Life as a Digital Nomad: Do Canadian digital nomads need to pay taxes back to Canada?

Do Canadian digital nomads need to pay taxes back to Canada?

Life as a Digital Nomad: Do Canadian digital nomads need to pay taxes back to Canada?

This article is not formal tax advice. It is our view based on the available information. Those who want formal advice should speak to a tax advisor or a government body directly.

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Like many sharing their way of life, Canadian digital nomads are often puzzled by the question: “Do I need to pay taxes back to my home country?”

The answer is, as with all cases, not that simple. Even in the best of times, tax residency—that is, your status as to what government and nation you are obligated to file your taxes—is a complicated affair.

However, if you’re thinking about moving abroad and becoming a digital nomad full-time—and possibly taking advantage of the many benefits of being one—you should understand how Canadian taxation works so that you can take care of your finances before you leave.

In this article, we will attempt to demystify the problem with Canadian digital nomad taxes and highlight all the relevant information so you can file your annual tax obligations properly, no more and no less.

Please note that this is not formal tax advice and the information in the article may have changed since we have published it.

We will make sure to present all the important data as is communicated by the Canadian government as of the time of publication, but do note that it is highly suggested you consult your tax attorney or a trusted financial planner for more details and clarifications.

Canadian digital nomads can live and work in over forty countries that offer them visas, but do they still need to pay taxes to Canada
Canadian digital nomads can live and work in over forty countries that offer them visas, but do they still need to pay taxes to Canada? | Photo: Pexels

What is a digital nomad?

A digital nomad is a person who works remotely while residing somewhere other than their nation of origin.

They come from all backgrounds, but compared to traditional labor, they are more youthful and technologically competent.

Digital nomads don’t often have specific hours or days off as conventional employees do. Instead, they work wherever and whenever they want. Many people utilize the internet to conduct business while traveling from one nation to another, living a life of adventure and independence.

For the purposes of this article, we’ll define a digital nomad as someone who travels frequently and works remotely. The term has been around since the late 1990s, but it wasn’t until recently that the idea of a digital nomad became more popular among people living abroad.

The lifestyle, which was made popular by online influencers and content producers, only succeeded in spreading more widely after the pandemic put several nations under lockdown. Nowadays, it is estimated that there are around 15 million digital nomads around the world.

Digital nomads are freelancers or entrepreneurs who use the internet to find work and clients online.

They often live in countries with lower cost of living than their home country, so they often can take advantage of the benefits of living abroad while still being compensated as if they are at home.

Being a digital nomad can have some pretty big benefits. The freedom to work from wherever you want, when you want and how you choose to dress is just one of them.

You’ll also have no commute time or dress code to deal with, working whenever and wherever is most convenient and most comfortable.

Many countries are welcoming digital nomads as they bring in the money they earn abroad and spend it within their respective economies. They issue special digital nomad visas, which are basically residence permits, to nomads who make a certain amount of income digitally.

This means that tourism and hospitality sectors—the ones most badly affected by the pandemic—are seeing accelerated recovery due to digital nomads booking long-term accommodations.

In essence, being a digital nomad is living a life without borders. And this is precisely the reason why your Canadian digital nomad taxes are so hard to figure out.

Do I need to pay Canadian digital nomad taxes back to Canada if I’m staying and working abroad?

Many governments around the world have special laws around citizens working abroad temporarily and permanently. Canada is no exception. This is where the confusion lies.

Workers in Canada pay taxes where they live, not where they make their income. This means that income taxes are paid in the jurisdiction where a Canadian digital nomad has a permanent residence.

Canadian digital nomads who have spent a lot of time abroad can also be subject to taxation there. This is an important point to remember.

However, the most important question you need to ask if you want to become a Canadian digital nomad is the biggest one: Do you plan to return to Canada, or are you leaving for good?

This is a critical question to ask because if you maintain substantial residential ties to Canada while residing or traveling outside the country, you are still considered a factual resident of Canada for income tax purposes.

This means that even though you no longer dwell in the country, you are still regarded as a resident for income tax reasons, and you should pay Canadian digital nomad taxes to the Canadian government.

Take note that tax residency is different from citizenship and should not be confused as such. You can be deemed a non-resident of Canada while still being a Canadian citizen.

The Canadian government gives the following examples of those who may be considered factual residents:

  • working temporarily outside Canada
  • teaching or attending school in another country
  • commuting (going back and forth daily or weekly) from Canada to your place of work in the United States (U.S.)
  • vacationing outside Canada
  • spending part of the year in the U.S., for example, for health reasons or on vacation

As such, you need to file your Canadian digital nomad taxes as if you were still living in Canada and have never left. Essentially, you’ll still need to do the following:

  • Report all of your yearly income, both from sources inside and outside of Canada, and claim all of your allowable deductions.
  • Claim all applicable federal, provincial, or territorial non-refundable tax credits.
  • Pay provincial or territorial tax as well as federal tax in the province or territory where you maintain residential ties to Canada.
  • Claim any applicable federal, state, provincial, or territorial refundable tax credits.

Use the Income Tax Package for the province or territory where you maintain residential ties for each tax year that you are considered to be a factual resident of Canada for the purposes of income tax.

This is typically the province or territory where you resided prior to leaving Canada.

Your income tax and benefit return must typically be submitted by or before April 30th in the following year.

If you or your spouse or common-law partner carried on a business in Canada (other than a business whose expenditures are mainly in connection with a tax shelter), this is extended to June 15 of the year after the tax year.

But what if I am already being taxed in the country where I am currently residing?

You still need to pay taxes to the country where you are residing in, provided that they deem you as a tax resident there. Yes, this means that there is a possibility that you will need to pay taxes twice, first to Canada, and then to your residing country.

If you paid tax on income or profits to a foreign country on income from that country that you declare on your Canadian income tax return, you could be allowed to claim a foreign tax credit (FTC) on your Canadian income tax return.

This does not apply if your income comes from or is earned in Canada.

You should also take note of Canada’s tax treaty with the country you are residing in. Take note of three things:

  • Have you established ties and become a resident of the country in which you are staying in?
  • Does that country have a tax treaty with Canada?
  • Are you still considered a factual resident of Canada?

If you said yes to all three questions, there is a possibility that you can be deemed a non-resident of Canada for income tax purposes, and so you will only need to pay taxes to your country of residence.

When your ties to the other country are such that, under the tax treaty that Canada has with that country, you would be regarded as a resident of that other country, you may be considered to be a non-resident of Canada.

How do I know if I still have substantial ties to Canada as a Canadian digital nomad?

As a Canadian digital nomad, your income tax responsibilities to Canada are determined by your residency status. Before you can understand your tax obligations and filing requirements to Canada, you must first determine your residency status.

This is important for you before moving abroad as part of your digital nomad career plan as it can determine how you should approach your move.

In assessing residency, all pertinent information in your case must be taken into account, including your residential ties to Canada and the duration, reason, and continuity of your stay both inside and outside of Canada.

If you are working outside Canada, but still have assets in Canada then you may have to file a Canadian tax return.

If your family is still in Canada, and you have plans to return home someday, then you may need to still pay your Canadian digital nomad taxes.

If you maintain social and economic ties to Canada, such as religious organizations, bank accounts, investments, insurance, government permits like your driver’s license and passport, then you are a Canadian tax resident.

You are also still tax resident of Canada if you live in Canada for more than half the year, and spend 183 days or more in Canada during that period.

The Canada Revenue Agency (CRA) has online resources that can help you determine if you remain a factual resident of Canada as a Canadian digital nomad.

What happens if my tax residency changes?

If you departed Canada with your family, made a permanent home in your new country, severed your ties to Canada by selling off all your properties there, and ceased to be a resident of Canada during the tax year, you may be regarded as an emigrant.

As such, you will only need to file a Canadian tax return if you owe taxes to the government or want a refund because you have already paid too much tax in the tax year.

You must inform any Canadian payers and your financial institutions that you are no longer a resident of Canada if you still have bank accounts there or are receiving payments from Canada.

Also note that you may need to pay a departure tax if you are deemed to have sold some types of property at their fair market value and have reacquired them for the same price when you leave Canada. Even if you have not actually sold them, this deemed disposition is subject to capital gains.

What if I don’t want to emigrate but am not considered a factual resident to Canada anymore?

If you’re living and working outside Canada, it’s important to understand how it may impact your tax situation.

You are considered a non-resident only if you “normally, customarily, or routinely live in another country and are not considered a resident of Canada”, and you do not have significant residential ties in Canada.

This means that you must live outside Canada throughout the tax year or stay in Canada for less than 183 days in the tax year.

In such a case, if you are working for companies that are based in Canada, then the CRA does not expect you to pay taxes on income earned outside of Canada.

However, if you are a Canadian digital nomad making an income from a company in Canada, or if your your business or rental property is in Canada, then it’s possible that the CRA may require you to file a Canadian tax return.

A non-resident is often required to pay either Part I tax or Part XIII tax on Canadian income received.

The most common types of Canadian income subject to Part XIII tax are:

  • dividends
  • rental and royalty payments
  • pension payments
  • old age security pension
  • Canada Pension Plan and Quebec Pension Plan benefits
  • retiring allowances
  • registered retirement savings plan payments
  • registered retirement income fund payments
  • annuity payments
  • management fees
It is your obligation as a digital nomad to report changes in your residency status to the CRA
It is your obligation as a Canadian digital nomad to report changes in your residency status to the CRA. | Photo: Pexels

How does the CRA determine my residency status?

The CRA looks at the facts and circumstances of your situation when determining whether you are a resident or non-resident of Canada.

It’s important to note that the CRA has an extensive list of factors it considers when making this determination, so it’s not as simple as “I’m here all year.”

Here are some examples:

  • Where is your family located? Are you single, married, divorced? Where are your children located?
  • Your ties to your country of residence? Do you have a permanent abode there?
  • How long have you lived in Canada this tax year?

The last question falls under the physical presence test, the most obvious test you can use to see if you’re a tax resident even as a Canadian digital nomad.

If you meet the requirements of the physical presence test, that is if you spend more than 183 days in Canada during the tax year, then you are considered to be a Canadian resident for income tax purposes.

Bottom line

The life of a digital nomad is that of adventure and freedom, but no amount of freedom can let you escape your yearly tax obligations. If you’re still unsure about whether or not you need to file a tax return in Canada, then talk to an expert.

If you’re not sure of your tax status, it’s best to hire an accountant or a trusted financial planner to help you figure out where you should file your Canadian digital nomad taxes. Having a professional advice can help you navigate your way through the ins and outs of the nomad life.

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Adam is an internationally recognised author on financial matters, with over 666.9 million answer views on, a widely sold book on Amazon, and a contributor on Forbes.

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