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Foreign Workers, International Tax and Oil & Gas Market Update

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In this presentation, FMC Partner Shawna Vogel and Associate Yasmeen Nizam team up with MNP Partner David Yager and Associate Kathy Bonazew to deliver information about foreign workers, international ...

In this presentation, FMC Partner Shawna Vogel and Associate Yasmeen Nizam team up with MNP Partner David Yager and Associate Kathy Bonazew to deliver information about foreign workers, international tax and oil & gas market updates. The following topics are discussed:
- We Need Foreign Workers Now
- New Developments in Permanent Residence Applications for Workers
- State of Canada’s Oil & Gas Industry and Future Employment Needs
- Taxation in Canada

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    Foreign Workers, International Tax and Oil & Gas Market Update Foreign Workers, International Tax and Oil & Gas Market Update Presentation Transcript

    • Foreign Workers, International Tax and an Oil & Gas Market UpdateThursday, March 21, 2013 1
    • We Need Foreign Workers NowPresenter: Shawna Vogel FMC Partner 2
    • We Need Foreign Workers NowGeneral Rule – prove no Canadian can fill the job unless  exception applies •NAFTA WORK PERMITS ‐ Professional ‐ Intracompany Transferee •GATS WORK PERMITS ‐ Professional ‐ limited ‐ Intracompany Transferee – same rules 4178217_1 3
    • A. LMO and A‐LMO1.  Key Elements • Advertise position • Qualify candidates • Apply for and obtain Labour Market Opinion  Confirmation (“LMO”) • Obtain work permit 4178217_2 4
    • 2.  Changes ‐ A‐LMO – Accelerated LMO • 10 day processing • Advertising and all other requirements still apply – post issuance VERIFICATION • Only applies if positive LMO issued to employer in last  2 years • Positions – NOC O, A, B (management, professional,  technical) 4178217_2 5
    • 3.  Changes – Wages under LMO• New Rule – must pay (i) same wage to TFW as to  Canadian employees, and (ii) median wage (or up to 5% ‐ 15% variance) 4178217_2 6
    • B.    Alberta Programs Work Permit • (specific semi‐skilled worker occupations) • No LMO PR Programs • Skilled Worker, Semi‐skilled in certain industries  (employer driven) • International graduate • Certain Trades, Certain Engineering professions  (employee driven) 4178217_2 7
    • C.    New • Compliance Requirements • AB Pilot project for working‐age dependent children of  skilled workers 4178217_2 8
    • D.    Tips 1. Passport expiry 2. Medical, TRV, Criminality • Delays due to need of medicals (where employee has  been in “medically‐required country for 6 months in  last year) • Delays (and change of venue of application) because of  nationality (and not residence) of employee • Criminal record – be prepared 4178217_2 9
    • New Developments in Permanent Residence Applications for WorkersPresenter: Yasmeen Nizam FMC Associate 10
    • New Developments in Permanent Residence Applications for Workers• Federal Skilled Trade Worker Program• Federal Skilled Worker Class• Canadian Experience Class 11
    • Federal Skilled Trade Worker Class• Citizenship & Immigration Canada began accepting PR  applications on January 2, 2013• 3000 applications for specific trades will be accepted until  January 1, 2014• Within the 3000, no limit on 26 in demand occupations• 17 occupations subject to sub limits of 100 applications 12
    • Group A – Jobs with sub‐caps of 100 applications each (and their corresponding 2011 NOC code)• 7202 Contractors and supervisors, electrical trades and  telecommunications occupations• 7204 Contractors and supervisors, carpentry trades• 7205 Contractors and supervisors, other construction trades,  installers, repairers and servicers• 7271 Carpenters• 7301 Contractors and supervisors, mechanic trades 13
    • Group A – Jobs with sub‐caps of 100 applications each (and their corresponding 2011 NOC code)• 7302 Contractors and supervisors, heavy equipment operator  crews• 8211 Supervisors, logging and forestry• 8221 Supervisors, mining and quarrying• 8222 Contractors and supervisors, oil and gas drilling services• 8241 Logging machinery operators• 8252 Agricultural service contractors, farm supervisors and  specialized livestock workers 14
    • Group A – Jobs with sub‐caps of 100 applications each (and their corresponding 2011 NOC code)• 9211 Supervisors, mineral and metal processing• 9212 Supervisors, petroleum, gas and chemical processing  and utilities• 9214 Supervisors, plastic and rubber products manufacturing• 9231 Central control and process operators, mineral and metal  processing• 9241 Power engineers and power systems operators• 9243 Water and waste treatment plant operators 15
    • Group B – no sub‐caps (2011 NOC code)• 7231 Machinists and machining and tooling inspectors• 7233 Sheet metal workers• 7235 Structural metal and plate work fabricators and fitters• 7236 Ironworkers • 7237 Welders and related machine operators• 7241 Electricians (except industrial and power system) 16
    • Group B – no sub‐caps (2011 NOC code)• 7242 Industrial electricians• 7243 Power system electricians• 7244 Electrical power line and cable workers• 7245 Telecommunications line and cable workers• 7246 Telecommunications installation and repair workers• 7251 Plumbers 17
    • Group B – no sub‐caps (2011 NOC code)• 7252 Steamfitters, pipefitters and sprinkler system installers• 7253 Gas fitters• 7311 Construction millwrights and industrial mechanics• 7312 Heavy‐duty equipment mechanics• 7313 Refrigeration and air conditioning mechanics• 7314 Railway carmen/women 18
    • Group B – no sub‐caps (2011 NOC code)• 7315 Aircraft mechanics and aircraft inspectors• 7318 Elevator constructors and mechanics• 7371 Crane operators• 7372 Drillers and blasters ‐ surface, mining, quarrying and  construction• 7373 Water well drillers• 8231 Underground production and development miners• 8232 Oil and gas well drillers, servicers, testers and related  workers• 9232 Petroleum, gas and chemical process operators 19
    • Requirements for Applications to the Federal Skilled Trades Program• Basic Language Proficiency• Valid offer of Employment in Canada• At least two years of work experience in the last five years• Must meet NOC employment requirements 20
    • Skilled Federal Worker Class• Changes will take effect on May 4th, 2013• Minimum official language thresholds and increased points for  official language proficiency • Introduction of ECA (Educational Credential Assessments• Increased emphasis on younger immigrants• Changes to arranged employment process• Additional adaptability Points 21
    • Skilled Federal Worker Class• In April CIC to announce: – A cap on the number of applications that will be accepted in the first  year – A new list of priority occupations – The organizations that will be designated to conduct educational  assessments 22
    • Canadian Experience Class• Workers can now apply for PR with 1 year of Canadian Work  Experience• Higher proficiency is now required in all of the language  abilities 23
    • Inadmissibility• Permanent Residence Applications will be refused if applicants  are  inadmissible to Canada for reasons such as serious  criminality, health reasons, accompanying and non‐ accompanying family member is inadmissible• No appeal right to the Immigration Appeals Division for  refused permanent residence applications in Federal Skilled  Trades Class, Federal Skilled Worker, and Canadian Experience  Class 24
    • State of Canada’s Oil & Gas Industry &Future Employment Needs - March 2013
    • Four questions to answer1. Where have we been?2. Where are we at?3. Where are we going?4. What is the manpower challenge?
    • 1) Where have we been?• Growth - 1991 to 2003• Boom – 2004 to 2008• Bust – 2009, 1st half of 2010• Growth – 2nd half of 2010 to Q1 2012• Oilsands explodes• Switch from gas to oil
    • Revenue/Cashflow 1998 - 2013 Billions of $ Cdn – (Estimates 2012, 2013) Source: ARC Financial WOW!
    • CAPEX Conventional/Oilsands1998 - 2013 SOURCE: ARC Financial For conventional OFS, the better $ years are behind us
    • 2) Where are we at?• January off to a decent start for drilling• Oilsands steady but projects being postponed• Gas prices remain soft• Oil prices, particularly bitumen, depressed
    • Commodity Price Snapshot Mar 11 Mar 12 Forecast* 2013 2012Gas - AECO 12 Month Strip ($C/mmcf) $3.29 $1.71Gas - Henry Hub Spot ($US/mmbtu) $3.64 $2.17 $4.13Synthetic Crude ($C/bbl) $101.20 $89.75Oil - WCS ($C/bbl) $75.53 $70.14 $69.80Oil - WTI Cushing Spot ($US/bbl) $92.06 $106.34 $91.30Oil - Brent ICE ($US/bbl) $110.22 $125.34 $104.15 *12 Month Futures Prices as at March 12 for March 2014 CME
    • The Rosy Picture Source: CAPP
    • The Cruel Facts Source: CAPP
    • Maintaining production will be steady business Jurisdiction Crude Liquids Gas MM MM B/D MM B/D MMCF/Day BOE/Day Russia 10.1 0.4 47.1 18.4 United States 9.0 0.2 47.2 17.1 Saudi Arabia 9.8 1.4 6.5 12.3 Iran 4.2 0.1 10.7 6.0 Canada 3.3 0.7 14.8 5.9 China 4.0 - 7.3 5.2 Alberta 2.5 0.4 12.8 4.6
    • 3) Where are we going?• CAPP forecast CAPEX steady• Continued shift from gas to oil• Bias towards the negative• No overall industry growth
    • Industry Capital Spending Cdn $billions Oil & Gas Investment Spending: 2011: $62 billion 2012: $61 billion (estimate) 2013: $63 billion (forecast) Northern Canada 2011 2012E 2013F $0.3 $0.3 $0.5 Oil Sands 2011 2012E 2013F $22.7 $23 $23 East Coast Offshore Western Canada 2011 2012E 2013F 2011 2012E 2013F $1.5 $1.5 $1.5 `11 `12E ‘13F $37.6 $36 $38 AB $26 $26 $27 BC $6.7 $4 $4Note: Excludes spending on mergers & acquisitions SK $5.1 $6 $7
    • CAPP 2012 – 2013 Drilling Estimates28,000 Dry/Susp. 2011 2012E 2013F Gas Alberta 7,087 6,500 7,34524,000 Oil British Columbia 560 440 375 Saskatchewan 2,980 3,090 3,20020,000 Manitoba 471 670 58016,00012,000 8,000 4,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013F Source: CAPP
    • Capital Expenditures PSAC Conventional Wellhead CAPEX Estimates Drill & Complete $17.3 $18.0 $16.2 $16.0 $15.6 $16.0 $13.9 $14.0 $12.0$ billions $10.0 $8.8 $8.0 $6.0 $4.0 $2.0 $0.0 2008E 2009E 2010E 2011E 2012F 2013F
    • Horizontal Wells Changing Drillingand Services 6 000 5 000 Manitoba 4 000 Saskatchewan Alberta 3 000 2 000 1 000  0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CAPP
    • Gas Well CountNatural gas drilling collapsed – PSAC 9,69210000 9000 Rig Releases 8000 7000 6000 5000 4,038 4,503 4000 2,752 3000 2000 1,308 1,324 1000 0 2008 2009 2010 2011 2012F 2013F
    • 4) How many jobs?• Oilfield services not growing, pause (or end?) of multi-year trend• Excess capacity• Downward pricing pressure• Employment challenges remains
    • The new realities• New oilsands projects on hold• Oil prices softer, discounts remain• Pipeline solutions two years out• Oil companies laying off staff• Demographics will still affect labor markets regardless of CAPEX scenarios
    • Current Oil and Gas Workforce 3% 11%In 2011, the industry directly employed186,635 workers: 47%• 87,087 in oil and gas services• 72,746 in exploration and production (or E&P) 39%• 20,304 in oil sands• 6,498 in pipelines *Percentages represent employment share to total oil and gas workforce in Canada. Source: PHRCC
    • Current Oil and Gas Workforce Top 10 Occupations Based on 2011 Employment Numbers1. Field workers (32,371)2. Supervisors, drilling & service (9,100)3. Engineers (chemical, mechanical, petroleum) (8,985)4. Non-steam ticketed operators (6,951)5. Heavy equipment operators (6,567)6. Drilling coordinators/primary production managers (6,513)7. Truck drivers (6,052)8. Millwrights and machinists (4,890)9. Geologists and geophysicist (4,676)10.Steam-ticketed operators (4,578) Source: PHRCC
    • Size of Industry Does Not Means Jobs Low gas prices offset employment gains in oil and oilsands 100,000 84,529 87,087 85,739 90,000 80,000Number of Jobs 70,000 62,103 73,511 72,746 60,000 50,000 Source: PHRCC 40,000 26,144 30,000 18,989 20,304 20,000 10,000 6,500 6,498 7,031 0 2010A 2011E 2012F 2013F 2014F 2015F Oil and Gas Services E&P Oil Sands Pipelines
    • Employment Scenarios High growth (oilsands plus West Coast LNG) will create greater manpower demands 260,000 246,887 Growth Scenario Source: PHRCC (2011) 240,000 214,579 220,000Number of Jobs 200,000 186,635 Most Likely 177,039 181,017 Scenario (2012) 180,000 177,892 160,000 166,548 Growth Oil/Low 174,779 Gas Scenario 140,000 (2011) 120,000 100,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
    • Hiring 2013 - 2015 Source: PHRCCTop 10 Petroleum Occupations Based on Hiring Due to Industry Activity to 2015 By Number of Jobs By Percentage of 2011 Employment1. Field workers, laborers and operators 1. Project engineers (19%) (1,521) 2. Steam-ticketed operators (19%)2. Steam-ticketed operators (891) 3. Mining engineers (18%)3. Heavy-equipment operators (597) 4. Electrical/instrumentation engineers4. Heavy-duty equipment mechanics (16%) (214) 5. Mechanical engineering technologists5. Electrical/instrumentation engineers (11%) (105) 6. Heavy-duty equipment mechanics6. Project engineers (99) (10%)7. Instrumentation technicians (94) 7. Heavy equipment operators (9%)8. Industrial electricians (57) 8. Environmental technicians (7%)9. Mechanical engineering technologists 9. Quality assurance analysts (7%) (44) 10. Drafting technologists (6%)10. Quality assurance analysts (39)
    • Demographics a ChallengeAge-related attrition will create 9,500 jobs in 201 – 2015 period Year-Over-Year Net Hiring Requirements for Canada’s Oil and Gas Industry 6,000 3,531 2,256 1,548 2,116 5,000 4,000Number of Jobs 3,000 2,000 1,000 0 -1,000 Source: PHRCC -2,000 -3,000 2012F 2013F 2014F 2015F Due to Industry Activity Due to Age-related Attrition
    • Net Hiring 2012 - 2015 Source: PHRCC Top 10 Petroleum Occupations Based on Net Hiring Requirements to 2015 By Number of Jobs By Percentage of 2011 Employment1. Field workers, laborers and operators 1. Project engineers (28%) (2,764) 2. Steam-ticketed operators (27%)2. Steam-ticketed operators (1,238) 3. Mining engineers (26%)3. Heavy equipment operators (1,132) 4. Electrical/instrumentation engineers4. Engineers (chemical, mechanical, (24%) petroleum) (429) 5. Heavy-duty equipment mechanics5. Drilling coordinators/primary (18%) production managers (429) 6. Mechanical engineering technologists6. Heavy-duty equipment mechanics (18%) (381) 7. Heavy equipment operators (17%)7. Supervisors, drilling and services 8. Quality assurance analysts (15%) (303) 9. Drafting technologists (14%)8. Millwrights and machinists (275) 10. Environmental technicians (14%)9. Truck drivers (254)10. Industrial electricians (225)
    • Total Hiring Outlook to 2015 Year-Over-Year Total Hiring Requirements for Canadas Oil and Gas Industry 6,000 4,887 3,662 2,914 3,482 5,000 4,000Number of Jobs 3,000 2,000 1,000 0 -1,000 -2,000 Source: PHRCC -3,000 2012F 2013F 2014F 2015F Due to Industry Activity Due to Age-related Attrition Due to Leakage
    • Recommendations• Industry can: o Recruit skilled workers from outside industry o Retain skilled workers during slowdowns o Invest in retention practices o Build internal capacity• Government can: o Communicate with industry and focus policies and programs o Enhance community housing, infrastructure and services in hard-to-recruit locations o Improve timely access to workers outside Canada Source: PHRCC
    • Conclusion We’ll come up with something. We always do.
    • Taxation in CanadaPresented by: Kathy BonazewDate: March 21, 2013
    • Taxation in Canada• Foreign workers will likely have to pay income tax in Canada• Canadian taxation is based on residency• Residency status will determine taxation in Canada
    • Factual resident• Resident of Canada for income tax purposes based on facts and circumstances• Residential ties in Canada include: – Home – Spouse or dependants – Personal property (automobile, furniture, etc.) – Economic ties• Subject to Canadian income tax on income from all sources• Can claim non-refundable tax credits – May be pro rated for a part-year of residency• Residency status in home country may be a factor
    • Non-residents• Does not establish or otherwise have significant residential ties with Canada and has not been in Canada for more than 183 days• Subject to Canadian income tax only on income from Canadian sources• Can claim non-refundable tax credits if 90% or more of the worker’s income is from Canadian employment – Basic personal amount, the spouse or common-law partner amount, if applicable or the amount for an eligible dependant.• Can claim non-refundable tax credits for Canadian Pension Plan (CPP) and Employment Insurance (EI) premiums
    • Deemed non-residents• Worker that: – Has been in Canada for more than 182 days in the year and – Is Considered resident of another country with which Canada has an income tax treaty• Taxed in the same manner as non-residents
    • Deemed residents• Worker from a non-treaty country who has been in Canada for 183 days or more in a calendar year• Subject to Canadian Income tax on income from all sources (both inside and outside of Canada)• Can claim in full all non-refundable tax credits that are applicable. (i.e. basic personal amounts, spouse or common law partner amounts or the amount for an eligible dependant)• Can claim CPP and EI premiums
    • Double taxation• A tax treaty between Canada and the worker’s home county ensures that the worker does not have to pay tax twice on the same income
    • Employer withholding• Workers that have regular and continuous employment in Canada are subject to tax deductions in the same manner as Canadian resident employees
    • Form TD1, Personal Tax Credits Return• All persons working in Canada have to complete a federal Form TD1 and a provincial TD1 and submit them to their employers• Helps the employer determine the amount of tax to deduct from earnings• If a worker does not give the employer a completed provincial Form TD1, the employer should deduct provincial tax using claim code “0”
    • T4 Information Return and Slips• Employers are subject to the same reporting requirements for foreign workers as they are for Canadian resident employees
    • Waiver From Withholding Tax• A tax treaty between Canada and a worker’s home country may exempt a certain amount of employment income from Canadian income tax – Barbados and U.S. - $10,000 – Jamaica - $5,000 – Mexico - $16,000• If employment income is less than the treaty amount, the entire amount is exempt from Canadian income taxation• If employment income is more than the treaty amount, the entire amount is subject to Canadian income taxation• Must request a waiver of withholding• CPP contributions and EI premiums withholding requirements will apply
    • T1 Income Tax and Benefit Return• Must be filed if: – Worker is requesting a refund of income tax, CPP and/or EI – Worker has to pay income tax with respect to employment income earned – CRA requests that a return be filed• Recommend that all foreign workers file a return• Province of employment determines return(s) to be filed – If employed in more than one province Form T2203 Provincial and Territorial Taxes – Multiple Jurisdictions must be completed
    • T1 Income Tax and Benefit Return• Schedule D Information About Your Residency Status• Schedule 1 Federal Tax• Form 428 Provincial Tax• T4 slips• Schedule A Statement of World Income• Schedule 5 Details of Dependant• Form T2203 Provincial and Territorial Taxes – Multiple Jurisdictions
    • Time Limit For Refunds• Within 3 years of the due date of the original return for income tax refunds• Within 4 years of the end of the tax year for CPP refunds• Within 3 years of the end of the tax year for EI refunds
    • Home Country Tax Issues• A non-resident of Canada is likely resident for income tax purposes in his home country – Will have to coordinate tax filings between the two countries• U.S. taxes citizens regardless of where they live and/or work – Ongoing U.S. filings and additional reporting requirements
    • Thank you for Joining UsShawna Vogel, FMC 780.423.7335 e: shawna.vogel@fmc‐law.com David Yager, MNP 403.461.8566 e: david.yager@mnp.caYasmeen Nizam, FMC 780.423.7201  e: yasmeen.nizam@fmc‐law.com Kathy Bonazew, MNP 780.969.1454 e: kathy.bonazew@mnp.ca 68
    • The preceding presentation deals with the kinds of  issues companies dealing with immigration could  face. If you are faced with one of these issues,  please retain professional assistance as each  situation is unique.