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Foreign Workers, International Tax and an Oil & Gas Market UpdateThursday, March 21, 2013

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We Need Foreign Workers Now

Presenter: Shawna VogelFMC Partner

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We Need Foreign Workers Now

General 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

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A. LMO and A‐LMO

1.  Key Elements

• Advertise position

• Qualify candidates

• Apply for and obtain Labour Market Opinion Confirmation (“LMO”)

• Obtain work permit

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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)

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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)

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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)

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C.    New

• Compliance Requirements

• AB Pilot project for working‐age dependent children of skilled workers

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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

D.    Tips

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New Developments in Permanent Residence Applications for Workers

Presenter: Yasmeen NizamFMC Associate

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New Developments in Permanent Residence Applications for Workers

• Federal Skilled Trade Worker Program

• Federal Skilled Worker Class

• Canadian Experience Class

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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

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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

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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

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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

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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)

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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

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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

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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

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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

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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

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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

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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

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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

State of Canada’s Oil & Gas Industry &Future Employment Needs - March 2013

Four questions to answer

1. 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 - 2013Billions of $ Cdn – (Estimates 2012, 2013)

Source: ARC Financial

WOW!

CAPEX Conventional/Oilsands 1998 - 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 SnapshotMar 112013

Mar 122012

Forecast*

Gas - 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 CrudeMM B/D

LiquidsMM B/D

GasMMCF/Day

MMBOE/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

Note: Excludes spending on mergers & acquisitions

Northern Canada2011 2012E 2013F

$0.3 $0.3 $0.5

Oil Sands

2011 2012E 2013F

$22.7 $23 $23

Western Canada2011 2012E 2013F

$37.6 $36 $38

East Coast Offshore2011 2012E 2013F$1.5 $1.5 $1.5

Oil & Gas Investment Spending:2011: $62 billion 2012: $61 billion (estimate)2013: $63 billion (forecast)

AB $26 $26 $27

BC $6.7 $4 $4

SK $5.1 $6 $7

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CAPP 2012 – 2013 Drilling Estimates

0

4,000

8,000

12,000

16,000

20,000

24,000

28,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013F

Dry/Susp.GasOil

2011 2012E 2013F

Alberta 7,087 6,500 7,345

British Columbia 560 440 375

Saskatchewan 2,980 3,090 3,200

Manitoba 471 670 580

Source: CAPP

Capital Expenditures

Drill & Complete

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

2008E 2009E 2010E 2011E 2012F 2013F

$16.0

$8.8

$13.9

$16.2$15.6

$17.3

$ billions

PSAC Conventional Wellhead CAPEX Estimates

Horizontal Wells Changing Drilling and Services

 0

1 000

2 000

3 000

4 000

5 000

6 000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ManitobaSaskatchewanAlberta

Source: CAPP

Gas Well CountNatural gas drilling collapsed – PSAC

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2008 2009 2010 2011 2012F 2013F

9,692

4,0384,503

2,752

1,308 1,324

Rig Releases

4) How many jobs?• Oilfield services not

growing, pause (or end?) of multi-year trend

• Excess capacity • Downward pricing pressure• Employment challenges

remains

• 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

The new realities

Current Oil and Gas Workforce

In 2011, the industry directly employed 186,635 workers:

• 87,087 in oil and gas services

• 72,746 in exploration and production (or E&P)

• 20,304 in oil sands

• 6,498 in pipelines

47%

39%

11%3%

*Percentages represent employment share to total oil and gas workforce in Canada.

Source: PHRCC

Current Oil and Gas WorkforceTop 10 Occupations Based on 2011 Employment Numbers

1. 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 JobsLow gas prices offset employment gains in oil and oilsands

84,529 87,087 85,739

73,511 72,746 62,103

18,989 20,30426,144

6,500 6,498 7,031

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2010A 2011E 2012F 2013F 2014F 2015F

Nu

mb

er o

f Jo

bs

Oil and Gas Services E&P Oil Sands Pipelines

Source: PHRCC

Employment ScenariosHigh growth (oilsands plus West Coast LNG) will create greater manpower demands

174,779

214,579

Growth Scenario (2011)

246,887

177,039

166,548 Growth Oil/Low Gas Scenario

(2011)

177,892

186,635 Most Likely

Scenario (2012)181,017

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Nu

mb

er o

f Jo

bs

Source: PHRCC

Hiring 2013 - 2015Top 10 Petroleum Occupations Based on Hiring Due to Industry Activity to 2015

By Number of Jobs By Percentage of 2011 Employment

1. Field workers, laborers and operators (1,521)

2. Steam-ticketed operators (891)

3. Heavy-equipment operators (597)

4. Heavy-duty equipment mechanics (214)

5. Electrical/instrumentation engineers (105)

6. Project engineers (99)

7. Instrumentation technicians (94)

8. Industrial electricians (57)

9. Mechanical engineering technologists (44)

10. Quality assurance analysts (39)

1. Project engineers (19%)

2. Steam-ticketed operators (19%)

3. Mining engineers (18%)

4. Electrical/instrumentation engineers (16%)

5. Mechanical engineering technologists (11%)

6. Heavy-duty equipment mechanics (10%)

7. Heavy equipment operators (9%)

8. Environmental technicians (7%)

9. Quality assurance analysts (7%)

10. Drafting technologists (6%)

Source: PHRCC

Demographics a ChallengeAge-related attrition will create 9,500 jobs in 201 – 2015 period

-3,000-2,000-1,000

01,0002,0003,0004,0005,0006,000

Nu

mb

er o

f Jo

bs

Year-Over-Year Net Hiring Requirements for Canada’s Oil and Gas Industry

Due to Industry Activity Due to Age-related Attrition

2012F 2013F 2014F 2015F

3,531 2,256 1,548 2,116

Source: PHRCC

Net Hiring 2012 - 2015Top 10 Petroleum Occupations Based on Net Hiring Requirements to 2015

By Number of Jobs By Percentage of 2011 Employment1. Field workers, laborers and operators

(2,764)

2. Steam-ticketed operators (1,238)

3. Heavy equipment operators (1,132)

4. Engineers (chemical, mechanical, petroleum) (429)

5. Drilling coordinators/primary production managers (429)

6. Heavy-duty equipment mechanics (381)

7. Supervisors, drilling and services (303)

8. Millwrights and machinists (275)

9. Truck drivers (254)

10. Industrial electricians (225)

1. Project engineers (28%)

2. Steam-ticketed operators (27%)

3. Mining engineers (26%)

4. Electrical/instrumentation engineers (24%)

5. Heavy-duty equipment mechanics (18%)

6. Mechanical engineering technologists (18%)

7. Heavy equipment operators (17%)

8. Quality assurance analysts (15%)

9. Drafting technologists (14%)

10. Environmental technicians (14%)

Source: PHRCC

Total Hiring Outlook to 2015

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2012F 2013F 2014F 2015F

Nu

mb

er o

f Jo

bs

Year-Over-Year Total Hiring Requirements for Canada's Oil and Gas Industry

Due to Industry Activity Due to Age-related Attrition Due to Leakage

4,887 3,662 2,914 3,482

Source: PHRCC

Recommendations• Industry can:

o Recruit skilled workers from outside industryo Retain skilled workers during slowdownso Invest in retention practiceso 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.

Presented by:

Date:

Kathy Bonazew

March 21, 2013

Taxation in Canada

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

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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

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.