What Happens to Your Taxes If You Move from Canada?

April 24, 2025
What Happens to Your Taxes If You Move from Canada?

Introduction

Moving from Canada to another country involves more than just relocating your belongings—it also triggers significant tax implications. The Canada Revenue Agency (CRA) requires individuals to follow specific procedures to determine residency status, report income, and settle tax obligations. Without proper planning, individuals may face unexpected taxes, penalties, or reporting obligations even after leaving Canada.

 

This article explains what happens to your taxes if you move from Canada, including how to determine tax residency status, how departure taxes work, and strategies to minimize tax burdens when leaving the country.

 

1. Determining Tax Residency Status in Canada

Canada taxes individuals based on their residency status, which is determined by residential ties and the length of time spent in Canada. When moving abroad, individuals may be classified as:

  • Resident: If they maintain significant residential ties (like a home, dependents, or personal property) in Canada.
  • Non-Resident: If they sever most significant residential ties.
  • Deemed Resident: If they live outside Canada but are present in Canada for 183 days or more in a tax year.
  • Part-Year Resident: If they leave Canada partway through a year.

Key residential ties that influence residency status include:

  • Owning a home in Canada.
  • Maintaining a Canadian driver's license, health insurance, or bank accounts.
  • Having a spouse or dependents remaining in Canada.
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2. The Departure Tax (Deemed Disposition)

When you leave Canada and become a non-resident, the CRA treats it as if you’ve sold certain assets at fair market value, even though no actual sale has occurred. This is known as the departure tax and is designed to capture gains accrued while you were a Canadian tax resident.

Assets Subject to Departure Tax

  • Shares and securities (like Canadian and foreign stocks).
  • Real estate (excluding a primary residence).
  • Personal property (art, jewelry, collectibles).
  • Business interests and partnerships.

Assets Exempt from Departure Tax

  • Canadian real estate (subject to Canadian tax upon actual sale).
  • Registered accounts like RRSPs, TFSAs, and RRIFs.
  • Pension plans and similar registered assets.

 

3. Reporting and Paying Departure Tax

  • File a final Canadian tax return, declaring all deemed dispositions.
  • Report gains and pay taxes on applicable assets.
  • Individuals can elect to defer departure tax by providing adequate security (like a bank guarantee) to the CRA.
  • Notify the CRA of the change in residency status.

 

4. Ongoing Tax Obligations After Leaving Canada

Even after leaving Canada, some income may still be subject to Canadian tax, including:

  • Rental income from Canadian property.
  • Income from Canadian businesses.
  • Capital gains from selling Canadian real estate.

Non-resident withholding taxes may apply to certain Canadian-source incomes, typically at a 25% rate, unless reduced by a tax treaty.

 

5. Strategies to Minimize Tax When Moving from Canada

  • Plan the timing of your move to minimize taxes in both countries.
  • Sell or restructure taxable assets before departure.
  • Review tax treaties between Canada and the destination country to avoid double taxation.
  • Use trusts or international tax planning structures to protect assets.

 

Conclusion

Moving from Canada involves complex tax considerations, including determining residency status, paying departure taxes, and managing ongoing Canadian-source income. Careful planning ensures compliance with CRA rules while minimizing tax liabilities. 

 

Tax Partners can assist individuals in preparing for a tax-efficient move, ensuring all reporting obligations are met and potential tax burdens are reduced.

 

This article is written for educational purposes.

 

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

 

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.

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