Canada - Special considerations for short-term assignments

Canada - Special considerations

Taxation of international executives

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For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than one year.

Residency rules

Are there special residency considerations for short-term assignments?

An individual is deemed to be a resident of Canada if he stays in Canada for 183 days or more during a tax year, and is not otherwise a resident of Canada (also referred to as the “sojourning” or “183-day” rule).

A deemed resident of Canada may be able to break his residency to Canada under the terms of a tax treaty if he has stronger residential ties to that other country.

If an individual is considered a resident of a country with which Canada has a tax treaty, he/she may be considered a deemed non-resident for taxation purposes.

Payroll considerations

Are there special payroll considerations for short-term assignments?1

Payroll withholdings are to be deducted according to the withholding requirements for regular employees regardless of whether the individual is considered a resident or non-resident for tax purposes in Canada.

Non-residents need to declare their status when completing Form TD1 to determine the correct amount of payroll withholdings. If less than 90 percent of the non-resident’s worldwide income for the relevant calendar year will be included when determining taxable income earned in Canada, the non-resident is not entitled to certain tax credits allowed for residents.

Taxable income

What income will be taxed during short-term assignments?

If the individual on a short-term assignment is considered a deemed resident for taxation purposes, the individual:

  • should file a Canadian income tax return for that tax year
  • must report worldwide income (income from all sources, both inside and outside Canada) for the entire tax year
  • is subject to federal tax and provincial or territorial tax
  • can claim all deductions and non-refundable tax credits that apply to him/her.

If the individual is considered to be a non-resident for taxation purposes, then only income earned from Canadian sources will be subject to Canadian taxes.

An employee who works at a special work site may have certain benefits that can be excluded from his/her income. These benefits include:

  • reasonable allowances for, or the value of, free board and lodging provided by the employer at the special work site
  • reasonable allowances for, or a reimbursement of, transportation expenses received for transportation to and from the employee’s principal place of residence, which must be a self-contained domestic establishment and may be outside Canada.
  • Certain conditions must be met to qualify for excluding benefits based on the special work site rules. These conditions include the following.
    • The individual is required to work at a special work site on a temporary basis 9see commentary below).
    • The individual’s principal place of residence (his/her original home) must be available for his/her use throughout the period and not rented out.
    • The residence must be too far from the special work site for daily commuting.
    • The individual is required to be away from his/her ordinary residence, or at the special work site, for at least 36 hours.

The term "temporary" refers to the duration of duties performed by the individual employee rather than the project as a whole. The length an assignment may last and still qualify for the special work site exclusion is not defined in the Income Tax Act. However, aAs a general rule, duties will be considered by the CRA to be of a temporary nature if it reasonably can be expected, at the assignment’s outset, that they will not provide continuous employment beyond two-three years.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Canada?

Employees should obtain proper work permits and immigration clearance before working in Canada.


1CRA - Non-resident workers

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