013, the Overseas
Employment Tax Credit (OETC) will be
phasing out over four years. During the
phase-out period the factor (currently
80%) applied to an employee’s
qualifying foreign employment income
in determining the OETC will be
reduced to 60% for 2013, 40% for 2014,
20% for 2015 and nil for 2016 and
thereafter. Note that the phase out
rules will not apply to qualifying foreign
employment income earned by an
employee in connection with a project
or activity to which the employee’s
employer had committed in writing
before March 29, 2012.
In this circumstance the factor will
remain 80% until 2016, and subsequent
years when it will be nil.
The Bottom Line
This change may significantly affect the
remuneration costs for those Canadian
companies that are in the resource and
construction industries with overseas
projects. The large tax advantage of
claiming the OETC was often used to
attract skilled employees to projects in
overseas locations where it was difficult
to get qualified labour at reasonable
remuneration. The elimination of this
credit may force employers to increase
the pay scale for these positions.
For more information, please do not hesitate to contact:
Diane Akelaitis
(604) 806-7011
[email protected]
Chantal Farrell-Carter (514) 205-5370
[email protected]
Anne Kestenbaum
(416)365-8169
[email protected]
Dave Peters
(403) 509-7481
[email protected]
Victor Romberg
(416) 365-2704
[email protected]
This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
SOLICITATION
© 2012 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP, a Delaware
limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a
separate legal entity.
PwC
Global Watch
2