Digital Nomad
Digital Nomads in Canada: Navigating Residency, Withholding & UHT Elimination
Updated rules in 2025 mean big changes for non-resident digital workers: UHT is gone, but withholding and residency still matter.
By NomadicTax Research Team • 5-8 min read • February 25, 2026
## Residency and Tax Obligations for Digital Nomads
Digital nomads—people who work remotely from a country while being tax residents elsewhere—face complexities. In Canada, you must consider:
- Whether you’re a **non-resident or deemed resident** for tax purposes, determined by ties like home, family, and time spent. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-g/guide-non-residents-deemed-residents-canada-completing-your-return.html?utm_source=openai))
- The **type of income** you earn: employment income, self-employment, royalties. Some are taxed differently.
- If you provide services from Canada to foreign clients vs. working for a foreign employer remotely.
## Key Recent Changes Effecting Digital Nomads
- **Underused Housing Tax (UHT) eliminated**: as of the **2025 calendar year**, UHT no longer applies—you don’t have to file returns or pay this tax going forward. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html?utm_source=openai))
- **Lowest personal income tax rate reduced**: from **15% to 14%**, effective July 1, 2025, meaning full-year rate for 2026 (and future years) is 14%, with 2025 being transitional. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-g/guide-non-residents-deemed-residents-canada-completing-your-return.html?utm_source=openai))
- **Top-up Tax Credit introduced**: to preserve effective rate for non-refundable credits claimed above first bracket for 2025. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-g/guide-non-residents-deemed-residents-canada-completing-your-return.html?utm_source=openai))
## Withholding Tax Rules & Filing Requirements
- If you’re a non-resident earning income in Canada from **film or video acting services**, you might require withholding—for which special forms (T1287, T1288) are used. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-g/guide-non-residents-deemed-residents-canada-completing-your-return.html?utm_source=openai))
- Section 216.1 returns: if you elect under this for income like acting services, there are specific deadlines and procedures. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-g/guide-non-residents-deemed-residents-canada-completing-your-return.html?utm_source=openai))
## Strategic Tips for Digital Nomads
- **Track your days physically**: know your residency status—days in Canada matter for eligibility and tax obligations.
- **Earnings source matters**: Remote digital work for international clients vs. income connected to a Canadian client—this affects whether CRA considers income taxable in Canada.
- **Use new tax rate reduction**: even as a non-resident, if you have Canadian taxable income, the 14% lowest rate and associated credits apply.
- **Eliminate UHT duties**: If you owned residential property in Canada previously taxed under UHT, note no new returns or payments needed from 2025 onward. Still address years 2022-2024. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html?utm_source=openai))
## Example Scenario
Maria is a digital marketing consultant. She lives in Spain but spends 90 days/year working remotely from Canada. She provides services mostly to non-Canadian clients. Under Canadian rules:
- She’s a non-resident with Canadian-source income only if clients are in Canada.
- She would not need to worry about UHT anymore after 2025, even if she had a vacation home here.
- If she earns for acting in a film or video production in Canada, uses T1287 or T1288 to reduce withholding.
- When filing for that income, credits and lowest tax rate (14%) apply accordingly.
## Actionable Checklist
- Assess your residency status and document where you are physically located.
- Determine whether your client base or income source triggers Canadian-source income.
- Identify if withholding obligations apply to any part of your income.
- Learn about and apply the top-up tax credit and reduced lowest rate.
- If you own Canadian residential property, cancel UHT with proper documentation for 2025 onward.