Leaving Canada: Your Complete Departure Tax & Non-Resident Checklist

You become a non-resident for Canadian tax purposes when the CRA determines you have severed your residential ties to Canada. The key factors are: you've left Canada with the intention of settling elsewhere, you no longer have a Canadian home available to you, and your spouse/dependants have also left or you've separated your personal ties. The day you become a non-resident triggers the deemed disposition.

On the day before you leave, you're treated as having sold all your property at fair market value (FMV) and immediately reacquired it at the same FMV. Any accrued capital gain is triggered. This applies to: shares of public and private companies, real property outside Canada, partnership interests, and most other capital property. Your Canadian real estate is excluded — the CRA continues to tax gains on Canadian real estate even after you become a non-resident.

The following are NOT subject to deemed disposition: Canadian real property (taxable when sold regardless of your residency), pension plans (CPP, OAS, employer pensions), RRSPs and RRIFs (taxed on withdrawal regardless of where you live), property used in a Canadian business, stock options that haven't vested, and life insurance policies.

Your RRSP can remain open after you leave Canada. Withdrawals are subject to a 25% non-resident withholding tax (reduced to 15% for periodic pension-like payments from RRIFs under most treaties, and to 15% for lump sum from RRIF under the Canada-US tax treaty). You cannot make new RRSP contributions as a non-resident. TFSAs: you can keep your TFSA open but cannot make new contributions. Importantly, the US does NOT recognize TFSAs as tax-sheltered — all TFSA income is taxable in the US if you're a US resident.

If at any point during the year you held specified foreign property (non-Canadian investments, foreign bank accounts, foreign real estate not for personal use) worth more than CAD $100,000, you must file T1135. This applies for the year of departure if you held qualifying property during the Canadian-resident portion of the year. Penalties for failure to file T1135 are $25/day up to $2,500 plus 5% of the property value for gross negligence.

Several strategies can reduce your departure tax liability:

**Post-departure elections**: You can elect under Section 216 to file a Canadian return on rental income and pay tax on net income rather than the 25% gross withholding.

**Crystallize losses before leaving**: If you have capital losses, trigger them before departure to offset gains.

**Installment sale or security agreement**: If you owe departure tax but don't have cash, you can post security with the CRA to defer payment.

**Timing**: Leaving early in the year or late can affect which year's income and gains are included in your departure return.

On your departure return, your province of residence is the province where you were resident on the day of departure. If you're in Ontario, the combined federal-provincial rate on capital gains can be significant. Some provinces are more aggressive than others about claiming residency — particularly Ontario and British Columbia. Make sure you formally change your provincial address, health card, and other ties before your departure date.

Once you're a non-resident, Canadian income payers (banks, brokers, employers) must withhold 25% on most passive income paid to you: dividends, interest, rental income, RRSP/RRIF withdrawals. This is reduced under tax treaties (Canada-US: 15% on dividends and periodic RRSP/RRIF payments, 0% on certain interest). You'll receive NR4 slips (not T4/T5) showing the income and withholding. If the treaty rate applies, file Form NR301 with the payer.