Leaving Canada – Tax Implications and Departure Tax

When a Canadian taxpayer ceases to be a resident of Canada, he is deemed to have disposed of each property owned by him at fair market value. He is then deemed to have reacquired his property at fair market value.  In other words, the taxpayer potentially owes « departure tax », usually taxes on capital gains.  There are, however, many exclusions and ways to mitigate the effect of this rule.

The following is a non-exhaustive list of types of property commonly seen by us, some of which requires careful analysis and planning :

  • Shares in a company;
  • Interest in a trust;
  • Real estate;
  • Life insurance policies with cash value;
  • RRSPs;
  • TFSAs;
  • A right to OAS and QPP benefits;

Another factor to consider is whether or not the taxpayer would be considered to have become a non-resident by Revenu Québec and the Canada Revenue Agency as it is purely a question of fact, based on a list of criteria.  See folio S5-F1-C1 for more information on how the CRA determines your residency.

In the case of employees being transferred abroad, depending on the destination, it may be beneficial to retain Canadian tax residency.

For a consultation, contact Me Julien Cohen at 438-386-4223 ext. 2