Are you planning to leave Canada and wondering what it means for your taxes? Here’s a comprehensive guide to help you understand your obligations as a resident moving out of Canada.

1. Am I considered an emigrant for tax purposes when I leave Canada?

You are generally considered an emigrant if you leave Canada to live in another country and sever your residential ties. These include:

• Disposing of or giving up your home in Canada 
• Moving your spouse or dependents out of Canada
• Selling personal property and breaking social tie

By severing these ties and establishing a permanent home abroad, you are no longer considered a resident for tax purposes.

2. What happens if I maintain ties in Canada after leaving?

If you keep significant residential ties in Canada, such as a home or close family, you might be classified as a factual resident. However, if you're a resident of another country with a tax treaty with Canada, you could be deemed a non-resident for tax purposes.

3. When do I officially become a non-resident of Canada?

You typically become a non-resident for income tax purposes on the latest of these dates:

• The date you leave Canada
• The date your spouse or dependents leave
• The date you become a resident of another country

4. What should I do about my Canadian bank accounts and payments after leaving?

Notify Canadian financial institutions and any payers that you are no longer a Canadian resident. This will help avoid complications with Canadian tax obligations.

5. Do I still need to file a tax return after leaving Canada?

Yes, you may need to file a tax return if:

• You owe tax, or
• You are eligible for a refund due to excess taxes paid
• Even if no return is required, inform the CRA of your departure date as soon as possible.

6. What is the "departure tax," and do I have to pay it?

When you leave Canada, certain properties, such as shares, jewelry, and collections, are considered sold at their fair market value, even if you haven’t sold them. This is known as a deemed disposition, and any capital gain from this must be reported.

7. How do I file my tax return after leaving Canada?

Use the tax package for the province or territory where you resided before departure. Ensure to enter the date of departure on page 1 of your return under the "Residence Information" section. If you have a spouse or common-law partner, report their net world income for the period they were a Canadian resident.

8. What income must I report after leaving Canada?

For the part of the year when you were a resident, you must report your world income (all income from inside and outside of Canada). For the non-resident portion of the year, you only report Canadian-source income. Some income may be subject to non-resident withholding tax.

9. What deductions can I claim after leaving Canada?

You can claim most deductions for the part of the year when you were a Canadian resident. However, moving expenses for leaving Canada are not deductible unless you're leaving to pursue full-time studies abroad with a taxable Canadian scholarship or grant.

10. What happens to my TFSA, HBP, or LLP when I leave?

You can keep your Tax-Free Savings Account (TFSA) but cannot contribute to it as a non-resident. Contributions made while non-resident may be subject to penalties. For the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP), special rules apply when you leave Canada, so review them on the CRA website.

11. Will I continue receiving Canadian benefits like GST/HST credits or Canada Child Benefit (CCB)?

Generally, non-residents are no longer eligible for benefits like the GST/HST credit or the Canada Child Benefit (CCB). If you receive these after leaving, contact the CRA to stop the payments.

12. What is my tax status if I move back to Canada?

If you later return to Canada and re-establish significant residential ties, you will become a resident again for tax purposes.

13. What is Section 217 of the Income Tax Act, and how does it apply to me?

If you continue to receive Canadian income (like pensions) after leaving, the payer will withhold non-resident tax. However, under Section 217, you can elect to file a Canadian tax return to potentially lower your taxes on that income.

14. How do I calculate my tax after leaving Canada?

To calculate your tax and credits, complete your tax return and the corresponding provincial form for where you last resided. You may also need to include Form RC381 if you were living in Quebec before leaving.

Conclusion:

Understanding your tax obligations as you leave Canada is crucial to avoid penalties or misreporting. Ensure you sever residential ties, notify Canadian financial institutions, and file any necessary tax returns for the year you leave. Consider consulting a tax professional for personalized advice tailored to your situation.

This blog provides general information and should not be considered as legal or tax advice. For personal assistance, contact Dinesh Aarjav & Associates.