One of the many benefits of working offshore, aside from the lifestyle, is that many of these locations have little to no income tax. We are often asked about tax implications for a Canadian living and working abroad and we've put together the basics here.
In order to be exempt from paying Canadian income tax, you need to qualify as a "non-resident" of Canada during your time abroad. The Canada Customs and Revenue Agency (the CRA) looks at each case individually but in general, to be considered non-resident, an individual should cut their main residential ties with Canada.
That might sound somewhat daunting, but it's fairly straightforward. There are three primary residential ties that are considered to be significant:
1. Dwelling place (or places)
2. Spouse or common-law partner
3. Dependants
You are generally able to maintain ownership of a home in Canada, as long as it is not sitting vacant for your own use. So if you choose to keep your property, it is advisable to rent it out on what the CRA refers to as "arm's length terms and conditions". A spouse or common-law partner that remains in Canada can often be considered a significant residential tie, as will dependents that remain in Canada.
Provided you are able to deal with these 3 major ties, you should be in good shape for earning a tax free (or very low tax) income abroad! There are secondary residential ties that the CRA may look at also, but generally a secondary tie or two will not be sufficient for an individual to be deemed a factual resident (and therefore subject to Canadian tax on their worldwide income).
To learn more, you may wish to visit the non-residency section of the CRA website and/or consult with an Accountant. We are also happy to answer questions on an individual basis.
Author: Jocelyn Poulsen