Moving abroad means a to-do list that never seems to end. Visas. Shipping. Bank accounts. Somewhere to live. Tax is often near the bottom of that list, until people discover that leaving Canada can trigger a tax bill on assets they haven’t sold. That’s the Canadian departure tax. Strictly speaking, it isn’t its own tax at all. It’s a rule that pretends you sold many of your assets on the day you stopped being a Canadian resident. Know how it works before the movers show up, and you’ll save yourself money and a fair bit of stress.
Why Departure Tax Exists
Normally, Canada taxes a capital gain only when you realize it. So picture someone sitting on twenty years of growth in a stock portfolio who moves to Lisbon and sells the following week. Without a special rule, Canada would never collect a cent on gains that grew while they lived here. The fix: the moment before you become a non-resident, you’re deemed to have disposed of most of your property at fair market value and bought it straight back at that same value.
Whatever gain that produces goes on your final Canadian return for the year you leave. The deemed reacquisition at fair market value also becomes your new cost base going forward.
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Which Assets Are Caught
The deemed disposition applies broadly. It typically covers:
- Shares of public and private corporations held in non-registered accounts.
- Mutual funds and ETFs you hold outside registered plans.
- Bitcoin, ether and any other crypto or digital assets.
- Property outside Canada, say a villa in Spain or a rental condo in Florida.
- Interests in certain trusts and partnerships.
For an owner of a private company, the deemed disposition of shares can produce a large gain, even though nothing has actually been sold and no cash has been received.
Which Assets Are Excluded
Several important categories aren’t subject to the deemed disposition at departure, largely because Canada keeps the right to tax them later:
- Canadian real estate, such as your home or a rental property in Canada.
- Property used in a business carried on through a permanent establishment in Canada.
- Registered plans and pensions, which covers RRSPs, RRIFs, TFSAs and registered pension plans. Nothing is due on these when you leave; money you pull out later gets non-resident withholding instead.
- Certain employee stock option rights, which follow their own rules.
- Some property of short-term residents, such as property owned when they arrived in Canada, if they were resident for 60 months or less in the preceding 10 years.
Excluded doesn’t mean tax-free. Selling Canadian real estate later as a non-resident brings its own withholding and clearance certificate process, and renting it out after you leave creates non-resident rental filings.
The Forms Involved
Form T1161: List of Properties
Add up the fair market value of everything you own on the way out. Over $25,000? Then you have to file Form T1161, which lists your properties. Cash doesn’t count, and neither do certain personal-use items worth under $10,000. This applies even if no tax is owing. File it late and the penalty runs at $25 a day, capped at $2,500. That’s an expensive thing to forget.
Form T1243: Deemed Disposition Calculation
This form calculates the deemed gains and losses on affected property, which then flow to your final return.
Form T1244: Election to Defer Payment
Paying tax on a gain you haven’t received in cash can be difficult. You can elect to defer payment of the tax on deemed dispositions until the property is actually sold. Above a certain level, the CRA requires adequate security, such as a letter of credit or a pledge of shares. No interest is charged on properly deferred amounts, which makes this election valuable.
Timing and Deadlines
Your departure date is generally the latest of the dates when you leave Canada, when your spouse or common-law partner and dependants leave, or when you become a resident of your new country. Your final return for the year of departure is due April 30 of the following year. It reports worldwide income up to the departure date, and Canadian-source income only after that.
Cutting Ties Properly
Departure tax only applies if you actually become a non-resident. The CRA looks at residential ties: a home in Canada, a spouse or dependants who stay behind, and secondary ties such as bank accounts, a driver’s licence and provincial health coverage. Someone who leaves but keeps significant ties may remain a factual resident, taxable on worldwide income, which is a very different outcome.
Avoiding Double Taxation in Your New Country
Your new country may not recognize the step-up in cost that Canada applies at departure. If you later sell an asset there, you could be taxed on the full gain, including the part already taxed in Canada. Some tax treaties, including the Canada–U.S. treaty, allow an election to step up the cost base in the new country to match. Check this before you leave, not when you sell.
Planning Before You Go
- Get fair market valuations of private company shares and other significant assets as of your departure date.
- Consider whether selling, or deliberately realizing losses, before leaving makes sense.
- Find out how RRSP and TFSA withdrawals get taxed once you’re gone.
- Make a call on Canadian real estate. Sell before you go? Keep it and rent it out? Or leave it empty?
- Plan the security arrangement if you’ll elect to defer payment.
For a deeper look at how residency ties are assessed and what the final return involves, this guide to Canadian departure tax covers the CRA’s residency categories and filing steps in more detail.
Conclusion
Leaving Canada is treated as a sale of most of your assets, even when nothing changes hands. Your Canadian real estate and registered plans escape it, as does certain other property. Shares, funds, crypto and anything held abroad usually don’t. The paperwork runs like this: T1161 if your assets top $25,000, T1243 for the gains, and T1244 if you’d like to defer payment. Then check how your new country will see those same assets. Start a few months out and departure tax becomes one more item on the list, not a shock.
Frequently Asked Questions
Do I have to sell my assets when I leave Canada?
No. Departure tax treats you as if you sold them, but you keep the assets.
Is my house in Canada subject to departure tax?
No. Canadian real property is excluded from the deemed disposition, although later sales and rentals as a non-resident have their own rules.
Are RRSPs and TFSAs taxed when I leave?
They aren’t subject to the deemed disposition. Once you’re a non-resident, though, withdrawals generally have withholding tax taken off the top.
Can I delay paying departure tax?
Yes. You can elect to defer payment until you actually sell the property, with security required above a certain amount.
