The Complete Guide to Leaving Canada: Tax and Financial Considerations

Moving abroad is increasingly attractive to Canadians, whether for retirement in a warmer climate, exciting work opportunities in international markets, or simply the adventure of experiencing life in a different culture. However, the financial and tax implications are significantly more complex than most people realize when they first start planning their international move, and the surprises can be expensive—sometimes costing tens or even hundreds of thousands of dollars.

This comprehensive guide covers everything you need to know before packing your bags and what you'll need to manage after you've settled into your new home abroad.

Understanding Tax Residency

A common and costly misconception: Simply leaving Canada doesn't automatically end your Canadian tax obligations.

Canada separates physical residency (where you actually live day-to-day) from tax residency (where you're legally required to pay taxes). You can physically leave Canada, establish a home thousands of kilometres away, and still remain fully liable for Canadian taxes on your worldwide income. This catches many expatriates completely off guard when they discover they're still required to file Canadian tax returns and pay Canadian tax on their global earnings years after leaving the country.

How Tax Residency is Determined

The Canada Revenue Agency (CRA) uses a sophisticated framework of primary and secondary ties to determine your tax residency status. Rather than relying on a simple checklist, they examine the overall pattern of your connections to Canada.

Primary Ties (even a single primary tie is usually enough to maintain tax residency):

• Having a home in Canada available for your exclusive use - This means you can return anytime without needing permission or waiting for tenants to vacate

• Leaving a spouse or common-law partner in Canada - Even if you're working abroad

• Leaving dependent children in Canada - For example, children attending Canadian schools

Secondary Ties (multiple ties can collectively establish or support tax residency):

• Personal property - Furniture stored in Canada, vehicles registered in your name, significant belongings

• Social ties - Memberships in Canadian clubs, professional organizations, gyms, religious communities, or maintaining close personal relationships

• Economic ties - Canadian bank accounts, investment accounts, credit cards, continuing employment with a Canadian company (even remotely), Canadian business interests

• Provincial health insurance coverage - Maintaining active coverage

• Driver's licenses and vehicle registrations - In your name in a Canadian province

• Canadian passport - Though less significant on its own

• Professional organization memberships - Active memberships in Canadian professional bodies

The CRA evaluates the overall pattern and strength of your ties rather than mechanically checking boxes. You can request an opinion on your specific tax residency status by filing Form NR-73, but here's the important caveat: this opinion is non-binding. The CRA can later change their position based on new information or a different interpretation of your circumstances, so the opinion provides guidance rather than absolute certainty.

For comprehensive details, review the CRA's official information on determining residency status.

The "Ordinarily Resident" Rule

Here's where intentions matter as much as actions, and where many people's assumptions about tax residency fall apart. Canadian tax law includes what's called the "ordinarily resident" concept, which considers not just your current physical situation but also your future intentions and the customary pattern of your life.

If you plan to eventually return to Canada—for example, as a temporary digital nomad planning a two-year adventure, on an international work assignment with a defined end date, or as an academic on sabbatical—you may well remain a Canadian tax resident for the entire period you're away, regardless of how many months or even years you spend outside the country.

Think of it this way: if Canada remains your home base, the place you "ordinarily reside" even if you're temporarily elsewhere, then for tax purposes, you haven't really left at all. This is particularly relevant for professionals on international assignments, academics on sabbatical, or anyone who views their time abroad as a temporary chapter rather than a permanent lifestyle change.

Tax Treaties

When you become a tax resident in a country with a tax treaty with Canada, the treaty's "tie-breaker" rules may automatically resolve conflicting residency claims between the two countries. Canada has tax treaties with nearly 100 countries, which you can explore through the Department of Finance's treaty information page.

These treaties prevent double taxation and typically provide reduced withholding rates on Canadian-source income. Countries without treaties face higher withholding rates and more complex tax situations.

Before You Leave

Filing Your Final Return

When you file your final Canadian tax return as a resident:

• Indicate your departure date on the return

• Provincial and federal credits will be pro-rated based on your departure date

• You'll no longer be entitled to GST/HST credits or Canada Child Benefit

• Inform all financial institutions of your non-resident status—this is mandatory, as they have reporting obligations

The CRA provides detailed guidance through Guide T4058, Non-Residents and Income Tax.

Departure Tax

Canada imposes a "deemed disposition" rule on certain assets when you cease to be a tax resident. This means you're treated as having sold these assets at fair market value on your departure date, triggering capital gains tax—even though you haven't actually sold anything. The policy rationale is straightforward: Canada wants to tax the appreciation that occurred while you were a Canadian resident before you move that wealth beyond Canadian tax jurisdiction.

Exempt from departure tax:

• Registered accounts - TFSA, RRSP, RESP, FHSA remain completely exempt

• Real estate located in Canada - Whether primary residence, rental property, or vacation home

• Cash - Including Canadian and foreign currency

• Personal-use items - Under certain value thresholds

Subject to departure tax:

• Non-registered investment accounts - All taxable accounts with stocks, bonds, ETFs, mutual funds

• Valuable collections - Fine art, jewelry, classic cars, or other collectibles above certain values

The tax bill can be genuinely substantial if you have significant unrealized gains. For example: If you have a $500,000 non-registered investment portfolio with $200,000 in accumulated gains (50% inclusion rate), you'll face immediate capital gains tax on that $100,000 taxable gain—potentially $30,000 to $50,000 or more depending on your marginal tax bracket and province.

Deferral option: You may defer paying this departure tax by filing Form T1244 (Election to Defer Payment of Tax on Income Relating to the Deemed Disposition of Property) and providing appropriate security to the CRA. This allows you to postpone the actual tax payment until you sell the assets in the future, though interest will accrue on the deferred amount. More details are available in Income Tax Folio S5-F1-C1.

Your Home

Your primary residence significantly impacts tax residency:

Keeping a home for your exclusive use typically maintains tax residency, even if you're physically absent for years. The key word is "exclusive"—meaning you can return anytime without permission or waiting for tenants.

Renting to arm's-length third parties (unrelated tenants ...