Canada Exit Tax (Departure Tax)

Are you considering leaving Canada permanently?

Whether it’s for work, family, or a new adventure, it’s essential to understand the financial implications of your departure. One crucial aspect to consider is Canada’s Departure Tax. At Cana Tax, we specialize in helping individuals navigate the complexities of taxation and financial planning, ensuring a smooth transition as you embark on your new journey.

What is Departure Tax?

When a Canadian resident decides to leave Canada and sever their tax residency, the Canada Revenue Agency (CRA) treats many of their assets as if they were sold on the day of departure. This process is known as a “deemed disposition.” Essentially, any unrealized gains on certain properties—like investments—become taxable, even if you haven’t actually sold anything.

Who is Affected by Departure Tax?

You may be subject to the Departure Tax if you meet the following criteria:

• You leave Canada and sever your residential ties (home, spouse, dependents, social and economic connections).
• On your departure date, you own “reportable” property that is subject to deemed disposition.

It’s important to note that not all assets are subject to this tax. For instance, registered accounts like RRSPs and TFSAs, as well as your principal residence, are typically exempt.

The Mechanics of Departure Tax

When you leave Canada, here’s what you need to do:

1. Final Tax Return: Declare your date of departure on your final Canadian tax return and report any deemed dispositions of reportable assets.
2. Capital Gains Calculation: For non-registered investments that have appreciated, calculate the capital gains based on the difference between their fair market value at departure and their original cost basis.

Can You Defer Departure Tax?

Yes, under certain conditions, you can elect to defer the Departure Tax. This option allows you to delay your tax liability until you actually dispose of the asset or if you return to Canada. This can significantly help with cash flow, especially if you’re not liquidating investments immediately.

Planning Your Departure

If you’re contemplating leaving Canada, here are some steps to consider:

• Assess Your Assets: List your non-registered investments, private company shares, and any other properties that might trigger deemed disposition.
• Evaluate Exemptions: Check if your assets fall under registered accounts or your principal residence, which may be exempt from tax.
• Estimate Potential Capital Gains: Compare the current fair market value of your assets against their cost basis to forecast your departure tax liability.
• Seek Professional Advice: Given the complexities of tax regulations, it’s wise to consult with tax professionals who can guide you in making informed decisions.

Why Choose Cana Tax?

At Cana Tax, we understand the intricacies of Canadian tax laws and the potential impact on your financial situation when leaving the country. Our team of experts is here to provide personalized guidance tailored to your unique circumstances.

Get Started Today!

If you’re planning to leave Canada and want to ensure a smooth transition regarding your tax obligations, contact us today! You can reach us by:

• Calling: 604-373-0788
• Emailing: commercial@ctpros.ca
• Filling in our contact form on our website.

We’re here to help you navigate the complexities of the Departure Tax and make your transition as seamless as possible.

Read More

For more detailed information directly from the Canada Revenue Agency, read more at:

• General CRA guidance:
  Individuals leaving or entering Canada – non-residents
  
• Specific guidance for emigrants leaving Canada:
  Leaving Canada – emigrants