Help: Canada Taxman (CRA) Coming After Digital Nomad Who Has Not Lived in Canada since 2011. Advice or Recommendations?

Hey guys.

I’m in the unfortunate situation (and true Digital Nomad’s worst nightmare) where the Canadian tax man (i.e. the CRA) has decided to come calling. And calling hard.

Any recommendations for Canadian Tax Accounts / Tax Lawyers specializing digital nomads / expats / non residents?

Here’s the deal:

I’m a digital nomad living in Thailand who has NOT lived in canada since the middle of 2011, and in that time, only been back to canada three times for a brief visit (with a total period between all those years of less than 90 days out of the 5 years).

I make an online income (affiliates, adsense, and such) of which all if it does not derive from Canada. And as stated, I don’t live there anymore and haven’t in many years. I don’t own houses, cars, or anything (I do have a personal bank account though and a DL – you need those to function mostly). I’ve only used Canada as my bank account, from which I would send money abroad to live while outside of Canada, which was the entire period of time.

Anyways, the taxman back in Canada doesn’t know this (that I’m a non resident) and of course has now come to collect. I had income tax demands sent to an address (parents’) stating I owe a very high five figure balance in income tax and owe it right away.

The whole digital nomad thing has just come to life the past years and when I left Canada in 2011/2010, no one new much about making money online, how to pay taxes when you don’t live in your home country, etc. I was doing this earlier than most (from this forum, I gather it’s common now).

I assume I’ll probably need a Canadian tax accountant and mayhaps a tax lawyer versed in…well…digital nomads. I’m going to call the CRA (Canadian Revenue Agency) and try to explain that I don’t live there and haven’t (and I can prove it), but yea. It may take more than that.

At this point, I’ve been looking how to properly structure my affairs (creating an Estonian Corp, creating an Thailand corporation) to properly handle how I should structure things in the future, but in the meantime…

Advice or a recommendation for a specific tax specialist (i’m from BC, Canada if that helps) would be awesome.

Ben

I had used Trowbridge previously and found them to be helpful and professional: http://trowbridge.ca/. The guy I worked with has since left and created his own firm, but I used him last year and was not happy with the services, so I would recommend Trowbridge.

I had income tax demands sent to an address (parents’) stating I owe a very high five figure balance in income tax and owe it right away.

How did they even determine how much you owe?

I am also a Canadian and would appreciate if we could keep in touch so we can share info on what ends up going down. I haven’t had demands from the CRA, but this coming year will be the second year I pay no taxes in Canada and would like to be prepared in case it happens.

@international_man helped me with figuring out my situation and he may have some useful information for you as well.

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Thanks for the recommendation. I will keep you updated.

I’ve seen a lot of nomads here ask tax questions about how to pay tax (or not pay tax) while they jump around living in different countries. As a Canadian, I’ve been doing this since the middle of 2011, so a bit longer than many of the ‘newer’ digital nomads that past couple years.

Which has meant I’ve had more time to build up issues with the tax man. I can’t speak for how the US or Europe deals with taxes, but Canada, at least in my case, won’t let you just leave the country without taking the proper steps.

Here’s a bit of the situation

  1. I left Canada 2011

  2. I did NOT file a departure form informing the CRA I would be leaving. From what I’ve read, this is an optional (but it appears, recommended) thing to do as it makes it official that you intend to ‘leave’ and become a non-resident. I just packed up and left.

  3. I previously filed taxes for the 2010 year, but had not done so for the 2011 year.

  4. When I left, I only had 1) a car, 2) a passport,3) a canadian driver’s license, a personal bank account, and two business bank accounts

  5. Prior to 2011, I had incorporated two businesses for my online companies with bank accounts for each. However, I only used one of these. I never really renewed the businesses or updated them. I only ever used one of the bank accounts. When I left Canada, that one business account was the source of my funds, acting basically as the place I could get paid from.

  6. I had some money going into the personal account as well. As I was living in Thailand and banking was difficult (and getting paid from online companies at this time needed my bank account info in canada), that’s where the money was going. However, these were ‘online’ only and business, if any, came from the US. I had no canadian revenue, clients, or anything.

  7. I finally had a notice of assessment done for my personal income tax a few months ago by the CRA. They did a backtrack and assessed four years: 2011,2012,2013,2014. 2015 & 2016 were not included.

Not sure if it was random or what. My personal account stopped receiving any funds into it as of the end of 2013. Since 2013, that account has been pretty much empty. Yet the assessed earnings for that year, which I’m not sure how or where they got that info. If the CRA did a checkup to calculate how much I was making, there would have been no funds going into that account after the end of 2013.

I’m going to be calling the tax office over the next couple days to figure out what’s going down and to try to claim I’ve been a non-resident, which has been the case.

In your case, you absolutely should file a departure form and severe all primary ties (house, car, etc) and as many secondary ties (social relations, care card, drivers license, credit cards, bank accounts). From what I’ve gathered, you are allowed to be a non-resident of Canada with some secondary ties such as Driver’s License and bank accounts and such. The main thing is you need to show or be able to show you are not maintaining close ties with canada and won’t be intending to return (at least for that period you claim non residency for). From what I’ve read, just having a bank account in canada and putting money you ‘earn’ outside of the country into it while you are a non-resident is allowed and does not automatically mean you pay taxes on it. This depends entirely on if you are considered a Non Resident. Like you can be living in China for 4 years, but have a canadian bank account and get paid into it and not have to pay taxes on that money, provided you are a non resident and deemed as such.

However, as I’ve found it, you are way, way better off not putting any money at all into your home country as a non-resident. In my case, I didn’t inform the CRA that I was leaving and, in their books, I’m a resident who owes taxes. Now I have to try to prove that for all that period of time, I was a non resident.

Anyways, that’s the story and how it’s going down. I’ll let you know what happens.

At this point, for all you other Canadian digital nomads. Don’t just leave the country for a few years and expect Canada will let you go! I would highly advise you close down all bank accounts in Canada and do not put any money into them if you want to become a non-resident and show this (without having problems like I am now).

Thanks for bringing this up. It’s good to talk this out.
I’m Canadian as well (from BC) and I left Canada in 2014 without filling anything out. I recently spoke to an accountant at a digital nomad conference and they said I should fill out a NR73 with the CRA in order to request a determination of my residency status.

However, what comes with that, is that I have to prove “residency” in another country. Which I can’t. I move around so much that I’m out of Canada for 99% of the year (only go back for weddings, etc) BUT I don’t stay long enough in another country to be considered a “resident” of another country (always on tourist visas, etc)

Thus…grey area that hasn’t been defined by the CRA. According to the accountant, I can’t be ‘residency-less’ so to speak.

Not sure if you can mention that to the CRA, and I have no experience dealing with them, but maybe they can cut you a break if you explain it that way? I would love to be kept posted as well.

Yea, I didn’t even know I ‘owed’ taxes as it was until a few days ago. Looks like the CRA did an assessment September…I never saw anything till November and they are charging huge interest each month on the whole ‘debt’.

Yea, the thing is, I have a very bad feeling that just mentioning I’ve been a non-resident is not going to be enough. I may have to file an objection and field proof. And like you, I can’t easily claim I’ve been a proper resident in another country (by proper, a tax-paying resident). I’ve been out of canada, yes. I’ve not been earning anything from Canada, yes. But it depends on how they view the situation. And you are always guilty until proven innocent with the tax man.

To me it seems pretty imperative to show verifiable proof you are tied to another country:

*work permit (which I never ever had in Thailand)
*proof you are paying some tax in your ‘new’ host country (again, something I never was doing in Thailand, since i didn’t have proper ‘permit’ as it were
*proof you’ve set down roots (apartment contracts, bank accounts in new country, drivers license in the new country, etc)

I don’t think just ‘leaving canada’ for a few years while hopping around to different countries is a strong qualification for ‘no taxes’ to the tax man, especially if you are not making one country specifically a place you might be able to prove is your new ‘home’.

I would set up base in one country, on paper anyways, to fortify your position. And it seems it’s a good idea you need to show you are paying taxes in one country. You can hope around to other countries, but it appears you need a base on paper.

In my case, I probably need to set up a Thai company, then pay myself some pittance wage, then pay ‘taxes’ on this (10-20 percent in Thailand if it’s under 20,000 usd) so you can get a tax receipt. This tax receipt (along with the work visa you get by starting a company) is very, very strong proof for non-residency in Canada.

And I can’t stress the importance of doing NO banking back in Canada – at least nothing you are not afraid to pay ‘some’ taxes on, if they ever use that to come with a tax assessment. You are far, far better holding things in PayPal or create an Estonian Company / HK company, or some offshore place to do your business + banking. I wouldn’t be in this mess if this was the case.

I’ll keep you guys updated. I’m still doing my research before I contact the CRA.

Looks like there are NO other Nomads here who have gone through anything like this…yet.

Let me just say that be prepared though – especially you Canadians. Don’t just leave Canada with properly preparing and structuring your business / finances so no money goes into Canada, which will complicate your residency situation, as it has in my case.

For the sake of taxes, I would create a home base – a fake one at least. Some place you spend say 120-180 days of the year at. Jump around the rest of the time, but you need something tangible to try and prove you are legit a non-resident, not just trying to evade taxes by staying out of Canada (which, I gather, is probably the first thing the CRA would consider you are doing, especially given that digital nomading is a new thing and tax law has not yet caught up with our lifestyle…yet).

In my case, I have been a resident of Thailand, in everything but ‘tax-wise’, which it seems now, is one of the most important criteria to be able to prove.

In my case, I have been a resident of Thailand, in everything but ‘tax-wise’, which it seems now, is one of the most important criteria to be able to prove.

Haha our situations are so similar. We have also been in Thailand for the last 6 months or so. We have decided to push up our plan of ending up in NZ for reasons separate from this threads topic, but I think that will help out with the “prove you are a resident somewhere else” part.

A few points:

  1. NEVER EVER GET TAX OR ACCOUNTING advice from a Canadian firm. My experience is that they are not your friend and in fact, believe it or not, are working for Canada, the government and the CRA. Indirectly. They are abdicating their responsibility to you the client! How can I say this? Because the purpose of Canadian firms is to try to get you into the system and to pay into the system and they do not want or like to offer you advice that essentially tells you how to fly away.

  2. When you leave the country, the final tax return of that year has a box, ‘final return’ and then you have to file some lists of assets. In your case, if you had a business when you left, that business has a fair market value. Canada is one of the ONLY countries in the world with a departure tax. I.e. even if you don’t sell your business, they assume the value is the unsold fair market value! Yes believe it or not, this communist ploy is extremely unpleasant since you must post security and be monitored (for the rest of your life?) even if you never ever have any connection to Canada ever again. Or pay the capital gains tax out of cash, essentially an immediate call for funds without selling any of your assets. Highly unpleasant. I think your mistake was not filing a final return in 2011 and paying departure tax. Your secondary mistake might have been to keep too many ties and combined with the first mistake, they just assumed you never left. Perhaps there is a way to correct this retroactively but I suspect they will try to argue that you are a still a resident. In other words, you will have the privilege of having your status determined based on your past activities by a judge who can lean either way. You are essentially at the mercy of the state’s ultimate ruling - but you can try to make an argument in court.

  3. You may believe you are resident nowhere but generally it defaults to your citizenship if you can’t prove the other place you are resident. Or rather, you can be dual resident and the tie-breaker is the citizenship when there is no clarity (usually it never gets that far). However, what I don’t understand is what happens when you have dual citizenshiip? Then it gets complicated. Heck you can have two lives, one with each citizenship. What about triple citizenship? The world just isn’t built for this migrant lifestyle. Governments need to change, the world is literally leaking and inconsistent. As an individual, however, chances are you can’t live like this forever. Just pick a place you believe in at least 50% and has laws and rules you can abide by. For me, Canada is not one of these countries.

  4. Generally speaking, Canada is a really bad nation to reside for a long period of time if you ever plan to leave, it’s very isolationist, very protectionist, very socialist. I’d try to move residence (temporarily) to another nation, and from that nation - which presumably has better and saner laws, move from their to a third place or keep travelling. In other words, have a bridge residency before taking off again but choose that country wisely. The departure tax is really the biggest obstacle I can see, the rest is not so difficult.

  5. If you are going to not pay tax because you want to live offshore or will travel forever, you better structure your affairs to use offshore structures like offshore banks, offshore investment accounts, and offshore corporations. It is quite problematic to have assets in a country and use that infrastructure but claim that you are from nowhere for tax purposes. Maybe find a place you can get residence that has a better system for you. Some countries have a payment - as opposed to time-based residence system. If you buy a property or satisfy some conditions you are given permanent residence. I believe some nations do not require much if any time spent in that country if you satisfy the monetary and address conditions.

  6. Being resident nowhere sounds like being off the grid. I can imagine health insurance is the biggest problem here as you’d have to lie about residency and then they may not pay out. You may also have trouble opening investment accounts which is usually the source of financing such a lifestyle. But I think this is an ideal to aspire to. It seems every individual has to operate under the graces and umbrella of a particular nation-government. It’s almost like the Mafia! Just choose a reasonable Mafia to protect you!

  7. Good luck!