I’m a Canadian citizen that is going to apply for Estonia’s new digital nomad visa that’s rolling out soon.
I would like to run my plan by other people to make sure I am not making any mistakes. My plan is to leave Canada and get Estonia’s digital nomad visa. What I want to know are the following:
Once I get Estonia’s digital nomad visa, do I have to stay in Estonia for any given period of time or can I travel?
How long do I have to stay out of Canada for my tax residency to change to Estonia?
I’m no expert on Canadian taxes, but I’ll give you my input anyway.
No requirement to stay put in Estonia for Estonia’s sake. You’ll only become an Estonian tax resident if you spend 183 out of the past 12 months in the country, however. If Canada will accept this as having established sufficient ties to another country is another question (again, I’m no expert).
Depends if you’re trying to permanently get out of the Canadian tax system (becoming tax non-resident in accordance with Canadian domestic law) or becoming tax resident in Estonia in accordance with Article 4 of the Estonia-Canada tax treaty (you may be considered tax resident according to local law in both countries, but the treaty will override Canada’s local law and give Estonia right to tax your income). The former would not be as easy.
Depends. Probably they would argue that only leaving for two years meant that you didn’t really intend to leave Canada permanently (which is crucial given that Canada has common law/domicile based taxation), so if they had initially agreed that you would be tax non-resident in Canada in accordance with internal rules they may backtrack on this point. However, if you qualified as Estonian tax resident in accordance with the tax treaty for the entire time you were away (and hence could use it to avoid double taxation for the whole period) this would be less of an issue. If on the other hand you go to Estonia for long enough to get a tax residency certificate to show Canada, then leave the country to go traveling around the world for a couple years then that could cause problems.
So at the end of the day, are you trying to move to Estonia (at least 50% of the time) or are you trying to get out of Canadian tax residency? Either way, the digital nomad visa may not be the best option, depending on your goals.
If you want to stay longer than 1 year in Estonia you may want to look into other visas instead.
I’m looking for a Canadian tax lawyer to help me so if there is one in this community please reach out!
to answer your last question, i intend to stay outside of Canada for the whole year. My plan is to live as a digital nomad and travel the world for a few years.
Canada doesn’t like people who declare non-residency for tax purposes and then return shortly afterwards. The CRA will pay extra close attention to you after you file your tax return upon returning. If they determine you didn’t cut enough residential ties or didn’t establish strong enough residential ties elsewhere, they will consider you a tax resident for the time you were gone and you will need to pay back taxes. In the coming years, the CRA will probably be even more strict since taxpayers are on the hook for programs like CERB due to covid-19.
If your goal is to save money on taxes and be a digital nomad, you will need to establish strong residential ties with a country and cut all primary and the majority of your secondary ties with Canada. There are lots of alternatives to Estonia for establishing residential ties. Such a place would ideally have a double tax treaty with Canada and some tax advantages. Some countries that come to mind are Chile (first 3 years are tax free for foreign income), Mexico (Relaxed on foreigners with foreign income), Thailand (No taxes if foreign income remitted after 1 year). You could also opt for a country with low or no taxes on foreign income and a double tax treaty with Canada (e.g. Dubai, Hong Kong). Countries such as these will usually require you to obtain a residence certificate to become a resident for tax purposes.
If your goal is to simply travel and be a digital nomad, I’d stay as a Canadian tax resident since you could keep Canadian ties and not have to sacrifice your time and resources escaping the Canadian tax net.
I intend on staying outside Canada for the foreseeable future, so I’ve already started cutting primary and secondary ties to Canada. I won’t have any primary ties and the only secondary tie I will have is my RRSP and TFSA, otherwise I will mostly have primary ties with another country.
That’s interesting to know regarding Mexico, Chile etc. I am definitely looking at Mexico as well as a place to live.
Thank you @louisz. I will keep this in mind and do more research, I appreciate your response!