Tax Planning Strategies

Departure Tax Canada: What Happens When You Leave

By October 15, 2026 No Comments

This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

» Quick Answer

  1. If you leave Canada permanently, the Canada Revenue Agency generally treats you as having sold most of your worldwide assets at fair market value on the day you depart — a "deemed disposition" that triggers capital gains tax on your final Canadian T1 return.
  2. Canadian real estate, RRSPs, RRIFs, TFSAs, pension entitlements and employee stock options are typically exempt from the deemed disposition, but each follows its own non-resident tax rules afterward.
  3. You must file a final part-year T1 by April 30 of the year after you leave, and attach Form T1161 (list of properties) and Form T1243 (deemed disposition schedule) if your reportable property is worth more than $25,000.
  4. You can elect on Form T1244 to defer the tax by posting security with the CRA until you actually sell the property, which often eliminates up-front cash strain.
  5. After departure, Canadian-source income like dividends, rent and RRSP withdrawals is subject to Part XIII non-resident withholding tax, typically 25% but often reduced by treaty.

» Why Leaving Canada Changes Everything on Your Tax Return

A move abroad feels like a change of address. The Canada Revenue Agency sees it very differently. The day you cut your residential ties to Canada, the tax system treats you as if you had sold almost everything you own and bought it back a moment later — all before you have left the country. The resulting bill is called departure tax, and for Canadians with growing portfolios, private company shares or a vacation property out of province, it can be a significant one.

The reassuring news is that departure tax rewards planning. Canadians who start the process ninety days before their flight generally pay less tax, keep more flexibility and avoid the penalties that catch unprepared emigrants. If your move involves working in the United States, our guide to cross-border tax compliance for Canada–US business owners is a useful companion piece to this one.

90 Days of planning before departure
4 Core CRA forms to file
25% Default Part XIII withholding rate
$2,500 Max penalty for a late T1161

» Quick Start: Pick Your Path

Your departure tax picture depends on who you are. Individual filers typically focus on investment portfolios and personal property. Incorporated professionals and SME owners have to layer in holding companies and private share planning. Cross-border professionals must coordinate Canadian departure rules with the tax system of the country they are moving to.
Individual filer

Focus on Form T1161 (list of properties), Form T1243 (deemed disposition schedule), and the final part-year T1. Review RRSP, TFSA and employee stock options separately.

Incorporated professional

Your Canadian-controlled private corporation and holding company do not emigrate with you. Review share valuations, planned dividends and corporate residency before departure day.

SME owner selling the business

If you are selling before you leave, the lifetime capital gains exemption may apply. Our note on LCGE and business exit planning walks through the sequence.

Cross-border contractor

Coordinate Canadian non-resident status with the tie-breaker rules of the Canada–US tax treaty, and plan withholding on any continuing Canadian clients.

Not sure which path fits? A short conversation with the team at ClearWealth can usually narrow it down in one call.

» The Deemed Disposition Rule, Explained Without the Jargon

Section 128.1 of the Income Tax Act says that when you stop being a Canadian tax resident, you are deemed to have sold most of your property at fair market value on departure day and immediately re-acquired it at that same price. The resulting capital gain is taxed on your final Canadian return — even though no actual sale took place.

In plain language, the CRA takes a snapshot of your assets the day you leave and sends you a bill as if you had cashed everything in. The "sale" is theoretical. The tax is real.

A worked example makes it concrete. Picture a Toronto reader with a $350,000 investment portfolio she purchased over the years for a total of $200,000. On departure day, the CRA treats her as having sold the whole portfolio for $350,000. That produces a deemed capital gain of $150,000. At the current 50% capital gains inclusion rate — which you can read more about in our note on Canada's capital gains inclusion rate for 2026 — $75,000 of that gain is taxable. At Ontario's top marginal rate, the departure tax owing would land near $40,000.

ClearWealth Accounting Advisors
Worked Example: $350,000 Portfolio on Departure Day
How the deemed disposition flows from fair market value to departure tax owing.
Deemed Capital Gain
$150,000
Taxable Portion (50%)
$75,000
Est. Departure Tax
~$40,125
Illustrative only, based on Ontario top marginal rate (53.53%) and the 50% capital gains inclusion rate. Source: Canada Revenue Agency. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

The next day she can sell any of those investments at $350,000 with no further Canadian capital gain, because her adjusted cost base has been bumped up to the deemed sale price. The pain is front-loaded, but it does not repeat.

» What You Pay Tax On, and What You Don't

Not every asset triggers departure tax. Canadian real estate, registered accounts such as RRSPs and TFSAs, pension entitlements and most employee stock options are exempt from the deemed disposition. They follow separate non-resident rules once you leave.

The quickest way to orient yourself is by category. Our broader note on Canadian residential real estate tax rules expands on the real estate side.

ClearWealth Accounting Advisors
What Triggers Departure Tax, and What Doesn't
Common Canadian asset categories and how each is treated on emigration.
Asset Category Deemed Disposition on Exit? What Happens Later
Public stocks and ETFsYes — triggersAdjusted cost base reset to fair market value; no Canadian tax on future gains
Canadian investment real estateNo — taxable Canadian propertyCapital gains tax applies on eventual sale; non-resident withholding on rent
Principal residence in CanadaNo — taxable Canadian propertyPrincipal residence exemption may apply to pre-departure years on sale
RRSP and RRIF accountsNo — registered exemptPart XIII withholding on withdrawals; typically 25%, often 15% under treaty
TFSA accountsNo — registered exemptNo new contributions permitted while non-resident; penalty tax if made
Private company sharesUsually yes — triggersExempt only if the shares qualify as taxable Canadian property; valuation needed
Source: Canada Revenue Agency, Leaving Canada (emigrants) — canada.ca. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

The pattern is simple. Assets the CRA can tax later, when you actually sell them, are generally exempt from the deemed disposition. Assets that could slip beyond Canada's reach are caught now.

» Your 90-Day Pre-Departure Roadmap

Departure tax rewards early planning. A disciplined ninety-day runway typically covers residency confirmation, asset valuations, Form T1161 preparation, the Form T1244 security election decision and the practical mechanics of closing out your Canadian financial life.
ClearWealth Accounting Advisors
Your 90-Day Pre-Departure Timeline
Seven milestones that keep an emigration organized, legal and tax-efficient.
Day 90 · Confirm residency intent
Review residential ties and consider Form NR73 for a CRA opinion.
Day 75 · Build the asset inventory
List every taxable asset at fair market value and adjusted cost base. Commission valuations.
Day 60 · Close non-essential ties
Transfer memberships, review RRSP and TFSA treatment, discuss family arrangements.
Day 45 · Decide on Form T1244
Model the tax owing and choose whether to defer by posting security.
Day 30 · Notify financial institutions
Flag non-resident status so banks and brokers apply the correct withholding.
Day 14 · Settle payroll and HST
Final paystub, record of employment, closing HST filings for self-employment income.
Day 0 · Departure
Keep flight records and proof of new address — strongest evidence of the departure date.
Source: Canada Revenue Agency, Form NR73 and Leaving Canada guidance. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.
  1. 1
    Day 90 — Confirm residency intent.Review your residential ties (home, spouse, dependants) and consider filing Form NR73 to request a non-binding CRA opinion on your residency status.
  2. 2
    Day 75 — Build your asset inventory.List every taxable asset with fair market value and adjusted cost base. For private company shares or significant art, commission formal valuations now.
  3. 3
    Day 60 — Close non-essential ties.Transfer memberships, update driver's licence plans and review your RRSP and TFSA treatment. If you have a Canadian spouse staying behind, discuss the implications carefully.
  4. 4
    Day 45 — Decide on Form T1244.Model your departure tax owing and decide whether to pay in full or elect to defer by posting security with the CRA.
  5. 5
    Day 30 — Notify financial institutions.Tell your bank, broker and pension administrators that your status is changing so they apply the correct non-resident withholding from day one.
  6. 6
    Day 14 — Settle Canadian payroll and HST.Collect your final paystub, record your ROE if applicable, and close any outstanding HST filings for self-employment income.
  7. 7
    Day 0 — Departure.Keep flight records and proof of your new country's address — they are the strongest evidence of the departure date on your final T1.

» Form T1244: How to Defer Your Departure Tax

Form T1244 is the CRA election that lets you defer paying departure tax until you actually sell the asset, rather than on your final return. You post security — typically a letter of credit, a bank guarantee or a pledge of the asset itself — and the CRA accepts the deferral for an unlimited period.

The election often makes sense for Canadians sitting on large unrealized gains in illiquid assets. If most of your departure tax relates to a concentrated share position or private company equity you have no intention of selling, paying tens of thousands of dollars in up-front tax on a paper gain can create real cash strain. Posting security keeps the money in your pocket until a true sale occurs.

Two cautions apply. The election generally must be filed by the balance-due date of your final T1 — miss it, and the deferral option is usually gone. And the CRA assesses acceptable security case by case, so build the conversation into your ninety-day planning window rather than waiting until April. Our overview of the CRA Voluntary Disclosures Program covers a related CRA-election framework for context.

» After You Leave: Ongoing Canadian Tax Obligations

Becoming a non-resident does not end your relationship with the CRA. Canadian-source income — dividends, interest, pension payments, RRSP withdrawals and rental income — typically remains subject to Part XIII withholding tax at a 25% statutory rate, often reduced by tax treaty to as low as 10% or 15%.
ClearWealth Accounting Advisors
Non-Resident Withholding Rates by Income Type
Canada's 25% statutory Part XIII rate compared with common treaty-reduced rates.
Treaty rates may vary by article and payer type. The 0% US interest rate applies to arm's-length interest. Rents are not reduced by treaty for most countries. Source: Canada Revenue Agency and the Canada–US tax convention. ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

Three ongoing filings tend to matter most. A Section 216 election lets non-resident landlords file a Canadian return on net rental income rather than paying 25% on the gross rent — usually a better outcome. A Section 217 election works similarly for Canadian pension income. And a treaty rate reduction must be claimed, usually by filing Form NR301 with each Canadian payer so they apply the lower withholding rate from day one.

For dual-residency situations, the tie-breaker rules in each tax treaty decide where you are considered resident for treaty purposes. Our note on cross-border tax filing for dual-employment households expands on how these rules play out in practice.

» Common Mistakes That Cost Emigrants Thousands

  • →Treating the move as a change of address rather than a tax event — the deemed disposition is triggered by residency, not by citizenship or passport.
  • →Skipping Form T1161 when total reportable property exceeds $25,000. The CRA penalty can reach $25 per day up to a maximum of $2,500 per late form.
  • →Keeping a Canadian home available for personal use alongside a spouse or minor children left behind — a primary residential tie that can defeat non-resident status entirely.
  • →Contributing to a TFSA while non-resident. New contributions are typically hit with a 1% per month penalty tax until withdrawn.
  • →Forgetting to notify Canadian financial institutions of the status change, which leads to incorrect withholding and T4 slips that have to be unwound the following spring.
  • →Missing the Form T1244 security election deadline — once the final T1 is filed and assessed without it, the deferral option is generally lost.
  • →Assuming the Canada–US tax treaty automatically reduces every withholding rate. Treaty benefits must be claimed, usually with Form NR301 on file with each Canadian payer.

» Frequently Asked Questions

Do I pay tax on my house in Canada when I move abroad?

No. Canadian real estate is classified as "taxable Canadian property" and is exempt from the deemed disposition on emigration. You will typically pay Canadian capital gains tax only when you eventually sell the property, and may still be able to claim the principal residence exemption for the years you lived in it.

What happens to my RRSP if I become a non-resident of Canada?

Your RRSP stays intact. It is not caught by the deemed disposition, so no departure tax applies to the plan itself. When you later withdraw funds, the Canadian financial institution typically withholds Part XIII non-resident tax at 25%, often reduced by tax treaty to 15% for US residents and residents of many other treaty countries.

Can I keep contributing to my TFSA after I leave Canada?

No. Your existing TFSA balance stays and continues to grow tax-free for Canadian purposes, but new contributions made while you are a non-resident generally face a 1% per month penalty tax until withdrawn. Your contribution room also stops accumulating until you re-establish Canadian tax residency.

How does the CRA know I've actually left Canada?

The CRA relies on the departure date you report on your final T1, supported by evidence like your new foreign address, severed residential ties, flight records and your employment or housing arrangements abroad. Form NR73 is an optional way to request a formal CRA opinion on your residency status, though the opinion is not legally binding.

Can I defer paying departure tax until I actually sell the assets?

Yes, in most cases. By filing Form T1244 with your final T1, you can elect to defer payment of the departure tax by posting security acceptable to the CRA, such as a letter of credit or pledge of the asset. The deferral generally continues until you dispose of the property for real.

What CRA forms do I need to file when I leave Canada permanently?

The core package is your final part-year T1 return, Form T1161 (list of properties if your reportable property exceeds $25,000), Form T1243 (deemed disposition of property schedule) and, if you want to defer payment, Form T1244 (election to post security). Form NR73 is optional and used only if you want the CRA's opinion on your residency.

If I move back to Canada later, do I get the departure tax back?

In many cases, yes. If you resume Canadian tax residency and still own the property that triggered departure tax, you may be able to "unwind" the deemed disposition by electing to be treated as if the deemed sale never happened. There are conditions and timing rules, so the planning conversation is worth having before you return.

Do I still pay tax on my Canadian rental property after I become non-resident?

Yes. Rental income on Canadian real estate remains subject to Canadian tax. By default, the tenant or property manager withholds 25% of gross rent and remits it to the CRA. Filing a Section 216 election lets you pay tax on net rental income instead, which is usually a better outcome.

Plan the Exit Before It Costs You

Departure tax is one of the few tax events where the entire outcome is set before you file. Canadians who plan with a ninety-day runway typically save money, keep flexibility and avoid the penalties that catch unprepared emigrants. If a move abroad is on your horizon, book a consultation with ClearWealth and we will walk you through your specific picture before departure day arrives.

Book a Consultation

This article is for informational purposes only and does not constitute tax or financial advice. Tax rules change and apply differently to each person's circumstances. Consult a qualified accounting professional before making any tax or financial decisions.

Sources & References

  1. Canada Revenue Agency — Leaving Canada (emigrants) — https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html
  2. Canada Revenue Agency — Form T1161, List of Properties by an Emigrant of Canada — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1161.html
  3. Canada Revenue Agency — Form T1243, Deemed Disposition of Property — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1243.html
  4. Canada Revenue Agency — Form T1244, Election to Defer Payment — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1244.html
  5. Canada Revenue Agency — Form NR73, Determination of Residency Status — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/nr73.html
  6. Canada Revenue Agency — Non-residents of Canada — https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html
  7. Canada Revenue Agency — Canada–US tax convention — https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/competent-authority-agreements-notices/canada-u-s-tax-convention.html
  8. Department of Justice Canada — Income Tax Act, Section 128.1 — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-128.1.html
  9. Canada Revenue Agency — Capital gains inclusion rate (line 12700) — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains.html