Roberts himself is a seasoned ESL teacher, having worked in 17 different countries. "I wasn't doing it for financial reasons, so I emerged culturally richer." He had his own apartments, dined out frequently, took side trips and explored the arts and culture of the places he lived and worked. "People who were trying to save money were much more frugal. They cooked at home, shared apartments, rode bicycles to work."
The taxman cometh
Here's how it works. If you meet the criteria for non-resident status, you don't pay taxes in Canada during the period you work abroad. Bob Gore, a chartered account in Toronto, says there are two considerations the CRA looks at. The first is time away. You must work outside the country for two years plus a day to be considered a non-resident of Canada. Secondly, you must demonstrate this status by severing your resident ties in Canada. This involves such things as giving up your apartment, putting your furniture in storage and terminating your car lease.
"If you have done these things, it's fairly simple. You file taxes in the country in which you're working, and on the next Canadian tax date you file a return declaring non-resident status here. You pay applicable taxes in the foreign country, but not in Canada provided you've done this and met Revenue Canada's criteria (as noted above)."
Gore says that failing to file a non-resident declaration by the tax deadline date (April 30th) will cause the CRA to look at your status more closely. It will investigate if you're maintaining a residence or car at home or supporting a spouse and children here. "The surest way to be investigated is to file your return declaring non-resident status late," Gore says. The other problem you can encounter is if you return home too soon. If your overseas dream job turns into a nightmare, you could find yourself owing Canadian taxes if you come back before two years.
Whether or not Canada has a tax treaty with the country where you're working doesn't make any difference, Gore says. It's all a matter of staying the required length of time and organizing your affairs in Canada to prove non-residency. "Otherwise, you'll be paying taxes in both countries."
Given that in some countries (such as those in the Middle East) there is no tax, you can emerge with the best of all possible worlds: tax-free status. These countries also have a high rate of pay and, for those who qualify, many additional benefits such as accommodation, health care and even paid vacations.
The banking question
Gore says the rule of thumb for where to keep your money is "if the tax rate is low in the jurisdiction where you're working, keep it there. If it's high, ship the money here and pay the withholding tax -- the worst you'll pay on that is 25 per cent. In a country like Germany, the tax rate is 40 per cent so you'd be better off sending your money home."
Double your income
As far as the CRA is concerned, "they don't care about under-the-table earnings," says Gore. "You're a non-resident for tax purposes, so it's up to the local country."
Durkee advises that where Europe is concerned, it is "next to impossible" to work there with a visa. Schools advise that if you want to work in an EU country, it's best to get there first and then look for a school in need of a teacher with no questions asked.
Finally, as with any employment, you need to negotiate the best deal possible. So research places with health care provided, free or low-cost housing, good rates of pay (and low rates of tax) and one-year renewable contracts. And when your two years is up, don't forget to stay that extra day to satisfy the Canadian taxman.
Diana McLaren is a writer in Toronto.
|-- Posted: Nov. 17, 2006