Leaving Canada involves more than changing the address on your next tax return. The date on which you cease to be a Canadian tax resident, the ties you keep, the property you own on departure and the Canadian income you receive afterward determine your obligations.
Planning before the move allows you to document the facts while the information is still readily available. It also reduces the risk of discovering after departure that a form, withholding obligation or deemed disposition should have been addressed.
Determine the actual date of non-residence
Tax residence is based on all the facts. A home available in Canada, the location of a spouse and dependants, personal ties and the establishment of a new home abroad are especially important. Day count matters, but it does not settle every case by itself.
When a person is considered resident in two countries under their domestic laws, a tax treaty may resolve the conflict through a series of tie-breaker tests. The date selected determines how long worldwide income continues to be reported in Canada.
Prepare the departure return and required forms
The return for the departure year reports the date of emigration. The individual generally reports worldwide income for the resident portion of the year and then applies non-resident rules to the period that follows. Personal credits may also be limited based on world income during the non-resident period.
Form T1161 may be required when the total fair market value of certain property owned on departure exceeds the prescribed threshold. Forms T1243 and T1244 may also be relevant to the departure-tax calculation or particular elections. The forms required depend on the assets, their tax cost and the choices made.
- Departure date and facts supporting the change in residence.
- Property inventory, tax cost and fair market value.
- Income before and after departure classified by source.
- Address, financial institutions and payers to notify of the new status.
Understand departure tax
When an individual emigrates, certain property is deemed to have been sold at fair market value and immediately reacquired for the same amount. The deemed disposition can create a gain even though no asset was actually sold and no cash was received.
Some property is excluded or subject to special rules. Investment portfolios, private-company shares, foreign interests and significant personal property should be inventoried early enough to obtain supportable values. An election may sometimes defer payment if acceptable security is provided, but the choice has to be reviewed in context.
Organize Canadian-source income after departure
After the change in status, certain Canadian income is subject to non-resident withholding. Banks, brokers, plan administrators, tenants and rental agents should be told that the recipient is now a non-resident so the correct treatment can be applied.
A person who keeps Canadian rental property must review withholding, Form NR6 and the section 216 return. See our page on tax returns for non-residents. Certain pension income may instead be eligible for a section 217 election.
Plan the departure before closing Canadian files
Residence, departure tax, registered accounts, private corporations and income kept in Canada should be considered together. Our tax residency and international mobility page explains the broader framework.
Impôts Ici can establish the timeline, prepare the departure return and identify obligations that continue after emigration. To have your situation reviewed before or after the move, contact our team.
