There has been a massive uptick in employees working remotely, and with that comes the added bonus of being able to work from different locations… including different countries!
However, no matter where you decide to call ‘home’ for a few months or a few weeks, the CRA will expect you to file your taxes as if you’d never left. In addition, it’s crucial that you make sure you know what to do and what to expect from a taxation standpoint before packing up for your working vacation.
What To Consider
Before heading off, make sure you’ve read up on the tax legislation in effect both in Canada and the country you’re intending to work remotely from. Tax laws will vary depending on where you’re visiting and the duration of your stay, so it’s important you’re informed before committing to anything.
Make sure you know the answer to the following questions before buying your plane ticket to avoid any taxation mishaps later down the line:
- Will you be maintaining your Canadian tax residency?
If you have significant residential ties to Canada, you’ll still qualify as a resident and will be expected to pay taxes on your income and file a tax return – even if you’re abroad.
Significant residential ties include having a home, dependants, and/or a spouse in Canada, and/or only working abroad on a very temporary basis.
Secondary residential ties, such as having Canadian bank accounts and ID (including driver’s licence and passport), may also be enough to prove your residential status. However, secondary ties are analyzed on a case-by-case basis and shouldn’t be relied upon.
Make sure that you’re up to date any tax deadlines that may be approaching while you’re away as you’ll still be required to adhere to them.
On the flip side of this, you’ll also want to check the tax residency requirements of wherever you’re visiting. If you meet certain criteria that qualify you to become a taxable resident, you may have to pay income taxes and file a tax return there as well.
- How long will you be away from your primary residence?
When you make the decision to mix work with travel, it’s important to be aware of how important the duration of your stay becomes.
The general rule of thumb is this: the longer you’re away, the higher risk you run of being considered a taxable resident in the country you’re visiting.
Now, this doesn’t mean that you won’t still be considered a Canadian resident. However, a longer stay in some countries could result in you having to file two tax returns and pay income tax on two different fronts.
Before you solidify your travel plans, make sure that you’re checking your intended country’s criteria for what constitutes a taxable resident. This way, you’ll avoid unexpected taxation dings while you’re abroad.
- Has Canada signed a tax treaty with your destination country?
Taxation treaties exist to prevent conflict between tax laws in different countries. If you’re visiting a foreign country where a tax treaty is in effect, you will generally be able to avoid the double taxation that was mentioned above.
You can find a complete list of countries that Canada has a tax treaty with here.
If the country you’re visiting doesn’t have a tax treaty with Canada, then you may end up paying more in taxes and having to file two income tax returns.
In the majority of cases, the country where you receive your salary and any other forms of income will collect income tax first. However, this can also vary depending on which country has the higher tax rate.
To-Do’s Before You Go
While working remotely from another country is appealing for many, it’s not quite as simple as just picking up your laptop and moving house. The last thing you want is to end up with problems, penalties, and workplace violations because something wasn’t conveyed or communicated properly.
Make sure that you’re going through the proper channels before committing to a work vacation, which includes:
- Checking in with your employer
If you’d like to work remotely from another country, ensure full transparency with your employer beforehand.
It’s important that your employer knows where you are and has approved you to work while abroad, as companies often have certain policies regarding working holidays. This may include having to complete and sign specific contracts and/or special agreements that dictate your working and financial obligations while away.
- Discussing the specifics of your stay with your employer
Keep in mind that if your employer isn’t specifically sending you somewhere for business purposes, they aren’t required to provide for any of your travel accommodations/needs.
Therefor, it’s important to talk to them about whether or not you can expect any travel compensation or if you’ll be required to pay your trip, services, and other expenses out of pocket.
You’ll also want to provide your employer with any indirect and direct work-related details, such as the length of your stay, what your work schedule will be while you’re abroad, and any company property (such as laptops, USBs, drives, etc) that you’re planning to bring with you.
- Understanding the tax implications
While working abroad can have tax implications for you as an individual, it can also have tax implications for your employer. It’s part of what makes it so important to have your higher-ups permission before taking off anywhere.
Depending on how long you’re planning to work abroad, and if your boss(es) are contributing to your travel, they will have to consider:
- The tax implications of any business expenses you accrue.
- Any social security agreements and charges within Canada and/or abroad.
- If withholding taxes on your salary is beneficial or required.
Planning a Working Vacation? Connect with Us!
If you like the sound of combining a cultural experience abroad with your work life, but would like more information on the tax implications and requirements, we would love to help.
Our Chartered Professional Accountants at Isaac Achal Professional Accounting can provide you with the clarity and insight you need to make sure all your local and international taxation bases are covered before you jet off.
