Tax Implications of Leaving Canada for Good

TurboTax Canada   2019

When you decide to move to another country from Canada, there are several things to consider, including the date of your planned departure, what you intend to keep in Canada and what are you liable for or entitled to.

Severing Ties and How it Works

In Canada, you are able to leave or emigrate and still keep your Canadian citizenship. You simply cease to be a resident of Canada and are considered a non-resident. The concept of severing ties allows the Canada Revenue Agency to ensure you are truly a non-resident of Canada.

Proof of severing ties entails demonstration of leaving and not appearing to return. Some examples of severing ties are canceling your license, closing bank accounts, selling your primary residence, and purchasing or renting a place in your new country. The CRA allows you to keep rental property and your tax-free savings account. While these are all acceptable proof of severing ties, the CRA takes the entire situation into account when determining if you demonstrated emigrating.

Your Tax Responsibilities

In order to emigrate, you and your family (if applicable) are required to file a final tax return in the year you leave. This is required even if you leave midway through the year. Any amount you owe should be paid prior to your departure. You are still required to pay taxes for any income earned in Canada before or after you leave the country. The filing deadline of April 30th of the following year is still in effect. You are also required to notify the CRA of your plan and date of emigration to cease your eligibility to certain tax benefits, such as the UCCB and the goods and services tax/harmonized sales tax benefit.

Your Tax-Free Savings Account

You are able to keep your tax-free savings for as long as you like, whether you live in Canada or not. You are no longer entitled to your yearly contribution room, nor are contributions allowed to be made once you have emigrated. Your investments can still grow in this savings vehicle tax free. It would be prudent to maximize your TFSA room and contribution prior to your departure.

Deemed Disposition

One of the biggest oversights when emigrating is the issue of deemed disposition. The CRA treats any property you own as if it were sold at the current fair market value when you become a non-resident. You might not have actually sold any property, but a deemed disposition is recorded on your tax return. For example, assume your rental property cost $200,000, and at the time of your departure from the country, the fair market value is $300,000. The difference between the two amounts equals a capital gain, for which tax is applicable. If you had a capital loss, on the other hand, you could also claim that on your return.

With more than 20 years’ experience helping Canadians file their taxes confidently and get all the money they deserve, TurboTax products, including TurboTax Free, are available at www.turbotax.ca. 

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