What is Canada Departure Tax?

Let’s talk taxes.

It’s good to understand that you’ll be deemed an emigrant if you are departing Canada and turning into a non-resident for tax reasons.

An emigrant is anyone who leaves and breaks off their residence links from their home country to live in another.

Having dependents leave Canada, disposing real estate, and breaking social ties may be involved in such process.

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44–7393–450–837).

This includes if you are looking for alternatives or a second opinion.

Some of the facts might change from the time of writing, and nothing written here is formal tax advice.

For updated guidance, please contact me.

Understanding Canada Departure Tax

What is departure tax in Canada?

The departure tax is assessed for those who stop being residents of Canada. It involves the deemed transfer of assets at fair market value.

Their taxable earnings include half of any proceeds from the deemed sale, which are then subject to regular taxation.

Most deductions are available to emigrants from their stay in the country. However, relocation expenses are not deductible unless some conditions are fulfilled.

Their resident status may also prevent them from getting certain federal and provincial non-refundable tax credits.

Non Residency in Canada

The latest of the following dates marks when individuals become non-residents for tax reasons:

• Their Canada departure date.

• The departure date of their spouse or dependents.

• The date they become residents in a foreign country.

Disclosure Requirements Canada Departure Tax

Emigrants are required to report their non-resident status to Canadian payers and financial firms.

To get a refund or pay taxes, they must submit a Canadian tax return.

The tax package for the province in where they lived at the time of departure should be used for that year.

Aside from the tax return for their departure year, individuals are required to file Form T1243, which details the deemed transfer of property.

Also, Form 1161 has to be filed if the aggregate value of the property exceeds 25,000 Canadian dollars.

Emigrants are required to submit their worldwide income for the portion of the year they lived in Canada. Only income from Canadian sources are declared after leaving.

Canada Departure Tax Exemptions

Some assets are free from exit tax, such as:

• Canadian real estate
• Inventory and business property
• Assets in registered accounts, like tax-free savings accounts and registered pension schemes.

When to file departure tax in Canada?

The deadline for departure tax is April 30 of the year after leaving.

By submitting Form T1244, individuals may opt to postpone payment until they actually offload their assets or repatriate to Canada.

It is necessary to offer sufficient security if the deferred tax goes over 16,500 CAD.

Considerations After Departing Canada

If the new home nation also levies capital gains, there may be foreign tax credits available.

Canada and certain other nations have tax deals that can prevent double taxes. Emigrants who want to know their tax responsibilities in Canada and their new country of residency should refer to such agreements.

Returning to Canada

Under certain circumstances, repatriating residents are allowed to retract the deemed sale and buy back their possessions at fair market value.