Digital nomads: a Canadian perspective

George Waggott^[1]

George Waggott Law, Toronto, Ontario

george@georgewaggott.com

Canadian nomads: coming to a province near you

Living and working on a nomadic basis is not just limited to working in different countries – an understated aspect of the digital nomadism phenomenon is that many people choose to be digital nomads within the borders of a country. In Canada, domestic digital nomads may travel vast distances – the distance from Toronto to Vancouver is greater than the distance from Paris to Moscow – and cause numerous legal challenges.

The federal structure of Canada’s constitution means that each province is empowered to craft its own laws governing labour and employment. However, Canadian law is also guided by the right to free mobility within Canada’s territory as enshrined in the Charter of Rights and Freedoms. The result is that digital nomadism and the right to live and work anywhere in Canada is, in principle, protected by Canadian law. Nevertheless, employers of digital nomads must account for the legal implications of potentially operating across multiple jurisdictions.

In Canada, the legal implications span several domains including taxation, employment law and immigration law. These three areas constitute the main sources of potential legal obligations for employers of digital nomads who are based in Canada. This article provides a general overview of the legal issues employers must consider if they are seeking to integrate digital nomads based in Canada into their workplaces and workforce.

Tax law: rules and rates may vary

The first tax-related consideration for any person working in Canada is whether or not they are resident in Canada within the meaning of the Canadian Income Tax Act (the ‘Tax Act’). If a person is ordinarily resident or deemed resident in Canada, then their income is subject to Canadian (federal) income tax and a corresponding amount of province income tax. A person may also be a part-time resident in Canada if they spend part of the year in Canada and part of the year in another country. In all cases, residency for tax purposes needs to be assessed on an individual basis, with a close review of the facts.

Employees in Canada must also pay provincial taxes to the province they are resident in. Residency for provincial taxes is determined based on what province a person is resident in on 31 December of the tax year. This means that if a digital nomad works in one province during the year, but becomes resident in another province on 31 December, then the employee’s income taxes are due to the province the employee resided in on 31 December.

One challenge for employers is that rates of provincial income tax vary across Canada. Often payroll and tax withholding rates are set up based on the province where the business is based. This can lead to incorrect amounts of tax being withheld and paid, and an issue which can be challenging and costly to fix.

Employment laws: which set of rules applies?

The first significant employment law issue faced by employers hiring digital nomads is whether the worker is an employee or an independent contractor. In Canada, if an employer misclassifies an employee as an independent contractor, the employer may face significant legal penalties. A court or tribunal may order an employer to pay damages or fines for denying employees their legal entitlements. The directors of an employer corporation may also be financially liable if the employer corporation misclassifies employees as contractors.

In addition to their obligations to employees, employers in Canada must make workers’ compensation payments to the jurisdiction governing their relationship with their workers. This can apply to digital nomads even if they are correctly classified as contractors. Depending on what industry an employee works in, they will be covered by either the Federal Workers’ Compensation Service or the workers’ compensation board of the province they are working in.

If a worker moves between provinces, then they may legally be covered by the workers compensation boards of different provinces at different times. To address this problem, the workers’ compensation boards throughout Canada have signed an agreement called the Interjurisdictional Agreement on Workers’ Compensation (IJA). The IJA provides that employers will not be double charged, once by each province, if a worker they employ moves from one province to another. Moreover, it allows workers to receive services and submit claims for workplace injury even if they are in a different province from the one they were injured in.

Immigration: no special Canadian rules yet

Currently, Canada does not offer a digital nomad specific visa. For a foreign digital nomad to work in Canada, they must usually obtain either an electronic travel authorisation (eTA) or a work permit. The major exception to this is that US citizens or green card holders can enter Canada for short-term visits without an eTA or work permit.

Depending on what kind of visa a worker has, their movement within Canada may be restricted. A worker who was accepted into Canada under the Provincial Nominee Program (PNP) may be restricted from leaving the province that nominated them. Under the PNP, workers are given a permit to enter the country for the purpose of working in the province that nominated them. This means that if they want to go work in a different province, they need to meet certain legal requirements first.

Concluding thoughts

Digital nomadism is reshaping the modern workforce, offering Canadian businesses access to global talent and increased operational flexibility. However, integrating digital nomads into the workplace requires careful attention to legal obligations across tax, employment and immigration law. Missteps in any of these areas can result in significant financial and legal consequences. As the Canadian example proves, these issues can arise even when the worker is moving within a country.

Looking ahead, Canada may adopt more tailored legal frameworks to support remote international work, such as clearer guidelines for compliance with existing laws or new provisions in existing legislation to specifically address the needs of digital nomads and those looking to retain them.