Moving from... Canada

Welcome to your tax information guide on leaving Canada. Our detailed Q&A guide has been split into 6 key areas in order to help you find the information you need – quickly and easily!  If you require further help, simply click here to contact us.

This guide is for reference only and professional tax advice should be taken before any action is taken.

Before/Once you depart

Q. Should I complete any documentation prior to leaving Canada?
A. No procedures, reporting, or tax payments are required before final departure from Canada.  Tax returns for the final period are due on the regular due dates, and no clearance from Canada Revenue Agency (“CRA”) CRA is required.
 
You report your non-residence status on filing a part-year return and disclosing a date of departure to CRA.
 
Q. Should I open an offshore bank account?
A. An offshore bank account may assist you in claiming Canadian non-residence.

Tax - Basics

Q. Will I be regarded as not resident in Canada during my period overseas?
A. An individual leaving Canada will often want to be considered a non-resident and in disputes with CRA, the issue is usually whether the person has truly become non-resident. Some of the steps that are generally taken by an individual to be considered a non-resident of Canada are:

• Close Canadian bank accounts if possible. Ensure that banks where accounts will be maintained are informed of the change in residency. This would include any RRSPs or other deferred income plans.

• Advise clubs or professional associations of the change in status from a resident member to a non-resident member. Alternatively, such memberships may be discontinued.

• Cancel Canadian credit card accounts, particularly department store, Gas Company and other domestic credit cards.

• Change the address on your driver's license to be in care of a relative or friend in Canada.

• Cancel Canadian brokerage accounts and maintain investments directly or through a broker located outside of Canada. Alternatively, ensure Canadian broker has on file that you are a non-resident of Canada.

• Rent out or sell any Canadian property, or otherwise arrange matters so that a residence is not available in Canada for personal use during the period of Canadian non-residency. It may be advisable to avoid renting property given CRA's current trend to view a rental property as being considered a residential tie for factual residency and considered available for use for Treaty purposes.

• Ensure legal counsel is informed of your change in residency.

• Cancel provincial health care coverage. Non-residents are not covered by provincial health care when returning for a visit.

• Limit recurring personal visits to Canada.

Please note that you may incur significant gains from the deemed disposition so you may not want to cease Canadian residency.

Tax - Administration

Q.  Will I still need to complete a Canadian tax return after my departure?
A.  You are required to file a tax return in the following circumstances:

• If tax is payable for the year in excess of amounts which were withheld on your behalf

• If you dispose of taxable Canadian property in the year (regardless of whether the disposition resulted in a gain or loss

• If you have a taxable capital gain or disposed of property in the year

• If you have to repay any Old Age Security or Employment Insurance benefits.

• If you or your spouse are entitled to receive a Child Tax Benefit

• If you had self-employment earnings in excess of C$3,500 (the return is filed in order to determine the amount of Canada Pension Plan contributions which are payable on that income) 

• If you have rental property in Canada

• If you have not repaid all of the amounts you withdrew from your RRSP under the Home Buyer’s Plan or the Lifelong Learning Plan.

• If the Canadian tax authorities (CRA) have issued a demand to file.

Tax - Income from Employment

Q. Will I have to pay Canadian tax in respect of the employment income I will earn overseas.
A. This will depend on you residence status. If you remain resident in Canada you will be subject to Canadian tax on worldwide income. In this case a foreign tax credit will usually be claimed on your Canadian tax return, equal to the lesser of the Canadian taxes attributable to foreign source income or the total foreign taxes paid during the year.
 
If you become a non-resident of Canada you will be liable to Canadian tax only on income sourced in Canada.

Q. Will I have to pay tax in respect of Canadian investment income earned while overseas?
A. Yes. Dividends and most forms of interest paid to non-residents are subject to withholding tax at 25%, subject to the reduced tax rates for treaty countries or certain other elections.

Q. I plan to sell my Canadian property while overseas. Are there any capital gains tax implications?
A. The gain on the sale of a principal residence may be tax exempt if the residence meets certain requirements. There is an exemption calculation to determine the exempt portion of the gain on the disposition of a principal residence. The formula calculates the numerator as one plus the number of taxation years in which the property is designated as a principal residence. The denominator is calculated on the period of ownership.

When taxable Canadian property (which includes a principal residence) is sold by a  non-resident of Canada, there is a requirement on the part of the purchaser to withhold tax of  25% of gross proceeds and remit these funds to the CRA. A clearance certificate can be obtained from the CRA to have 25% tax withheld on the capital gain of the property.  If you decide to sell your principal residence you should ensure that your legal counsel files this form on your behalf.

Q. I have a number of Canadian company shares. Will I remain liable to Canadian capital gains tax if I sell any of these while outside Canada?
A. Generally, all capital gains arising from the disposal or deemed disposal of capital assets are taxable, regardless of the location of the asset sold, but non-residents are taxed only on gains arising from the disposal of taxable Canadian property.  The tax rules deem assets to have been disposed of in a number of situations including upon ceasing to be a tax resident of Canada (although it is usually possible to make an election to defer the tax due, until such time as the property is actually sold).

Q. What Social Security contributions will I pay when abroad?
A. This will depend upon whether you retain some form of continuing contractual link with your Canadian employer. If you do not retain a connection you will become liable to Social Security contributions in the country that you are going to. If you do retain a connection your ability to remain in the Canadian system, and be exempt from Social Security in the country you are going to, will depend on the existence and nature of a Social Security agreement between the two countries.