Paying taxes in two countries? Learn all you need to
If you are a citizen of the United States but employed by a company in Canada, then you are required to pay taxes on your earned income in both countries. This is called double taxation wherein you are required to fulfill both the countries tax liabilities in order to avoid penalties against your income. For this, there is a Canadian Tax Consulting Service you can seek help from.
Types of Taxes
The types of taxes that almost all countries have can be divided into three different categories that are progressive taxes (which is directly levied on the income), regressive taxes (which are subjective) and proportional taxes tax (payable depends on the proportion of your value). Under these three categories, there are the following taxes:
- Income Tax
- Common Tax
- Sales Tax
- Gift Tax
- Property taxes
- Duty on exports and imports, if any
- Service Tax
- Capital Gains Tax
- Corporate Tax
- Inheritance Tax
Strategies to avoid the burden of double taxation
Every time two countries face double taxation, they decide to get into a double taxation agreement together. DTAs are basically joint agreements on paper between two countries that come together and decide different means to reduce or eliminate the tax burdens on residents as well non-residents of their respective countries. The two common methods under such agreements are as follows:
Potential option of exemption
In certain situations, countries decide to exempt the taxpayer from the taxes of the resident country. The general rule is to pay tax in the country where your income has been generated. So, with this exemption action, both the countries involved can benefit from lower barriers to trade and effective steps towards globalization while lowering the tax burden on you.
Use of Foreign Tax Credit (FTC)
This is a form of the unilateral tax relief scheme wherein the tax percent you pay in your resident country gets deducted from the tax percentage you owe to the non-resident country, reducing the payable tax amount greatly.
Seek advice from a Tax Consultation Service
The main purpose of a tax consultation service, regardless of your geographical location, is to thoroughly understand your situation and queries and offer the best solutions for you.
Additionally, the availability of these consulting services in both the US and Canada is impressive. So, for matters related to the US tax systems, you can consult Tax Consultants in New York or New Orleans. And to understand how to work around the corporate taxes in Canada, you can reach out to Corporate Tax Consultants in Toronto.
But in case you have other country-related tax queries, you can always reach out to the International Tax consultants in Toronto as well as New York as their pool of knowledge goes beyond their own country’s tax systems. Additionally, The Accounting & Tax Company is a dedicated firm that helps with such queries.
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