Are you one of the founders, executives, or IT/AI entrepreneurs contemplating traveling for work in 2026? If so, and you haven’t sought timely and proper cross-border tax and related legal counsel, you may face a potential storm of economic surprises that you do not know about, and that can wipe out your profits.
In November 2025, the OECD released an update to the Model Tax Convention in part to reflect the proliferation of flexible work arrangements and the remote worker. Over the past decade, the regulatory challenges facing employers and workers alike have resulted in additional treaty guidance from the OECD in the areas of residence and taxable nexus relating to services.
As a practitioner, I continue to remediate Canadian businesses caught up in the U.S. federal and state regulatory systems, and vice versa for U.S. organizations in the Canadian system. Specifically, I’m referring to the unnecessary transfer of profits from businesses and their owners to the tax authorities, and tax professionals. In my experience, global tax management is not a priority in most business school programs, so even very sophisticated entrepreneurs/managers are making cross-border decisions without a clear understanding of the tax systems they’re engaging. For readers who want a primer on global tax management, see my novella La Brienza Winery: Tax Trouble in Wine Country, co-authored with Arthur Cockfield, JSD (Stanford).
While Canada and the United States, and other countries, have detailed rules on when or how commentaries published by the OECD may become woven into the fabric of that country’s interpretation of treaty law—a conversation beyond the scope of this article—there is an increased marketing push for countries worldwide to attract digital and remote workers.
Moreover, tax practitioners are not only seeing a traditional continuation of the mobility of business executives that has been taking place for decades, but also, and quite remarkably, a new generation of business travelers who are increasingly sophisticated enough to establish their own business legal entities. And so, the stage is set for our drama.
In its “Tech Talent Strategy – Digital Nomads” post of November 07, 2023, Canada’s Citizenship and Immigration offers the following definition of a “digital nomad”:
- “A digital nomad is a person who earns their living working online from various locations outside their country of permanent residence.
- As they are not entering the Canadian labour market, they may enter as visitors and reside where they like for up to six months.”
Seems straightforward enough, but don’t be fooled. Leaving before six months or simply following the immigration rules does not translate into tax protection. If you carefully consider Canada’s residence law and the treaty with the United States, including the leading tax court decisions, you will see how any intending traveler seeking to work in Canada can become trapped in a highly complex web of international tax intrigue from which the escape routes may be limited and very dear. The CBSA tracks your travel data, and the CRA knows you are here. I get calls from people who worked in Canada many years ago who assumed their employer ‘had taken care of everything’. The CRA has a knack for sending you a tax assessment including taxes, penalties and interests years after your stay. You may forget, they don’t.
My insights are informed by my December 2025 110 page update on Canadian residence law, to the Tax Advisor’s Guide to the Canada-U.S. Tax Treaty, a book and digital service published by Thomson Reuters, available for around C$1,000.00 plus hst. As the Editor in Chief and Principal co-Author of the two volume, 2,300 page book/service, I was pleased to have been cited, together with the book, by the Federal Court of Appeal, Priority Foundation v. Canada (National Revenue), 2025 FCA 180 (decision released October 7, 2025).
- The Holy Trinity: Immigration Law, Business Law, and Tax Law
My remediation, aka “redo” files, tend to follow a consistent pattern. There is always an opening act where immigration, employment, and corporate issues [together comprising business law] are addressed, a turning point where a strategy is implemented, and then the elusive tax that inevitably catches up with them. Surprisingly, the common denominator in my residency remediation files is a flawed legal process. A person can pay top dollar for legal advice in connection with their relocation plans to receive a visa, but business law and tax are two sides of the same coin, and professional advice can sometimes be siloed and unidimensional—unlike a traveller’s lived experience. Even with well-timed residence tax advice, the subject of residence tax law in Canada is a daunting one, here is why.
The primary objective of tax treaties is to eliminate double taxation. To achieve this goal, treaties aim to define the term “resident” so that an individual or corporation generally will not be subject to tax as a resident by each Contracting State. Article IV is based on the principal of fiscal domicile of the OECD Model Treaty whereby a person is considered to be a resident of a country, if, under the laws of that country, the person is subject to taxation by that country because it is the person’s country of domicile, residence, citizenship, place of management, place of incorporation, or similar criterion. The Treaty provides important tie-breaker rules to determine residence in the case of a person who, under the basic definition of residence under Article IV, would be considered to be a resident of both Canada and the U.S. (e.g., an individual who is taxable as a resident under domestic tax law in both Canada and the U.S.). These rules will apply to such dual residents to determine the residence of the individual for all purposes of the Treaty. However, relief under the Treaty from tax liability does not necessarily mean that a taxpayer will be relieved from the domestic compliance and reporting obligations of a Contracting State. The legal waters run very deep especially in fact scenarios involving individuals, including snowbirds, who are spending time in the U.S. Advance tax planning is required to side-step very onerous tax land mines. Equally, very important and complex rules apply to U.S. citizens who are seeking relief under the Canada-U.S. Tax Treaty. It is very easy to misread the treaty and think you have solved your problem and have the right answer, when due to the highly technical construction of the treaty, you actually have the wrong answer and the economic costs that go with it.
Canada imposes primary liability for income tax based on tax residency. The term “resident” is not defined in the Act. The determination of whether a particular person is resident in Canada for the purposes of the Act is made based on a number of “connecting” factors set out in common law and deeming statutory provisions of the Act. The general concept of residence has been developed in common law. Further, the Act contains supplemental rules dealing with the residency of individuals, corporations and trusts. As different rules apply to the determination of residency of individual, corporations, trusts and partnerships, the residency analysis starts from the legal nature of a taxpayer. The taxpayer’s residency is then determined by the application of various “connecting” factors set out in common law and deeming provisions of the Act, as relevant for the particular taxpayer. In common law, residency is based on the economic and non-economic relationships existing between the taxpayer and Canada. The concept of residency under Canadian domestic law is premised on the assumption that (i) every person has a residence; and (ii) may have more than one.
The determination of who is a resident in Canada is one of the most complex legal questions under Canadian international tax law, it is also arguably the most important. After all, can you navigate between two destinations on a map without knowing where North is? Compounding the challenge to this question are over 7 (seven) decades of case decisions related to the concept, the rules and the tests. This blog can in no way explain the architecture or content of how residence law works in Canada including the ordering and hierarchy of the rules, or in cases dealing with travelling to and from Canada, including for work.
The seminal case on the meaning of ordinarily resident in Canada is the Supreme Court of Canada decision in Thomson v. Minister of National Revenue, [1946] S.C.R. 209. Some of the passages from the decision are noted below:
Estey, J.
A reference to the dictionary and judicial comments upon the meaning of these terms indicates that one is “ordinarily resident” in the place where in the settled routine of his life he regularly, normally or customarily lives. One “sojourns” at a place where he unusually, casually or intermittently visits or stays. In the former the element of permanence; in the latter that of the temporary predominates. The difference cannot be stated in precise and definite terms, but each case must be determined after all of the relevant factors are taken into consideration, but the foregoing indicates in a general way the essential difference. It is not the length of the visit or stay that determines the question. Even in this statute under section 9(b) the time of 183 days does not determine whether the party sojourns or not but merely determines whether the tax shall be payable or not by one who sojourns.
Kerwin, J.
There is no definition in the Act of “resident” or “ordinarily resident” but they should receive the meaning ascribed to them by common usage. When one is considering a Revenue Act, it is true to state, I think, as it is put in the Standard Dictionary, that the words “reside” and “residence” are somewhat stately and not to be used indiscriminately for “live”, “house” or “home”. The Shorter Oxford English Dictionary gives the meaning of “reside” as being “To dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place”. By the same authority “ordinarily” means “1. In conformity with rule; as a matter of regular occurrence. 2. In most cases, usually, commonly. 3. To the usual extent. 4. As is normal or usual”. On the other hand, the meaning of the word “sojourn” is given as “to make a temporary stay in a place; to remain or reside for a time”.
Canada has over 90 tax treaties where the subject of residence law in Canada often must be considered. Remote workers and digital nomads who fail to plan, and even for those who do but don’t get cohesive advice, could face substantial financial repercussions.
- Citizenship by Investment (CBI) – All that Glitters is not Gold
Successful business owners and entrepreneurs around the world acquire citizenship and permanent resident status in another country through an ever-growing competition of investment programs. There are many reasons for this, including: glamour and cachet, the ability to work in a particular country or region, lifestyle, asset protection, and political security. And some seekers living in a high tax country, may also consider CBI or RBI (or CRBIs) for tax reasons. Depending on jurisdiction, there may be a number of players, from service providers to government agencies, involved in a journey to acquire CRBIs. This article is not about CRBIs but rather about the merits of obtaining a tax opinion relating to a contemplated investment outlay. Very generally, CRBIs allow high net worth individuals to acquire citizenship or residence visas in return for making specified financial investments in a particular country. Many countries offer citizenship and residence by investment programs today. There is also a complex web of agencies and advisors that often go along with these opportunities. The legal parameters of these choices can be quite extensive and varied as they relate to, for example, the concept of physical presence.
People pursuing a digital nomad visa or CRBIs, often have very different expectations about their tax circumstances than the unpleasant realities that may follow them under residence rules. Some of these tax surprises are noted below. Although extremely different in their legal composition and economic repercussions, both Canada and the United States have their own respective systems of departure taxes on their residents. Leaping into a foreign CRBI without having a multi-jurisdictional (including local country) and multi-disciplinary understanding of your tax and related legal consequences (including tax, legal, accounting) may be imprudent and costly. The CRBI fine print needs to be carefully considered. For example, a program may have unlikely and unpleasant rules and restrictions on post visa travel. For Canadians, residence may be looked upon as easy to acquire but difficult to lose. As explained in the residence chapter in my book, The Tax Advisor’s Guide to the Canada-U.S. Tax Treaty, travellers may depart Canada, even for years to live and work abroad, only to find out later, contrary to their plans, that fiscally speaking, they never left. Not everyone who leaves Canada to acquire CRBI can shelter under the double tax convention between Canada and their newly adopted home and expect the CRA to respect that emigrant’s entitlements to treaty benefits. It is also important to remember that each foreign jurisdiction and CRBI program has its own rules on taxation, and these legal details must be examined on a case-by-case basis. Establishing banking relations while abroad may entail their own hazards. For example, for US travellers, checking the wrong box, or signing the wrong paper on a self-certification, may trip a wire that brings you into a danger zone the IRS has in place to support its global enforcement reach in international reporting. For Canadian travellers, newly acquired foreign immigration status can complicate CRS due diligence and reporting for both the individual and the foreign financial institution. It’s worth noting that CRBI can also create new challenges for financial institutions and agencies in minimizing risks in the very broad realm of global regulatory compliance.
Lately, and importantly, some major governments and international bodies have been expressing concerns around certain ‘buy-a-passport’ style programs. And while it may not be clear whether any particular change applies to you, the shifting sands in this area can, for some, affect how easily you may be able to travel or work in the EU and the USA in the future—so getting timely, proper, legal advice before relying on any expected benefits, including mobility may be prudent.[1]
- Entrepreneurs and executives abroad: No, you are not in Kansas anymore
The legal label and legal structure that describes your business world in Canada or the United States, as a sole proprietor, employee, or independent contractor or owner/manager of a personal service corporation, personal business corporation, LLC, partnership, S Corp or C Corp is often viewed through a different regulatory lens when you cross the border. This realisation also applies with equal truth to trusts, living trusts, executive compensation, and retirement planning. Digital nomads do think carefully about the comfortable clothes and shoes to take in their smart carry-ons, but how their legal arrangements will follow them after arriving at their destination is more an afterthought (if they are lucky). Reliance on careful tax and business planning, even at the ‘best practices’ level for where you live now, may be questionable when that structure is considered under another country’s tax and legal framework. For digital and remote travellers to and from Canada, this can potentially result in double or triple tax costs for you, and involve multiple tax troubles for your legal entity or ‘employer’. Worse still, many remote workers who function in highly regulated fields, for example health and teleworking, may not receive timely and proper legal advice regarding provincial or state laws that can apply to (and sometimes hinder) their work strategies.
- Silent Enforcement: CRS, FATCA, TIEAs, EOI
In May 2008, as a result of the revelations of whistleblower and former UBS executive, Bradley Birkenfeld, the IRS learned that tens of thousands of US taxpayers maintained secret bank
accounts in Swiss banks. A lot has happened since then in the field of global regulatory compliance and reporting of bank accounts. For background you can read my book, International Tax Evasion in the Global Information Age, co-authored with David Chodikoff, published by U of T Press and Springer Nature (15K chapter downloads).
Through a legal network of treaties, including newer multilateral systems - the subject of which is not appropriate for this article -governments may access and exchange allowable taxpayer information. This includes the traditional double tax treaty system, and the system of Tax Information Exchange Agreements. For a background on Canada’s TIEA system, see my book: Practical Insight: Canada’s Tax Information Exchange Agreements, published by Thomson Reuters (available on Taxnet Pro).
The United States has its own system compelling banks outside the U.S. to report U.S. persons to the IRS under FATCA. The treaty between Canada and the U.S. also contains its own collections enforcement article [two recent cases under the article include: Retfalvi v. United States, 930 F.3d 600 (4th Cir. 2019) and Ryckman v. Commissioner, 163 T.C. No 3 (2024)]. Self-certification systems under Canadian law [Parts XVIII (FATCA) & XIX (CRS) ITA] and under U.S. law can be quite tricky to navigate and can lead to costly penalties. A ‘look before you leap’ (i.e., speaking with your tax professional) may be prudent in such matters—whether you are travelling abroad or facing such banking documents at home.
And so it is that often armed with little more than a checklist, or AI, digital nomads and remote workers planning to travel abroad for work in 2026 may believe, “I’ve got this.” When actually, without your biography, playing the tape forward, and a seasoned professional to guide you, you almost certainly do not.
© David S. Kerzner
[1] See, for illustration/background only. The following public materials are cited solely to note that the regulatory landscape is evolving and for no other purpose. European Commission, Eighth Report under the Visa Suspension Mechanism, COM(2025) 792 final (Dec. 19, 2025); Regulation (EU) 2025/2441 of the European Parliament and of the Council of 26 Nov. 2025 amending Regulation (EU) 2018/1806 as regards the revision of the suspension mechanism; European Commission, Commission welcomes agreement on a stronger and more flexible visa suspension mechanism (June 17, 2025); Council of the European Union, Visa policy: Council and European Parliament secure a deal on rules about the suspension of visa-free travel for third countries (June 17, 2025); European Parliament, More flexible visa suspension mechanism (Oct. 7, 2025); Council of the European Union, Council greenlights new EU rules for the suspension of visa-free travel for third countries (Nov. 17, 2025); Visas: Visa Bond Pilot Program, 90 Fed. Reg. (Aug. 5, 2025); White House, Restricting and Limiting the Entry of Foreign Nationals to Protect the Security of the United States (Dec. 16, 2025); U.S. Dep’t of State, Suspension of Visa Issuance to Foreign Nationals to Protect the Security of the United States (effective Jan. 1, 2026).