Q: Can Canadians get exempt from paying taxes in either country?
A: Not without claiming non-residency for tax purposes (more on this later). As a resident of Canada for tax purposes, you must pay both Korean and Canadian taxes. However, because there's a double tax treaty between Canada and Korea, the Government of Canada will give you a tax break.
Here's a quick example (doesn't take into account any tax credits and deduction you may receive to lower your tax liability
, both in Korea and Canada):
Tax rate Korea: 15%
Tax rate Canada: 15%
Korean income: $20,000 CAD (after converting)
Taxes paid to Korean government: $20,000*15%= $3,000
The Cdn government will use the amount you paid to the Korean government to reduce your taxable income in Canada.
Thus, Taxable income in Canada = $20,000 - $3,000
(from above) = $17,000
Canadian tax liability = $17,000*15% = $2,550Q: Really? There is no way to avoid paying Korean or Canadian taxes?
A: You gotta pay Korean taxes--period.
You can avoid paying Canadian taxes if you call
the Canada Revenue Agency (CRA hereafter) and tell them you want to be a non-resident of Canada for tax purposes. However, whether you can claim non-residency depends on your residential ties to Canada:
"You are a non-resident for tax purposes if you:
normally, customarily, or routinely live in another country and are not considered a resident of Canada; or
do not have significant residential ties in Canada; and
you live outside Canada throughout the tax year; or
you stay in Canada for less than 183 days in the tax year."Residential ties include:
-a home in Canada;
-a spouse or common-law partner (see the definition in the General Income Tax and Benefit Guide) or dependants in Canada;
-personal property in Canada, such as a car or furniture;
-social ties in Canada; and
-economic ties in Canada
Other ties include the following:
a Canadian driver's licence;
Canadian bank accounts or credit cards; and
health insurance with a Canadian province or territory 
The main ties are the following: (1) spouse; (2) house ; property and/or car ownership under your name; and/or (3) investments (including savings accounts, not chequeing).
If you don't any of the those main ties, it's safe to assume you can claim to be a non-resident. If you wanna be completely safe, you can submit form IT221R3-CONSOLID Determination of an Individual's Residence Status
to the CRA and they will determine whether you can claim non-residency .
Note that if you self-claim to be a non-resident, but the CRA later determines you were actually a resident, they can retroactively make your claim invalid, meaning you will have to pay taxes (plus interest) for the year(s) you claimed to be a non-resident,Q: Do I have file my returns here?
A: Yes, whether you are a resident or not. Becoming a non-resident only means you don;t pay Canadian tax, but you still have to file
. You can simply wait until you return to Canada and file for the year(s) you missed, but the problem with this you will have to pay interest if you owe the CRA money and it determines you were actually a resident (and you self-claimed to be a non-resident).
Of course, with NETFILE (filing online), filing in Korea isn't much hassle. However,non-residents cannot use NETFILE.Q: How do I report my Korea income on my return?
A: Ideally, ask your employer for a year-end pay stab and keep it just in case the CRA asks for it. In Korean, it's "원어민교사 연말 급여지급내역," meaning "year-end foreign teacher's salary payments." Then use the exchange rate to convert it to Canadian dollars. I doubt the CRA will be picky when it comes to the exchange rate, but if you're concerned and wanna be precise, you can look up historical rates on the Bank of Canada's web site to get a yearly average (you might have to calculate it yourself).
I know some employers (especially hagwons) do not give pay stubs. In this case, just estimate. If the CRA asks for proof, I'm sure they will understand if you tell them your employer was disorganized (or whatever) and didn't provide pay stubs.Q: I know some people who are residents, but when they filed their returns for the years they were in Korea, they reported no income.
A: Tax evasion is illegal. While I will admit it's highly unlikely the CRA will find out if you only do it for one year
, it's illegal nevertheless.
The risk increases dramatically if you're in Korea for several years and file paper returns
in Korea. The CRA will may notice that you keep sending returns from Korea and will suspect that you are earning income there. Filing via NETFILE is less suspicious.
The greatest risk is when you're away for several years and decide to to file all your returns when you return to Canada and report no income. Q: Came to Korea in '10. Returned to Canada for a year, and now I'm back, and probably for a long time. Can I apply for non-residency retroactively (i.e., my first year in Korea in '10?
A: Yes. Again, if you self-claim this, remember the CRA can make your claim invalid.Q: Do I lose my health coverage if I declare non-residency?
A: If you're out of Canada for more than three months, you lose your coverage whether you're a resident or not
. You will have to apply for it if you return to Canada. Q: Will I lose any other privileges if I declare non-residency?
1) GST/HST credit available in certain provinces. In the end, however, you're likely
better off declaring non-residency.
Ineligible for Government grants and scholarship; in Ontario, you need to be a resident of the province for the last 12 months to be eligible. This will affect you if you intend to go back to school.References