Foreign Employees Entitled to a Five-Year Tax Exemption

As a rule, an individual who is not resident in Canada and who comes to Québec to work in certain specialized sectors of activity (hereinafter called an “employee”) is entitled to a full or partial tax exemption for a period of five years, provided the eligibility requirements are met. The exemption consists in a deduction in the calculation of taxable income.

Such an employee is entitled to only one five-year exemption period, even if he or she holds more than one type of employment qualifying for the exemption. The exemption period is continuous in the case of employees who enter into an employment contract after March 30, 2004.

However, if the employee signed a contract before March 31, 2004, and renews the contract after March 30, 2004, and if, under tax legislation, the contract is not considered to be separate from the contract signed prior to March 31, 2004, the employee's exemption period may be non-continuous. This means that if the employee stops working before the end of the five-year exemption period, the period in which he or she is not working is not taken into account in calculating the five-year period as long as the employee does not sign a new (separate) contract.

To calculate the source deductions of income tax with respect to such an employee, see Source Deductions of Income Tax for Foreign Employees Entitled to a Five-Year Tax Exemption.

Applying for a certificate or a qualification certificate

In order for an employee to benefit from the exemption, you must obtain a certificate or a qualification certificate with regard to the employee. To find out how to proceed, contact the government body responsible for issuing the certificate or qualification certificate you require. For a list of such government bodies, see Eligibility Requirements for the Five-Year Tax Exemption for Foreign Employees.

As a rule, you must apply for a certificate or qualification certificate each year. Your application for a given year must be submitted by the last day of February of the following year.

Documents to be given to the employee

You must give the employee a copy of the certificate or qualification certificate, so that the employee may claim the tax exemption to which he or she is entitled in his or her income tax return.

Foreign employee who spends more than 182 days in Québec before taking up his or her employment duties

A foreign employee who spends more than 182 days in Québec in a year is deemed to be resident in Québec throughout the year. However, this rule does not apply for the purposes of determining whether a foreign employee was resident in Canada immediately before taking up his or her employment duties.

Example

If a foreign employee was in Québec from March 1 to September 1 of a given year (a period of more than 182 days) and started to work on October 1 of that year, the employee is not deemed to have been resident in Québec since January 1 of that year. Consequently, the employee was not resident in Canada before taking up employment duties on October 1.
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