New Challenges for Cross Border Travellers

Transcription

1 New Challenges for Cross Border Travellers 1

2 Presenters Bruce Harwood Immigration Individual Immigration & Family Reunification Saba Naqvi Individual Immigration & Family Reunification Bill Cooper Tax Individual Tax Planning Elizabeth Reid Employment Human Rights Page 2

3 "Your Digital Trail Follows You to the Border The New York Times, Article - May 8, 2014 Page 3

4 Entry and Exit Initiative First phase was implemented in September 2012 Final phase will be implemented June 30, 2014 Ultimately, this is all about increased scrutiny of individuals at Ports of Entry travelling between the US and Canada Page 4

5 Background Examine the Federal Government's Economic Action Plan URL Beyond the Border: A Shared Vision for Perimeter Security and Economic Competitiveness Page 5

6 Background (Cont ) Document issued February 4, 2011 Canada and the US will screen Travellers seeking to enter either country Identify persons who have committed serious crimes or violated Immigration Law and enable Canadian and American officials to make informed decisions on visas and admissibility Page 6

7 Background (Cont ) Canada and the US will use a common approach to screening Share information on watch lists, criminal history records and immigration violations Key Points: 1. There will be an integrated Entry and Exit system 2. To date, Canada has not monitored exits from Canada Page 7

8 Three Phases September 30, 2012 Exchange of data on 3 rd country nationals, Permanent Residents of the US and Canada at no more than 4 Ports of Entry September 30, 2013 Extended the exchange of data on the same group to all common land Ports of Entry June 30, 2014 The exchange of information will extend to all travellers including Canadian and American nationals Page 8

9 Air Travel Canada will demand that airlines submit passenger manifests on outbound flights. Page 9

10 Permanent Residence The ability to monitor exits will impact calculations of physical residence for those Permanent Residents seeking to maintain Permanent Residence status Rule 730 days of physical residence in any 5 year period, unless an exemption applies Exemptions include persons employed outside of Canada by a Canadian business Page 10

11 The Role of NAFTA The Difference Between Business and Work Saba Naqvi

12 Business Travel: Business vs. Work Increasing scrutiny and monitoring means it is critical that the difference between business v. work is understood for cross-border business travel Business travel: When an individual enters a foreign country on behalf of their employer in their home country to engage in business activities such as: Business meetings Conferences and trade shows Negotiating contracts Sales and marketing on behalf of the individual s employer back home Page 12

13 Distinction between Business vs. Work Work travel: When an individual enters a foreign country to: Perform services to a foreign employer for which remuneration is paid The main profit centre is in the foreign country Perform activities which a local in the foreign country could be hired to perform Note: Remuneration is not the determining factor Myths that are incorrect: It is ok to provide services to a US employer as long as you are not paid It is ok to provide services to a US employer as long as you are paid through your Canadian bank account Page 13

14 Work NAFTA Categories If it is determined that an activity falls outside the realm of a business visitor, facilitative options to consider are categories pursuant to the North American Free Trade Agreement (NAFTA) which include: NAFTA Professionals pursuant to Appendix 1603.D.1 Intracompany transferees Exception: After sales service In the event that NAFTA does not apply, other work authorization categories should be canvassed. Page 14

15 Cross-Border Business Travel Tips Familiarize yourself with the rules Know the classification under which you are seeking admission Be prepared to clearly describe the purpose of your visit Be honest Travel with supporting documentation Be mindful of other aspects of the law that relate to your immigration classification such as tax issues and employment issues Page 15

16 Tax Considerations for Frequent US Travellers Bill Cooper

17 US Entry Exit Initiative Alert Perimeter Security and Competitiveness Action Plan effective June 30, 2014 US authorities able to access Canadian data Entry Exit Initiative allows US to count the days Every entry into the US counts as a day - includes business trips, shopping trips, holidays, etc.

18 How Many Days Can You Stay? Six months or 183 days of US presence to have a US "problem? The US "substantial presence test" determines residence for tax purposes You have a substantial presence if: Weighted total of number of days spent in the US over the last three years (determined by formula) equals or exceeds 183 days, and In the US for > than 30 days in current year.

19 How Many Days Can You Stay? (cont ) Weighting formula number of days in US this year plus one third of the number of days in US last year +1/6 of the number of days in US year before last If you spent 183 days in the US in any given year you will meet the substantial presence test If you regularly spend over four months a year in US (122 days), you will be considered US resident

20 Counting US Days Now a Big Deal Any day in the US is counted as a full day that includes those two hours shopping trips Time in transit (less than 24 hours) in the US is excluded if traveling between two other countries Delayed travel days in US due to medical condition excluded if intention was not to stay Other exceptions exist file Form 8843 to claim exclusions

21 Consequences of US Residency If you meet the substantial presence test you're automatically considered a US resident You may be considered a US resident even if you re still a Canadian resident Two options for Canadians with a substantial presence in the US: Claim the "closer connection exception" allowed under the Internal Revenue Code Claim a treaty exemption

22 Closer Connection Requirements Closer Connection Exception requires the filing of Form stating number of days and answer questions to show closer connection with Canada Closer connection factors with Canada : permanent home family personal belongings banking carrying on business drivers license voting

23 Closer Connection Requirements (Cont ) Cannot claim Closer Connection Exception if: Spend more than 183 days in the US in the current year, or Have or have applied for a green card, or Did not file Form 8840 by the due date If can't claim closer connection then dual resident - look to Treaty "time-breaker" rules

24 Canada-US Tiebreaker Rules Canada-US tax treaty will protect from having to pay US tax on your income Subject to US filing requirements under the Internal Revenue Code and related penalties Must file Form 1040 NR

25 Filings, Deadlines and Penalties Form 8840 and Form 1040 NR must be filed by June 15th If taxpayer has employment income subject to US withholding - deadline is April 15 Failure to file Form 8840 by due date could lead to $1000 penalty for each item of income not disclosed Subject to US foreign reporting requirements if failed to file Form 8840 on time

26 Filings, Deadlines and Penalties Meet substantial presence test? File FinCEN Form 114 (FBARs) for bank and investment accounts outside of US if combined balance > US $10,000 (incl RRSPs) on failure to file Form 8840 by due date If combined balance of accounts is > US $250,000 failure to file is up to US $10,000 per year per account FBARs are due by June 30 of following year no extns FBARs not required if 8840 filed and US Income filed on Form 1040NR

27 OVERSTAYING YOUR U.S. WELCOME CAN MAKE LIFE VERY COMPLICATED AND EXPENSIVE!

28 Cross-Border Employees Managing the Global Employment Relationship Elizabeth Reid

29 Introduction Work that is performed in multiple jurisdictions raises numerous issues for employers and employees Both sides want to make sure that they have certainty in terms of: The nature of the travel required The employee s ability to undertake the required travel What law applies to the employment contract Where the employment contract will be disputed if there is a disagreement 29

30 Job Postings Identify which corporation is the employer if there is a corporate group Highlight that cross-border travel by air is a requirement of the position 30

31 The Employment Contract 1. Specify the Employer 2. Employee s Reps and Warranties 3. Choice of Law 4. Choice of Forum 31

32 Specify the Employer Corporate groups may have subsidiaries in many different countries In the absence of any specified employer, if there is any connection to British Columbia, the common employer doctrine under common law and s. 97 of the Employment Standards Act can put them all at risk 32

33 Specify the Employer Minimize the risk to related companies by choosing one entity to be the employer and being consistent Use a formal secondment agreement for short or medium term assignments to another jurisdiction Use a formal transfer agreement for permanent reassignments to another jurisdiction 33

34 Get Those Reps & Warranties! DON T bring the employee on until you have a signed contract in place that: specifies that international travel is required makes the employment conditional on the approval of travel documents, work permits and immigration papers as required addresses tax issues provides for a specific governing law and forum 34

35 Which Law Governs? Your head office is in Russia. Your corporate group includes a Russian company and a Hong Kong company licensed to do business in Texas. There is an operations office in Texas. You hire a Russian citizen to perform work for you in Moscow. He lives in Russia and does all his work there, but your contract with him is run through a British Columbia company of which he is the sole director, owner and shareholder. You pay his compensation to a bank account in British Columbia owned by the B.C. company. 35

36 Choice of Law You can choose the law that will govern the contract BUT the law you choose might not be the only law that governs the contract Most jurisdictions have mandatory laws that apply to persons and activities within their territories regardless of choice-of-law clauses 36

37 Choice of Forum Choice of law and choice of forum are not the same thing Choice of law indicates which law the parties want to use to determine things like whether the contract was formed, whether it was performed properly, and what damages might flow from a breach Choice of forum indicates where the parties want to litigate their dispute 37

38 Three Take-Aways As soon as you ask someone to do work in another jurisdiction, you need to think about cross-border issues. You can use pre-hire advertising and an employment contract to limit the risk of hiring an employee whose ability to travel is restricted. Just because you say that it s a B.C./Washington State/Delaware/Hong Kong contract doesn t mean that is the only law that applies and doesn t mean that is where the contract will be litigated. 38

39 Questions? Page 39

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41 ADDENDUM LOSS OF PERMANENT RESIDENCE As a Canadian Citizen, IRPA guarantees an absolute right of entry. Therefore no matter how much time a Canadian Citizen spends outside of Canada, physical absence from Canada will not prevent reentry. Permanent residents, on the other hand, have a qualified right of reentry because there is a residency obligation. Under s. 28 of IRPA, a permanent resident must comply with a residency obligation with respect to every five year period. A permanent resident complies with the residency obligation with respect to a five year period if the permanent resident is physically present in Canada for 730 days in a five year period. However, there are enumerated circumstances where an individual will be deemed physically present in Canada notwithstanding they cannot meet the physical residence rule. Page 41

42 ADDENDUM LOSS OF PERMANENT RESIDENCE Those circumstances are as follows: a) where the permanent resident is outside Canada accompanying a Canadian citizen who is their spouse or common law partner; b) where the permanent resident is outside Canada employed on a full time basis by a Canadian business or employed by the Federal Public Service or the Public Service of a Province; and c) where the permanent resident is outside Canada accompanying a permanent resident who is their spouse or common law partner or in the case of a child, their parent, and who is employed on a full time basis by a Canadian business or in the Federal Public Service or the Public Service of a Province. Page 42

43 ADDENDUM LOSS OF PERMANENT RESIDENCE In the event that a permanent resident of Canada cannot meet these requirements, an officer may justify the retention of permanent resident status on humanitarian and compassionate grounds. In our view, this last option is arbitrary and fact specific, and would only be used as a last resort. Please note that persons who are reported under the IRPA for loss of permanent resident status have a right of appeal to the Immigration Appeal Division. They may appeal on the basis the decision has breached the rules of natural justice, is wrong in fact, in law, mixed law and fact or on Humanitarian and Compassionate grounds. Page 43

44 ADDENDUM LOSS OF PERMANENT RESIDENCE For your purposes, we will concentrate on the ramifications of being employed outside Canada by a Canadian business, through an examination of the relevant Immigration Regulations as they describe a Canadian business. Under s. 61(1), a Canadian business is: a) a corporation that is incorporated under the laws of Canada or a province and that has an ongoing operation in Canada; b) an enterprise other than a corporation described in (a) that has an ongoing operation in Canada and: (i) is capable of generating revenue and is carried on in anticipation of profit, and (ii) in which a majority of voting or ownership is held by Canadian citizens, permanent residents or a Canadian business as defined in this subsection. c) an organization or enterprise created by the laws of Canada or a province Page 44

45 ADDENDUM LOSS OF PERMANENT RESIDENCE S.61(2) states that a Canadian business does not include a business that serves primarily to allow a permanent resident to comply with a residency obligation while residing outside Canada. In other words, any attempt to satisfy the business exception to the 730 day physical residence rule by creating a corporate entity which exists as a shell only, and does not actually operate in Canada, will not satisfy the test for maintenance of permanent residence. Page 45

46 ADDENDUM LOSS OF PERMANENT RESIDENCE The term employed on a full time basis by a Canadian business or in the Public Service of Canada or a province means, in relation to a permanent resident, that the permanent resident is an employee of, or under contract to provide services to, a Canadian business or the Public Service of Canada or a Province, and is assigned on a full time basis as a term of the employment contract to: a) a position outside Canada; b) an affiliated enterprise outside Canada; or c) a client of the Canadian business or the Public Service outside Canada. Page 46

47 ADDENDUM LOSS OF PERMANENT RESIDENCE The key points to remember are as follows: The Canadian company cannot merely act as a holding company or a shell. There must be an ongoing operation in Canada; There must be a relationship of employee or independent contractor between the permanent resident and Canadian company; and The permanent resident must be assigned on a full time basis as a term of an employment contract with the company to a position or affiliated enterprise or to a client outside Canada., and there must also be a position within the Canadian n company to return to for the employee after his foreign posting ceases. Page 47

48 ADDENDUM LOSS OF PERMANENT RESIDENCE Summary of Residency Requirements for Permanent Resident Purposes: If the nature of a permanent resident's business demands that the permanent resident remain outside of Canada for extended lengths of time such that the permanent resident cannot meet the 730 day physical residence requirement, it is important to take the following steps to meet the business exemption; a) Enter into an employment contract with a Canadian corporate entity; b) The Canadian corporate entity must actively operate and not merely exist as a shell designed to meet Immigration residency requirements. This means preparing and filing corporate tax returns, as well as preparing financial statements that reflect the payment of a salary to the permanent resident as a person employed overseas on a full time basis; Page 48

49 ADDENDUM LOSS OF PERMANENT RESIDENCE c) Under the terms of the employment contract, the salary or remuneration paid should not be a nominal amount. The amount paid should reflect the position and the duties. The position must be full time; d) Document the business activities of the assignment overseas with invoices, receipts, s and contracts; e) Affirm the temporary nature of the assignment; and f) Confirm the availability of employment in Canada at the end of the assignment. Page 49

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