A1
The European Union has implemented regulations with respect to the coordination of social security systems within the EU, Norway, Iceland, Liechtenstein and Switzerland. Form A1 is a statement on the applicable social security legislation.
Artist
An artist, for purposes of a tax treaty, refers to a performing artist and includes stage performers, actors, musicians and others where an entertainment character is present in the appearance. Artists do not generally include conference speakers or support staff. Additional information is available
here.
Bona Fide Residence Test
A US citizen whose tax home is in a foreign country and who generally makes her/his home in a foreign country for an extended, indefinite period of time which includes a full tax year (January 1 to December 31 for calendar year filers) will generally meet this test. Green card holders may also qualify under the bona fide residence test if they are citizens of a country that has an income tax treaty in effect with the US.
Canada Pension Plan
The Canadian Pension Plan ("CPP") is a Canadian Government program that provides pensions and benefits when contributors retire, become disabled, or die. Additional information is available
here.
Canadian Tax Resident
Canadian residency is not defined by law rather it is determined on a case by case basis taking into consideration the facts and circumstances of an individual’s situation. Elements that are considered in determining tax residency include: residential ties maintained in Canada, the types of ties established in a foreign country and the purpose and permanence of stays outside of Canada.
Certificate of Coverage
A certificate of coverage is an official document issued by a competent authority of a country / jurisdiction in order to confirm that an individual is covered by a social security agreement between his/her home country and the country where the individual will temporarily work, either as an employee or as an independent contractor.
CSST
The Commission de la Santé et de la Sécurité du Travail of Quebec is the organization in charge of the management and the application the laws about health and security at work in the province of Quebec. Additional information is available
here.
Dependent Personal Services
Income earned as an employee. Employment income.
Domestic law
The internal law of a country defined in opposition to international law.
Employee
An individual is considered an employee when an employer-employee relationship or contract of service exists between the individual and the payer. Whether or not an individual is an independent contractor or an employee is determined by evaluating the facts of the working relationship.
Employer (for Quebec social security purposes)
For most of the Quebec social security laws, the employer is defined as the payer of the remuneration.
Employer Health Tax
The Employer Health Tax ("EHT") is an Ontario payroll tax on remuneration paid to employees and former employees, which finances the health care system in Ontario. Additional information is available
here.
Employment Insurance
Employment Insurance ("EI") is a Canadian program which provides temporary financial support to unemployed Canadians. EI can also support individual and family with other type of benefits such as: maternity & parental benefits, sickness benefits, compassionate care benefits, etc. Additional information is available
here.
Establishment
A concept in Canadian and Quebec tax law that is the basis for determining which provincial tax rates and social charges should be withheld from an employee’s pay.
Exemption and exemption with progression
A mechanism to avoid double taxation. Additional information is available
here.
Foreign Bank Account Reporting ("FBAR")
The US requires that residents of the US report details of all foreign investment accounts if the sum of the annual maximum balances determined for each foreign account exceeds US$ 10,000. Reporting is done annually
online.
Foreign Earned Income Exclusion
A US citizen or green card holder may exclude foreign earned income up to a certain amount per year if the taxpayer qualifies under the Bona Fide Residence test or the Physical Presence test.
Foreign Tax Credit
A mechanism to avoid double taxation. Additional information is available
here.
Gross-up
A gross-up represents the taxable value of personal income taxes and/or social charges borne by the employer on behalf of the employee to ensure the employee receives an agreed upon net amount. Gross-ups are commonly seen as part of tax equalization and tax protection policies.
Health Services Fund
The Health Service Fund ("HSF") is a Quebec payroll tax on remuneration paid to employees and former employees, which finances the health care system in Quebec. Additional information is available
here.
Income Tax
A tax levied on income. May be assessed at the federal, provincial/state, or local level.
Income Tax Convention
see Tax Treaty
Independent Contractor
An independent contractor generally enters into a contract for services, or a business relationship with a payer. Whether or not an individual is an independent contractor or an employee is determined by evaluating the facts of the working relationship.
Individual Taxpayer Identification Number
An Individual Taxpayer Identification Number (“ITIN”) is an identification number issued by the Internal Revenue Service to individuals who are not eligible for a Social Security Number but who are required to file an income tax return or provide a federal tax identification for another purpose such as claiming a tax treaty benefit or being claimed as a dependent on another person’s US tax return.
Nonresident Alien Withholding
The US imposes a withholding tax of 30% on certain US source payments made to a foreign person. Examples include payments to independent contractors who are not residents of the US for services performed in the US and rents received by a nonresident of the US from rental property located in the US.
OECD Model Tax Convention
The Organization for Economic Co-operation and Development ("OECD"), publishes a model tax treaty and commentary that may be used by member countries as a basis for negotiating their income tax treaties. The United States and the United Nations each have model tax treaties however the OECD model and commentary is the most frequently referenced in general discussions of tax treaty provisions. All references in this website are to the OECD model unless otherwise stated. In determining whether a treaty provision applies, you should at all times make reference to the tax treaty concluded between your country of residence and the relevant foreign country.
Part XIII tax
Part XIII tax is a Canadian income tax applicable to non-resident of Canada. Part XIII tax generally applies to passive income but it can apply to other income. The applicable rate is 25% but it can be reduce to a lower rate by virtue of a Tax Treaty. Part XIII tax constitutes a final tax and as such there is no additional obligation to file an income tax return. Additional information is available
here.
Passive Income
Passive income is income earned on passive investment such as interest, dividends, royalties, etc.
Payroll Tax
Generally charges payable by the employer as a percentage of the salaries paid to employees. The term payroll taxes may include what is often separately referred to as social charges.
Permanent Establishment
A concept defined in a tax treaty that forms the basis of whether a company or independent contractor is subject to tax in the foreign country. Additional information is available
here.
Physical Presence Test
The taxpayer’s tax home must be in a foreign country and the taxpayer must spend at least 330 full days outside of the United States in a consecutive 12 month period.
Quebec Pension Plan
The Quebec Pension Plan ("QPP") is a Quebec Government program that provides pensions and benefits when contributors retire, become disabled, or die. Additional information is available
here.
Regulation 105 withholding
Payments made to a non-resident entity or independent contractor for providing services in Canada are generally subject to 15% withholding federally and an additional 9% withholding if services are performed in Quebec.
Social Charges
Includes government-mandated programs for the general welfare of the population and are generally payable by the individual performing services. In the case of employees may be shared by the employer.
Social Security Agreement
A bilateral agreement concluded between two countries to coordinate pension coverage when an individual lives and/or works in both countries. Additional information is available
here.
Sportsperson
The term is not limited to traditional athletic events (Ex. hockey, football, gymnastics) but also includes, among others, jockeys, tennis players, racecar drivers, etc.
Substantial Presence Test
In order to determine if an individual is a resident of the United States in a taxation year the days of presence in the United States during the current and 2 preceding years are summed to determine if the individual was present in the US for more than 182 days, where:
Each day in the current year = 1 day
Each day in the preceding year = 1/3 of a day
Each day in the second preceding year = 1/6 day
The taxpayer must be present in the US for a minimum of 31 days in the current year in addition to being present in the US for at least 183 days based on the above formula in order to be considered a resident of the US in the current taxation year.
Tax Treaty
A bilateral agreement concluded between two countries to resolve double taxation issues. Additional information is available
here
Tax Waiver
A request to exempt payments made to non-residents from withholding on the basis that the income will be exempt from tax pursuant to a tax treaty. Additional information is available
here.
The Tie-Breaker rule
The article of a tax treaty which is applied to determine of which country a taxpayer is a resident and/or which country the taxpayer is a non-resident in cases where the taxpayer is considered a tax resident of both countries under each country’s domestic law. Additional information is available
here.
Totalization Agreement
see Social Security Agreement
US savings clause
US tax treaties contain a provision referred to as a “savings clause” which expressly permits the US to tax its citizens and green card holders as though the treaty did not exist. Many treaties contain certain exceptions to the savings clause that allows citizens and green card holders to benefit from certain treaty provisions.
US tax resident
The following individuals are considered residents of the US: a US citizen, a green card holder or an individual meeting the Substantial Presence Test.
