Introduction
As remote work becomes more popular, many Canadians are choosing to live abroad. This case study follows Sarah, a graphic designer from Toronto, who moved to Mexico while continuing her Canadian client work.
Background
Sarah relocated to Playa del Carmen, Mexico, and found herself in a complex tax situation involving both Canadian and Mexican tax laws.
Tax Residency Considerations
- Canadian Residency: Sarah maintained ties to Canada, such as her home and bank accounts.
- Mexican Residency: After living in Mexico for more than 183 days, she became a tax resident there.
Tax Implications
- Canadian Taxes: As a Canadian resident, Sarah had to report her global income, including earnings from her Mexican clients.
- Mexican Taxes: Sarah was subject to Mexican income tax on her earnings generated while residing there.
Steps Sarah Took
- Consulted with Tax Professionals in Both Countries: She got advice on how to manage dual taxation.
- Claimed the Foreign Tax Credit: This helped alleviate double taxation on her income.
Conclusion
Sarah’s experience illustrates the importance of understanding tax obligations when living abroad. Digital nomads should seek professional guidance to navigate complex international tax laws.