Who hasn’t dreamed of spending the winter on the beach instead of shovelling snow? With many companies now allowing remote work, it may be tempting to pack up the laptop and seek greener (or warmer!) pastures. Before you do, research the requirements of your Destination Country. Immigration rules, visa requirements, tax filing and other issues will vary significantly depending on where you are going and how long you plan to stay.
Will you remain a Canadian resident?
If your travel is temporary, chances are that you will remain a resident of Canada for tax purposes. If you are planning on leaving Canada permanently and severing economic ties here, don’t hesitate to get in touch with your McCay Duff LLP advisor before making that decision so we can advise you on the tax implications. While being a non-resident of Canada might mean that your future income is no longer taxable here (with some exceptions), the immediate burden before leaving can be significant, depending on your situation. It’s also possible to remain a resident of Canada for tax purposes even when you’re not present in the country. Your McCay Duff LLP advisor can help you apply Canada Revenue Agency‘s criteria to your particular situation.
Visa requirements for temporary stays
Some countries offer a Digital Nomad Visa that allows for an extended period of remote work, provided that the organization you work for is located outside the Destination Country. A visa application is still required but can sometimes be more straightforward and quicker than other visas the Destination Country offers. Proof of a specified minimum income level may be required to show authorities that you can contribute to the local economy there.
Other countries are less amiable to remote work and might require you to apply for a regular work permit before you can work remotely during your stay. This process is usually more complicated than a Digital Nomad Visa.
Health insurance – Most Destination Countries require that you have your private health insurance before they grant any visa for an extended stay.
Some countries do not require documentation or registration from the business or organization that is paying your income.
Other countries require that the business paying your income to be registered in the Destination Country. That business might have to set up a payroll account with the Destination Country and withhold foreign taxes and/or social security from your pay. Because of these potential obligations, it’s extremely important for you to speak with your employer before you decide to work remotely from an international location. If you’re self-employed or own your corporation, speak to your McCay Duff LLP advisor about these potential obligations.
Easier scenario: Destination Country does not plan to tax your income
Countries trying to lure remote workers may indicate as part of the terms of the visa they grant you that they do not plan on taxing your remote work income. This arrangement makes life easier. You would still be considered a resident of Canada and pay tax on your worldwide income in Canada. If you are a US citizen, your obligations continue there as well.
More difficult scenario: Destination Country wants to tax your income
This is where things can get a little sticky. Your Destination Country wants to tax your income based on your presence there, but so does Canada, based on your residency for tax purposes. When this happens, we turn to the tax treaty between Canada and your Destination Country to see the rules. Most of the time, the treaty decides which country gets the first crack at taxing you based on the following:
- How long you are present in the Destination Country
- Where the business paying your income is resident, and
- Whether that business has a permanent establishment in the Destination Country.
A permanent establishment might be an office or warehouse (with some exceptions). In addition, sometimes an employee (you) can create a permanent establishment in the Destination Country for the business paying your income, depending on your work and the decisions you make. This is where things can get even worse, as a permanent establishment can create a corporate income tax obligation in the Destination Country for the business paying your salary. So, if you are an employee, you’ll want to get employer approval before making remote working arrangements. If you are self-employed or own your corporation, your McCay Duff LLP advisor can help you navigate potential obligations.
Am I stuck in the snow?
Not necessarily. It is possible to work remotely without adverse tax consequences. The keys to a successful trip are choosing your destination carefully, researching entry and immigration requirements, and getting professional tax advice before booking your ticket. Bon voyage!
Contact McCay Duff LLP in Ottawa for Skilled Tax Planning Guidance for Working Remotely
An experienced tax specialist can provide much-needed guidance and strategy with respect to tax and financial planning while abroad and working remotely.
The financial specialists at McCay Duff LLP in Ottawa will review your circumstances and recommend a tax plan that will benefit you now and in the future. To learn more about how we can assist you, don’t hesitate to get in touch with us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.