The Ins and Outs of the Canadian Departure Tax

The Ins and Outs of the Canadian Departure Tax
Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Reading Time: 2 minutes

Instead of figuring out the Departure Tax Canada, we suggest that you learn about it here. As someone who was a Canadian resident but aren’t going to be one, you will be disposing your assets at fair market value. In case of a deemed gain, you must report it on your final tax return or your departure tax.

Here are some other things to know:

Exceptions

You may be eligible for Canadian Departure Tax Exemptions if:

  1. Your Canadian real property was a principal residence and thus, qualifies for principal residence exemption. In case, you will keep and rent it out then change of rules will apply, you will have to pay the tax for the resulting capital gains.
  2. Your Canadian business property operates as a permanent establishment.
  3. When Leaving Canada RRSP, TFSAs, employer pension plans, and other registered accounts won’t be on the list. Here is the complete list.
  4. Short term residents – 60 months or less — do not have to pay tax on property they inherit after they left or used to live in while in Canada.

Learn about tax issues for Canadians moving to the US

Eligible Assets

You will have to pay the departure tax on the following asset types:

  • Personal use and listed personal property, including works of art, stamps, jewelry, coins stamps, and rare manuscripts
  • Property you own outside Canada
  • Unincorporated businesses located outside of Canada
  • Portfolio investments, such as mutual funds and company shares both within and outside Canada, interests in partnerships or non-resident inter-vivo trusts

Filing Obligations

When you file your final tax return, you must also include two special schedules, i.e., T1161 and T1243. The former lists the assets you own when emigrating and the latter is about the deemed disposition.

Deferring Payment of Tax

You may also Defer Departure Tax Canada until you dispose of the property – with no interest. For that, you’ll have to file form T1244 with your final tax return. Besides that, the Canada Revenue Agency (CRA) will also ask you for adequate security.

Special Consideration for Emigration to the US

Canadian expats moving to the US can make an election to avoid potential double taxation of any deem gains they acquire. When you do that, you decide a deemed cost base for US tax purposes. The said base will be equal to the fair market value of your property when you leave Canada. Therefore, when an actual sale happens, you won’t have to pay for the gain in the US after paying in Canada.

Learn in detail about the special tax relief for Canadians in the US

Besides the departure tax, there are other things that you must consider when moving abroad. Consult a tax expert to guide you through the personal tax implications when you leave Canada. For instance, do you know How to File Canadian Tax Return from Overseas? Need help? Then contact us immediately!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.  Akif CPA will not be held liable for any problems that arise from the usage of the information provided on this page.

Leave a Reply

Your email address will not be published. Required fields are marked *

Client Reviews
AKIF CPA
5.0
Based on 95 reviews
powered by Google
Ammoria Daniels
Ammoria Daniels
02:11 16 Sep 21
We contacted Akif with an urgent matter regarding corporate taxes. Akif immediately understood what was needed and... within days had everything ready to sign. The level of service we received was amazing and unmatched. Waqar expertise in trucking industry made our situation seamless. His communication was outstanding; I heard from him daily and could have been completed sooner if I was as fast as he was 😃 Highly recommended!read more
Joe Paneitz
Joe Paneitz
18:30 18 Aug 21
What an absolute pleasure to work with this CPA firm. My business is already seeing such a positive impact and growth.... I cannot believe I didn't connect with them sooner. This firm is helping in so many ways! 5 stars is an understatement! Thank you so much for your help AKIF CPAread more
Helptest ARCpoint Labs
Helptest ARCpoint Labs
15:02 18 Aug 21
The firm is quick, responsive, and has the latest technological software. Thus far, I have been with them for 3+ years... and will continue to work with them even after relocating. They make it easy even when I'm miles away. Would highly recommend them.read more
Luz Tipaz
Luz Tipaz
16:06 13 Jul 21
Saim and his team are the best CPAs in town. I have been their client for years. All started when I needed help with... company structure with multiple companies and then accounting and Taxes. I have been very happy ever since. Thank you AKIF CPA.read more
Maria perez
Maria perez
18:31 08 Jun 21
Me and my husband have been getting all of our personal Taxes, business Taxes, monthly bookkeeping, accounting and... payroll done with AKIF CPA. Recently, we had more stuff come up and had detailed analysis done on capital gains, single family rentals (SFR) and business disposition. You will only know how great this CPA company is until you have worked with them and given them a chance. Words can’t describe our experience. AKIF CPA gets the job done every time - very reliable, professional and affordable.read more
Afnaan Amin
Afnaan Amin
22:14 02 Jun 21
Very good experience, we had unique situation in regards to cross border income as Canadians currently residing in the... US. Income on both sides of the border through completely different channels. Everything was very easy and completed timely, I also had lots of random questions and Mohammad provided top notch service along the way and even after we finished our taxes!! Highly recommended.read more
Ryan Paton
Ryan Paton
10:56 08 May 21
I moved to the USA from Canada late 2018 as part of a promotion/relocation for work. For my 2019 returns, I used an... accounting firm recommended by the local Canadian social club in my city, which was a terrible experience. They were slow to respond to inquiries and would follow up in piecemeal requests which dragged out my return process over several months, often asking for information I had already provided.For the price I paid, I vowed to find better service. I found Mohammad online and decided to reach out. Mohammad was extremely responsive, took care of my US and Canadian returns as well as my wife's business returns in a timely manner. Overall, it was a very positive experience and I would recommend him to another in my situation.read more
Tuan Vo
Tuan Vo
01:59 20 Apr 21
I relocated to Texas from Alberta, Canada and needed a CPA to help me with my cross-border taxes as I was not happy... with the CPA that I used previously. During my interviewing process to find another CPA, I had good feedback from Mohammad as he was able to answer my questions regarding my unique tax situation with expertise, and importantly to me, in a timely manner. I decided to use his services for the current tax year and I have nothing but compliments for the work Mohammad provided. If you are in need of a professional cross-border CPA, I highly recommend reaching out to Mohammad Akif.read more
See All Reviews