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Leaving Canada? Tax Pitfalls Ahead

Tax Strategies for Leaving Canada ๐Ÿ‡จ๐Ÿ‡ฆ

Residency Status for Tax Purposes ๐Ÿก

Canada’s tax system is based on residency, not citizenship. If you leave permanently, you might be deemed a non-resident. It’s important to maintain significant ties like a home, spouse, dependents, or bank accounts to remain a resident for tax purposes.

Departure Tax (Deemed Disposition) ๐Ÿ’ผ

When you leave Canada, certain assets are considered disposed of at fair market value, potentially triggering capital gains tax.

๐Ÿ“ Exemptions:

  • Canadian real estate (taxed upon sale).
  • RRSPs, RRIFs, pensions (taxed normally).

Filing a Final Tax Return ๐Ÿ“

In the year of departure, file a final tax return as a resident. It’s essential to report any departure tax liabilities and complete Form T1243 (Deemed Disposition) and T1161 (Properties over $25,000 CAD) if needed.

Future Taxation as a Non-Resident ๐ŸŒ

  • Canadian-source income (rent, dividends, pensions) is subject to non-resident withholding tax, usually 25%, but this may be reduced by a tax treaty.
  • Employment income earned in Canada may still be taxable.

RRSPs and Pensions ๐Ÿ’ณ

RRSP withdrawals are subject to a 25% withholding tax, which can be lower under some tax treaties. Canadian pensions (CPP, OAS, private pensions) are taxable, dependent on the new countryโ€™s treaty with Canada.

Other Considerations ๐Ÿ“‹

Principal Residence: If you plan to sell your home after leaving, you may forfeit the principal residence exemption.

TFSA & RESP: While tax-free in Canada, these accounts may be taxed by your new country.

Foreign Reporting: Your new country may require the declaration of former Canadian assets.

Consult a Professional: If you’re planning to leave, consider consulting a tax professional to minimize liabilities and ensure compliance. We’re here to help with specific tax planning strategies tailored to your situation! ๐Ÿ“Š

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