Why we need to pay taxes? Because society needs money for social service, police, education, roads, medicine and so on. Therefore we need to pay taxes where we live. For example we live in one country, but get money from another for some service. So, by my opinion we should only pay taxes to country where we live. Particularly if I live in Canada and have contract with US company, I need to pay only Canadian taxes, not US, right?

But I did some search and see that people don't share the same opinion.

So, I'd like to get some clarification regarding this subject (not only restricted by Canada and US, but any country in general).

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    It varies by country, citizenship, residency, and tax treaties between countries ... so any generalization will be incorrect for many cases. Commented Mar 14, 2014 at 23:50
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    Is your question about what the laws actually are, or about the logic behind them?
    – BrenBarn
    Commented Mar 15, 2014 at 1:24
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    Laws, but logic would be nice too.
    – Alexan
    Commented Mar 15, 2014 at 1:27
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    Like others have said, there just isn't any general answer about what the laws are. Each country makes its own laws.
    – BrenBarn
    Commented Mar 15, 2014 at 2:09
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    Business pays taxes too.
    – Alexan
    Commented Mar 15, 2014 at 23:52

1 Answer 1


If you're a US citizen/resident - you pay taxes on your worldwide income regardless of where you live. The logic is that Americans generally don't agree to the view that there's more than one country in the world.

If you're non-US person, not physically present in the US, and provide contract work for a US employer - you generally don't pay taxes in the US. The logic is that the US doesn't actually have any jurisdiction over that money, you didn't earn it in the US. That said, your employer might withheld tax and remit it to the IRS, and you'll have to chase them for refund.

If you receive income from the US rental property or dividends from a US company - you pay income tax to the US on that income, and then bargain with your home tax authority on refunds of the difference between what you paid in the US and what you should have paid at home. You can also file non-resident tax return in the US to claim what you have paid in excess. The logic is that the money sourced in the US should be taxed in the US. You earned that money in the US.

There are additional rules to more specific situation, and there are also bilateral treaties between countries (including a US-Canadian treaty) that supersede national laws.

Bottom line, not only that each country has its own laws, there are also different laws for different situations, and if some of the international treaties apply to you - it further complicates the situation. If something is not clear - get a professional advice form a tax accountant licensed in the relevant jurisdictions (in your case - any of the US states, and the Canadian province where you live).

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    +1 but please include in your first paragraph that a US citizen/resident can get a reduction (not necessarily dollar for dollar) of the income tax due to the US for the income taxes that were paid to foreign governments on the non-US-source income. Commented Mar 15, 2014 at 14:11
  • @Dilip that actually is not always true. In the example the OP provided, when he's getting paid by the US employer, there will be no reduction.
    – littleadv
    Commented Mar 16, 2014 at 1:06
  • I meant that while a US citizen receiving foreign income while living abroad nonetheless has to declare all that income on his/her US tax return and pay taxes on it, this person will receive a credit on the US tax return for foreign taxes paid that will reduce the amount due to the US. If a nonresident non-US-citizen earns income from a US source and is taxed by the US as well as his country of residence/citizenship on this income, then, as you state, this person has to negotiate tax credits with the other taxing entities; no reduction on his/her US taxes for income taxes paid elsewhere. Commented Mar 16, 2014 at 14:15
  • @Dilip I think these are details out of the scope of the OP's intentions. Generally, all income is taxable. Whether or not exclusions or deductions apply, and to what extent, is not really the point. The US is the only country in the world that does that (some claim Eritrea does it as well, but its not the same, you can ask a question if you want more details on the differences).
    – littleadv
    Commented Mar 17, 2014 at 4:27
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    "The logic is that Americans generally don't agree to the view that there's more than one country in the world.". I still think this needs to be removed from the answer. Besides being insulting to Americans, its factually incorrect. There is a valid legal theory as to why this is done, I just haven't been able to find the source.
    – Andy
    Commented May 16, 2015 at 22:55

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