Taxes for workers abroad: Mexico, US and Canada
International companies have increased their activities globally in different countries, such as Mexico, the United States, and Canada. This is due to various factors, such as the practice of nearshoring, but… what happens, in fiscal terms, when a worker is sent to another territory?
Every country that receives a foreign worker has its own rules to follow in these cases, which should be respected and fully met by the companies involved, and if they do not comply, they could receive significant sanctions that may have an impact on business.
In the case of Mexico, to have a clearer idea, it is important to define the type of assignment that everyone shall have since, in terms of taxes, there shall be different obligations that employees assigned must consider.
Another point is the origin of the workers’ income. For example, a person who has income obtained from other parts of the world should report it to the tax authorities and, depending on the method of payment, it will be necessary to define what shall be the best process for reporting it to the tax authority.
These elements should be considered along with other important points, such as immigration or labour legal structures, such as documentation (working visa, electronic signature, individual taxpayer identification number, etc.), and legal regulations (such as Federal Labour Law).
In the case of other countries, such as the United States, there are some resources and practices on sending workers abroad, such as tax equalization policies or shadow payroll. The latter allows employers to maintain the payroll of the country of origin, while still complying with the tax commitments of the worker’s host country.
This landscape for a country like Canada also has specific implications. In this country, regarding the tax issues of foreign workers, we may talk about two aspects: the Canadian tax return for non-residents who conduct a business activity in Canada and the services provided in Canada by non-residents.
Ultimately, in any country and in the different scenarios we may consider, at Mazars, we know that staying at the forefront of knowledge and practices on these issues is what allows us to support employers in achieving the best outcome at the lowest cost.
If you are interested in learning more about this topic, we invite you to watch our webinar “Mexico, US and Canada: tax considerations when sending employees to another jurisdiction”, with the participation of Mazars’ experts: Roberto Cantú, Tax Partner in Mexico; Jorge Chávez, Tax Manager in Mexico; Andrew Engaldo, Global Mobility Senior in the United States; Arda Minassian, Global Mobility Director in the United States, and Shayne Pringle, Senior Manager in Canada.
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Jorge Chávez Mercado Tax Senior Manager - Mexico City
Arda Minassian Executive Director - Global Mobility Tax - Montreal
