The United States-Canada Treaty
The U.S.A –Canada treaty is meant to shield its citizens from incurring double taxation when working from member countries. However, it has set rules to ensure that the Canadian citizens earning from the United States pay their taxes to the Canadian government. In contrast to the U.S. system of income tax assessment depends on citizenship and residency while the Canadian system depends basically on the idea of residency; citizenship is superfluous. Note that non-occupants of Canada are liable to impose in Canada on any income created in Canada and on the demeanor of particular kinds of property in Canada (Reichert, 2018).
Article XV of the system expresses that subject to the orders of Articles XVIII (Pensions and Annuities), and XIX (Government Service), income rates, compensation and other comparative compensation inferred by an occupant of a Contracting State in regard of a work will be assessable only in that State except if the business is practiced in the other Contracting State. If the company is so worked out, such compensation as is gotten from that point might be taxed in that other State.
Despite the provisions of the section above, compensation inferred by an occupant of a Contracting State regarding a business practiced in a schedule year in the other Contracting State will be assessable only in the first-referenced State. It occurs if such compensation does not surpass ten thousand dollars ($10,000) in the money of that other State (Reichert, 2018). It likewise occurs if the beneficiary is available in the other Contracting State for a period or periods not surpassing in the total 183 days in that year. In such a case, the compensation is not borne by a business. The business might be an inhabitant of that other State or by a lasting foundation or a fixed base which the company has in that other State.
Question Response
Thomas is a resident of Canada and spent less than 183 days working from the U.S. Therefore, the income paid to him during the time is not liable to U.S. tax. Additionally, spending fourteen days in the U.S. is not considered to meet all requirements for tax collection from income earned under the U.S. tax laws. However, despite Thomas not been subjected to tax in the United States, he has to fill W-8BEN form that will help in preventing the united states tax system from withholding tax from his income. Also, in the form, he has declared and agrees to remit taxes to his Canadian authority from the income earned from the United States. However, to enhance compliance, the United States submits the information of the Canadian residents working in the United States to the Canada Revenue Agency (Raizenne & Campbell, 2019).
The U.S. – Canada Tax Treaty has a positive effect on the Thomas situation because it has given clear guidelines of tax payment between the member countries. Therefore, it reduces conflicting situations where he would undergo double taxation or have any withheld by the United States from his income.