5 Common Tax Pitfalls for Canadians Working Remotely Abroad

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Are you sure you’re not breaking any tax laws while working remotely from paradise? The CRA’s global reach might surprise you.

Just because you’ve swapped your office for a beach doesn’t mean you’ve escaped Canadian taxes. The CRA keeps tabs on Canadians working abroad, and your ties to Canada—like property or bank accounts—could mean you still owe taxes back home.

If you’re not careful, you could face double taxation, penalties, or legal trouble. Before you pack your bags, here are five common tax pitfalls Canadian digital nomads often overlook—and how to avoid them.

1. Not Knowing Your Residency Status

Swapping your office for a beach in Bali or the streets of Lisbon doesn’t mean you’ve escaped Canadian taxes. If you have “residential ties” to Canada, like the following, you could still be considered a Canadian resident for tax purposes:

  • Owning a Home: Even if you rent it out while you travel.
  • Family Connections: A spouse, partner, or dependents staying in Canada.
  • Financial Ties: Keeping Canadian bank accounts, credit cards, or health insurance.

Spending most of the year abroad doesn’t free you from Canadian taxes. Strong ties to Canada can still make you a resident with global income reporting.

Quick Tip: Check your ties before you leave. If they’re strong, you might still owe Canadian taxes no matter where you are.

2. Paying Double Taxes

Nobody wants to pay taxes twice on the same income, but that’s exactly what could happen if you don’t understand how double taxation works.

Canada has tax treaties with over 90 countries to prevent you from paying taxes in both Canada and the country you’re staying in. These treaties generally do two things:

  • They Decide Who Gets to Tax What: For example, some treaties let your host country tax your freelance income, while Canada gets to tax your investment earnings.
  • They Give You Tax Credits: If you pay taxes abroad, you might get a credit on your Canadian taxes so you don’t get taxed twice.

Tax treaties vary by country. Some require you to pay local income tax if you stay over 183 days, while others give Canada the taxing rights.

Quick Tip: Check the tax treaty before you travel to know which country taxes your income.

3. Forgetting to Report Foreign Income and Assets

A common mistake digital nomads make is thinking that because they earned money outside Canada, the CRA doesn’t need to know about it. Unfortunately, that’s not how it works.

If you’re still considered a Canadian resident, you must report every dollar you make, no matter where in the world you earned it. This includes:

  • Freelance and Consulting Income
  • Rental Income from Overseas Property
  • Investment Earnings, including Cryptocurrency

If you own foreign property worth over CAD 100,000—including investments, rental properties, or even crypto—you’ve got to file Form T1135. The form is complicated, so reach out to a tax lawyer in Canada to make sure it is filled out and filed properly with CRA. Mess it up or skip it, and you’ll face heavy penalties and interest.

Quick Tip: Keep solid records of your foreign income and assets. Save those receipts and bank statements—you’ll thank yourself come tax time.

4. Missing Out on Tax Deductions for Remote Work

Working remotely lets you deduct expenses to lower your taxable income, but many digital nomads miss out by not knowing what’s deductible or failing to keep good records.

Here are some deductions you don’t want to miss:

  • Home Office Expenses: If you rent an apartment abroad and use a room exclusively for work, you can deduct part of the rent, utilities, and internet costs.
  • Travel Expenses: Business-related flights, accommodation, and local transportation are deductible if they’re directly related to earning income. Think attending a conference, meeting clients, or even coworking space fees.
  • Professional Services: Legal fees, accounting services, or even paying someone to help you with your taxes.

Quick Tip: Save every receipt and maintain a detailed log of your work-related expenses. It could save you a lot of money—and stress—come tax time.

5. Ignoring Local Tax Laws

Earning Canadian income doesn’t mean you’re off the hook for local taxes. Many countries have specific rules for foreign workers, including:

  • Tax Residency Rules: In countries like Spain, Portugal, or Thailand, staying more than 183 days can make you a tax resident. And that means you owe them taxes.
  • Digital Nomad Visas: More countries are offering special visas for remote workers, but they often come with local tax obligations.
  • Double Taxation Risks: If you don’t plan carefully, you could end up paying taxes in both countries.

Quick Tip: Plan your travels strategically to avoid becoming a tax resident in multiple countries. It’ll save you a lot of time, money, and paperwork.

Staying Compliant as a Digital Nomad

The digital nomad lifestyle is amazing, but the tax stuff? Not so much.

To keep things smooth, make sure you know your residency status, avoid double taxation, report all your income and assets, claim the deductions you’re entitled to, and stay on top of local tax rules.

Staying organized and informed is the secret to living your best nomad life without any tax nightmares.