This is the guide people skip. It is also the one that saves the most money, because leaving badly is expensive in ways that are entirely avoidable if you know them in advance.
Nothing here assumes you will leave. It assumes only that a permit has an expiry date and that plans change.
Ceasing to be a tax resident
You stop being a Canadian tax resident when you sever your residential ties — give up the home, and your spouse and dependants leave with you. Handing back a permit is not what does it; the ties are.
The year you leave you file a final return covering the part of the year you were resident, with your departure date on it. Getting that date right matters, because everything below hangs off it.
Departure tax
On ceasing residency, Canada treats you as having sold most of your property at market value on the day you left, and taxes the gain. This is the deemed disposition, commonly called departure tax.
The important exemptions for most newcomers:
- RRSPs are not subject to it
- TFSAs are not subject to it
- Canadian real property is generally excluded from the deemed disposition, though it has its own rules on eventual sale
For someone whose Canadian assets are a savings account and a modest TFSA, departure tax is usually a non-event. For someone holding a large non-registered investment account, it is not, and it needs advice before you go.
Your registered accounts
TFSA. You may keep it and it keeps growing tax-free under Canadian rules. Stop contributing the moment you cease residency — contributions after that attract 1% per month. Note that your new country may not recognise the TFSA's tax-free status and may tax the growth anyway.
RRSP. You may keep it, and leaving it invested is often sensible. Withdrawals as a non-resident face withholding tax, commonly 25%, reduced by treaty for some countries. There is rarely any need to cash it out in a hurry — and hurrying is usually what costs money.
The most common expensive mistake is liquidating everything in a panic in the last fortnight. Registered accounts can usually stay where they are. Decide from a settled position, not from an airport.
Things with deadlines
- Your final tax return for the departure year. Skipping it does not end the obligation; it just makes the eventual resolution worse.
- Tell your bank your residency has changed. Reporting obligations and account rules differ for non-residents, and getting this wrong creates problems later.
- CPP contributions you made are not lost. They stay credited to you, and Canada has social security agreements with many countries. You may be able to claim a pension later. Find out before you assume it is gone.
- Any tax refund owed to you still exists. Leave a way to be paid and an address that reaches you.
The afternoon that pays for itself
Write down, now, while nothing is urgent:
1. Every Canadian account you hold and how to reach it from abroad 2. Your CRA My Account login, and a second contact method that survives the move 3. Which of your assets are registered and which are not 4. The name of an accountant who handles departure returns
If it never happens, you have lost an afternoon. If it does, you will be making these decisions in the worst two weeks you have had in years, and the version of you sitting there will be very glad the list exists.