By Sharad Gondaliya, CPA
An Ontario or BC corporation lets you be the sole director while living abroad. That freedom comes with a responsibility many foreign founders miss: Canadian law can hold a director personally liable for certain unpaid amounts. Living outside Canada does not change this.
Here is what the liability covers, how long it lasts and how to protect yourself.
What a director can be personally liable for
| Liability | Law | What is covered | How long after leaving the board |
|---|---|---|---|
| Payroll source deductions | Income Tax Act s.227.1 | Income tax, CPP and EI withheld from employees but not remitted | 2 years |
| Non-resident withholding tax | Income Tax Act s.227.1 | Part XIII tax on dividends, interest, fees and royalties paid to non-residents | 2 years |
| GST/HST | Excise Tax Act s.323 | Net GST/HST the corporation failed to remit | 2 years |
| Unpaid wages, Ontario and federal corporations | OBCA s.131, CBCA s.119 | Up to 6 months of wages, plus up to 12 months of vacation pay under the OBCA | Varies by statute; the CBCA allows 2 years |
| Unpaid wages, employees working in BC | BC Employment Standards Act s.96 | Up to 2 months of wages per employee | Set by the statute |
The withholding tax line surprises many owners. When the corporation pays a dividend to you or to a foreign parent, it must withhold Part XIII tax and remit it. If it does not, the director can be assessed.
When CRA can come after a director
CRA cannot simply bill the director first. Under the Income Tax Act, it must usually show that it tried to collect from the corporation. That means one of three things: a court certificate against the corporation that remains unpaid, the corporation being dissolved or liquidated, or the corporation going bankrupt.
Once that step is met, CRA can assess each person who was a director when the amount went unremitted.
Living abroad is not a shield
Some founders assume CRA cannot reach them overseas. Several of Canada’s tax treaties include collection assistance between tax authorities. A Canadian assessment also follows you if you later want to do business, bank or travel in Canada. Please treat these obligations as real from day one.
The due diligence defence
A director is not liable if they exercised the care, diligence and skill a reasonably prudent person would have shown in the same circumstances. The courts look at what you did to prevent the failure, not what you did after.
Practical steps that support the defence:
- Run payroll through a reliable provider that remits on schedule.
- Keep a written calendar of every remittance and filing due date.
- Review payroll, GST/HST and withholding remittances every month.
- Never pay suppliers or yourself ahead of CRA when cash is short.
- Record your oversight in directors’ resolutions or minutes.
- Authorize a CPA firm as your CRA representative so notices are not missed.
Why this matters if you consider a resident director
This liability is why resident and nominee director fees are high. A person who joins your board accepts personal exposure for amounts they do not control. Ontario and BC corporations avoid the issue because you can be your own director. A federal corporation cannot avoid it unless a founder already lives in Canada.
Resigning as a director
A director resigns in writing. The corporation must then report the change to the registry within 15 days. For an Ontario corporation, that is a Notice of Change in the Ontario Business Registry.
Resigning does not end liability for past failures. The 2-year period runs from the date you last ceased to be a director.
How we help
We register all CRA accounts for your corporation, act as your authorized CRA representative, run payroll and file GST/HST and withholding returns on time. That keeps the remittances that create director liability under control. Related reading: non-resident corporation tax compliance in Canada.
FAQs
Am I liable for the corporation’s income tax as a director?
Not generally. Director liability covers source deductions, withholding tax, GST/HST and certain unpaid wages, not the corporation’s own income tax.
Does liability apply if I never signed a cheque?
Yes. Liability attaches to the director role. What matters is whether you took reasonable steps to prevent the failure.
Can a director be liable after the corporation closes?
Yes, for amounts that went unremitted while you were a director, within 2 years of when you last ceased to be a director.
Speak with a CPA
Please book a free consultation at gondaliyacpa.ca/consultation. We are a 2026 Xero Awarded Firm with 1300+ five-star Google reviews, and we work on AFFORDABLE flat-fee annual packages.
Sharad Gondaliya is a CPA Canada & CPA USA with 15 Years+ experience of Accounting, Tax, Payroll of Corporate Small Businesses as Tax Accountant. He is a CPA Ontario member (61040184) and holds US CPA licences in Washington and Montana and is well known among corporate small businesses for tax planning, efficient tax solutions, and affordable CPA services. Sharad is the Principal (Director) of Gondaliya CPA – Affordable CPA Firm in Canada. Licenses: CPA Ontario: 61040184 | CPA USA (MT): PAC-CPAP-LIC-033176 | CPA USA (WA): 57629 | CPA Firm License: 61330051 View Full Author Bio