Many Ukrainians who arrived in Canada under the CUAET program (Canada-Ukraine Authorization for Emergency Travel) received temporary status but continue to work remotely for Ukrainian employers or as sole proprietors (FOP) in Ukraine. In this situation, a logical question arises:
Who should I pay taxes to if the income comes from Ukraine?
At first glance, everything seems simple: income from Ukraine — taxes in Ukraine. But Canadian tax legislation applies a more complex approach, where the key factor is not citizenship or source of income, but the concept of tax residency.
Why does the tax question often arise specifically for CUAET holders?
This is a typical situation because:
- A person works remotely, and funds come from abroad.
- The temporary CUAET status does not clearly indicate tax obligations.
- Many perceive themselves psychologically as “temporary guests,” although they have actually lived in Canada for a long time.
As a result, there is often a false impression that there are no tax obligations to Canada. However, Canadian tax legislation is guided not by visa status, but by the actual circumstances of residence and the level of integration into Canadian society.
What is tax residency and how does it differ from immigration status?
Canada uses the principle of factual residency — factual tax residency. It is determined not by the type of visa or work permit, but by your lifestyle and level of ties to Canada.
You are considered a tax resident of Canada if:
- You reside in Canada for more than 183 days per year (even with interruptions).
- You have rented or own housing in Canada.
- You opened a bank account here, obtained a mobile phone number or a health card.
- Your family lives in Canada, or you plan to stay long term.
- You conduct the main part of your personal, social, and financial life here.
Having permanent resident status (PR) is not a mandatory condition — Canada may recognize you as a tax resident regardless of your immigration status.
Global practice: how this works in other countries
Canada is not an exception. In most countries of the world, taxation is based not on citizenship but on actual residence and center of life interests:
- Germany — more than 183 days of residence or having a “center of life interests” (family, housing, work) creates tax obligations.
- Portugal — 183 days per year or having long-term housing in the country.
- Ukraine — a person may be recognized as a tax resident based on permanent economic ties, even with physical absence.
- USA — complex substantial presence formula, but the general principle is the same: “live here — report here.”
- France, Netherlands — the main criterion is the “center of life and economic interests.”
This is the international standard: where you actually use state services, you have tax obligations.
How Ukrainian income is taxed for Canadian tax residents
Canada has a global taxation system — this means that all income of a tax resident, regardless of source, must be declared in Canada:
Such income includes:
- Salary received from Ukraine.
- Income from entrepreneurial activity (FOP).
- Freelance income.
- Passive income (rent, dividends, interest, etc.).
At the same time, Canada recognizes taxes already paid abroad and allows them to be credited through a tax credit mechanism to avoid double taxation.
Your obligations as a Canadian tax resident:
- Submit an annual tax return by April 30.
- Declare all income, including Ukrainian.
- If taxes were already paid in Ukraine — submit relevant documents (receipts, payment confirmations, tax authority statements).
What happens if you don’t file a tax return
Ignoring tax obligations can lead to negative consequences:
- The Canada Revenue Agency (CRA) may obtain information through automatic exchange with banks or other countries.
- Financial transfers, using the healthcare system, having a SIN number, credit history — all this leaves traces.
- Penalties and fines accrue for late reporting.
- In serious cases, there may be problems with future immigration applications or even criminal liability.
Practical tax calculation example
Suppose you are an FOP (3rd group) in Ukraine and earn $5000 USD monthly:
- In Ukraine, you pay:
- 5% unified tax.
- Social contributions — 22% of the minimum salary.
- Military levy — 1.5%.
Total approximately $4100 USD in taxes per year.
- In Canada:
- Annual income $60,000 CAD.
- Tax rate ≈ 17% (around $10,252 CAD).
- Taxes paid in Ukraine ($4100 USD ≈ $5600 CAD) are credited.
- Additional payment to Canada’s budget: about $6152 CAD.
This is not double taxation but a supplementary payment of the difference, since Canada applies higher rates than Ukraine.
Bilateral Agreement between Canada and Ukraine
Since 1996, there has been:
Convention between the Government of Canada and the Government of Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital.
Key provisions of the Agreement:
- Income can be taxed in both countries depending on its nature.
- Canadian tax residents have the right to credit taxes paid in Ukraine (foreign tax credit).
- A mechanism for resolving conflicts over tax residency is provided (tie-breaker rule).
Important: The Agreement does not exempt from the obligation to file a tax return in Canada; it only minimizes the risk of double taxation, provided supporting documents are submitted.
Practical example of applying the Agreement
- You are a Canadian tax resident.
- Received $20,000 CAD of income from Ukraine.
- Paid 5% in Ukraine — $1000 CAD.
- In Canada, you must pay 17% — $3400 CAD.
- With the $1000 CAD already paid, the remaining amount to pay in Canada is $2400 CAD.
Conclusions
The CUAET status is not a “tourist break” free of obligations. If you integrate into Canadian life and use state services — tax transparency is an essential part of your obligations.
Even if your income comes from Ukraine, as a Canadian tax resident, you must:
- Declare all income.
- Keep proof of taxes paid abroad.
- Submit tax returns on time.
This allows you to:
- Maintain a positive history with CRA.
- Avoid sanctions.
- Have peace of mind when applying for permanent residence in the future.
