The Ins and Outs of the Canadian Departure Tax

The Ins and Outs of the Canadian Departure Tax
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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.

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