Nobody charges you to cross the border. What Canada charges is the tax on growth you never converted to cash, billed in the year you go. Below: how the charge is built, what escapes it, which forms carry it, and how to postpone paying.
Key Takeaways
- Emigration triggers a deemed sale of most property at market value under ITA 128.1(4)(b).
- Canadian real estate, RRSPs, TFSAs and pensions sit outside the charge.
- Form T1161 carries a $2,500 penalty that applies even when you owe nothing.
- Form T1244 postpones payment until you actually sell the property.
- Security is only required once the tax on the deemed sale passes $16,500.
What Departure Tax Is and When It Applies
Departure tax is not a fee, a levy or a penalty for leaving. It is ordinary income tax on unrealized growth, collected at the moment Canada loses the right to tax you later.
The charge lands on the day you cease to be a resident of Canada for tax purposes. The Canada Revenue Agency generally treats that date as the latest of three: the day you physically leave, the day your spouse and dependants follow, and the day you become resident in your new country. Cutting a lease and severing residential ties on the same weekend keeps those dates together.
Before you plan around any of this, settle the status question first. Someone who keeps a home and a family here has not emigrated at all, whatever their boarding pass says, and our guide to factual versus deemed residency works through that test.
How the Deemed Disposition Works on the Day You Leave Canada
Subsection 128.1(4) of the Income Tax Act (ITA) does two things at once. Immediately before you stop being resident, you are deemed to have disposed of your property at fair market value. You are then deemed to reacquire it at that same amount, which resets your cost base for the future.
Half of the resulting net gain enters your income and is taxed at your marginal rate for that year. Nothing was sold, so no proceeds arrive to fund the bill. That mismatch, rather than the rate, is what makes emigration expensive.
Property That Escapes Canadian Tax When You Emigrate
The deemed sale is broad but not universal. Certain assets stay outside it entirely:
- Canadian real property and Canadian resource property.
- Capital property used in a business you carry on through a permanent establishment in Canada.
- Excluded rights or interests, which cover RRSPs, RRIFs, TFSAs, RESPs, RDSPs, registered pension plans, deferred profit sharing plans, employee stock options and most Canadian life insurance policies.
- Property you already owned when you last became resident, if you were resident for 60 months or less out of the previous 120.
Canadian real estate is excluded for a reason worth understanding. It remains taxable Canadian property, so Canada simply waits and collects when you sell, through the section 116 clearance certificate process that a non-resident vendor must complete. Postponed, not forgiven.
Paragraph 128.1(4)(d) then offers a lever. You may elect to treat that Canadian real property and business property as sold anyway, which is worth doing when it carries an accrued loss you want set against gains elsewhere in the same return.
Calculating the Capital Gain on Your Departure Return
Numbers make the shape clear. Amara leaves Ontario for Portugal on 30 June and holds four things:
| Asset | Cost base | Value at departure | Result |
|---|---|---|---|
| Non-registered portfolio | $310,000 | $560,000 | $250,000 gain, half included |
| RRSP | $400,000 | $400,000 | Excluded |
| Etobicoke condo | $520,000 | $790,000 | Excluded, Canadian real property |
| Lisbon rental flat | $240,000 | $330,000 | $90,000 gain, half included |
Amara adds $170,000 to her income for a year in which she was resident for 181 days. Her non-refundable personal credits are prorated over those days under ITA 118.91, so roughly half the shelter she would normally expect is unavailable against that income. Timing the departure and the size of the accrued gain against each other is most of the planning work, and our overview of how capital gains are taxed covers the underlying mechanics.
Your RRSP, TFSA and Other Registered Accounts After You Leave Canada
The deemed disposition skips registered plans, but leaving still changes how each one behaves, and the differences are large enough to plan around before your departure date.
- RRSP and RRIF. Both stay intact and keep growing tax-free on this side of the border. Withdrawals after you leave Canada face non-resident withholding tax of 25%, and many treaties cut that to 15% for periodic RRIF or annuity payments while leaving lump sums at 25%. Timing withdrawals against your new country’s rates is one of the few levers that stays open after the move.
- TFSA. Canada keeps treating it as tax-free, but no new room accrues while you are away, and a contribution made while non-resident draws a 1% monthly tax until removed. Just as important, most other countries do not recognize the wrapper and simply tax the growth. For many emigrants the right answer is collapsing it before the move, and it deserves a deliberate decision either way.
- RESP and FHSA. Grants stop on an RESP once the beneficiary is no longer here, and existing grant money can be clawed back on withdrawals in some situations. An FHSA generally cannot be used for a home outside the country, so leaving usually means winding it down on its own timeline.
None of this appears on Form T1161, which is exactly why it gets missed: the exit paperwork is silent about the accounts that need the most attention.
Owner-Managers: Private Company Shares on the Way Out
Shares of your own corporation are not exempt. They face the deemed disposition at market value on your departure date, which forces two things most owners have never done: a supportable valuation of the business, and a decision about the lifetime capital gains exemption.
The exemption is the planning opportunity buried inside the exit. If the shares meet the qualified small business corporation tests at that moment, the deemed capital gain can be sheltered by any unused exemption room, up to $1,275,000 in 2026. The gain is crystallized, your cost base resets to market value, and no cash tax arises on that portion. Emigrating without checking those tests first wastes the single largest shelter available on the way out.
Example. Miguel moves abroad on 1 September holding shares of his consulting corporation worth $900,000 against nominal cost. The deemed disposition produces a capital gain of roughly $899,900. Because the shares qualify and his exemption room is untouched, the entire gain is sheltered, his cost base steps up to $900,000, and his departure return shows no tax on the shares. Without the tests met, half the gain lands in income in his final resident year.
Dividends the company pays you afterwards are a separate stream: as a non-resident you receive them under withholding tax rules, at 25% or the treaty rate, and the company must remit it. Budget for that before deciding whether to strip surplus out ahead of the move or leave it inside.
How to File a Tax Return for Your Departure Year
Three pieces of paper matter, and they have independent triggers:
- Enter your date of emigration on page 1 of the T1 for the year of departure.
- Attach Form T1243 to report each property caught by the deemed sale.
- File Form T1161 if the total value of your reportable property exceeded $25,000 on the day you left.
Reportable property for the T1161 test leaves out cash and Canadian bank deposits, registered plans, and personal-use items worth under $10,000 each. Everything else counts, including assets the deemed sale never touched.
That gap is where files go wrong. In our CRA representation practice, the emigrants who arrive with a problem are rarely the ones who owed real money on the deemed sale. They are the ones whose whole portfolio sat in an RRSP and a condo, who therefore owed nothing, and who never filed the T1161 because nothing seemed reportable. The late-filing charge runs $25 a day with a $100 floor and a $2,500 ceiling, it applies even where no tax is payable, and it applies even where you had no obligation to file a return at all. A nil departure tax with a $2,500 penalty attached is a common outcome, and it compounds through CRA interest and penalties if it goes unnoticed.
The filing deadline is the ordinary one: 30 April of the following year.
How to Defer the Departure Tax With Form T1244
You do not have to pay in the year you go. An election under ITA 220(4.5), made on Form T1244 and filed with the departure return, lets you defer payment until you genuinely sell the property or resume Canadian residence.
Security is only required above a threshold. Where the federal tax attributable to the deemed sale exceeds $16,500, or $13,777.50 for Quebec residents, CRA wants acceptable security: typically a letter of credit, a bank guarantee, or a charge over Canadian assets. Below that line you post nothing.
Here is the useful way to read that number. It is exactly the tax on the first $100,000 of gains at the top 33% federal rate, which is the amount ITA 220(4.51) shields from the security requirement, so an emigrant with a moderate portfolio clears the whole election without touching a bank. Where adequate security is held, no interest accrues on the postponed amount under ITA 220(4.5)(b), which makes the election close to free money for anyone planning to sell years later in a lower-rate year.
What Changes for Your Tax Residency After You Go
Your residency status changes the moment you go, and with it the scope of what Canada taxes. From that date forward, tax law reaches your Canadian-source income only. Most passive amounts are handled by a flat 25% withholding tax under Part XIII, reduced where a tax treaty applies, covering dividends, rents, pension payments and RRSP withdrawals.
Two accounts behave in ways a departing tax resident often misreads. A TFSA can stay open, but any contribution made while you are non-resident attracts a 1% monthly charge until you withdraw it. An RRSP can also stay open and keeps growing sheltered, though without Canadian earned income you generate no new room.
Rental property owners have a better option than gross withholding. Filing an NR6 with your agent, then a section 216 return, lets you pay on net rental profit instead of 25% of every rent cheque. And if you come back, subsection 128.1(6) lets you unwind the earlier deemed sale on property you still hold, which restores your original cost base as if you had never left.
If You Come Back: Unwinding the Exit
Emigration is not always permanent, and the Act anticipates the round trip. Under subsection 128.1(6), a returning former resident can elect to unwind the departure-year deemed disposition on property still owned at the time of the return. The election treats the property as if the exit never happened for that asset: the gain comes off the departure return through an amendment, tax already paid comes back, and the original cost base is restored.
Three practical points decide whether that works smoothly. The property must still be owned when residency resumes, so assets sold abroad in between stay taxed. The election is made for the year you come back, and it reaches backward, which means the departure-year records must still exist. And where security was posted under Form T1244, the unwind releases it. Keep the full departure file, valuations included, for as long as living abroad remains temporary in your mind.
Frequently Asked Questions
Do you have to pay a fee to leave Canada?
No. There is no exit fee, border charge or permit cost for leaving the country. What people call departure tax is income tax on the growth in your property, calculated as though you sold it on the day you stopped being resident.
Is Canada going to charge an exit tax?
Canada already does, and has since capital gains first became taxable here in 1972. The current rules sit in ITA 128.1. It is not a new or proposed measure. The charge falls only on emigrants, and only on accrued growth that Canada would otherwise never tax.
When is departure tax due?
It is payable with the return for your year of emigration, due 30 April of the following year. Filing Form T1244 with that return postpones payment until you sell the property or become resident again.
Does CRA know when you leave the country?
Yes, through several channels. Canada and the United States exchange entry and exit records, provincial health plans report coverage changes, and your own T1 asks for the emigration date. Failing to report the departure does not hide it, and it starts no limitation period in your favour.
Can departure tax be deferred?
Yes. The election on Form T1244 postpones payment indefinitely, until an actual sale or a return to Canada. Security is required only where the federal amount attributable to the deemed sale exceeds $16,500, and no interest runs while that security is held.
Do I still have Canadian tax obligations after I leave?
Usually yes, but narrower ones. You report Canadian employment and business income, Canadian real estate gains when you sell, and you accept withholding on passive amounts. Worldwide reporting stops on the day your residence ends.
Does departure tax apply to my RRSP or TFSA?
No. Registered plans are excluded from the deemed disposition. The cost shows up later instead: RRSP withdrawals as a non-resident face withholding tax, and TFSA growth is usually taxable in your new country even though Canada leaves it alone.
What happens if I move back to Canada later?
Property you still own can be covered by the subsection 128.1(6) election, which unwinds the departure-year deemed disposition, restores your old cost base, and recovers the tax through an amended return. Assets sold while you were away stay taxed as assessed.
The Bottom Line
Emigration is a taxable event dressed up as a travel decision, and the paperwork punishes people who assume otherwise.
- Most property is deemed sold at market value on your emigration date.
- Canadian real estate, registered plans and pensions stay outside the charge.
- File T1243 for the deemed sale and T1161 whenever your property passed $25,000.
- Use Form T1244 to postpone payment, and post security only above $16,500.
Departure planning rewards sequencing: which assets to sell before you go, which to hold, and when the emigration date should fall. Those answers move with your portfolio and your destination, so treat the framework above as a starting point rather than a plan. Our personal tax team prepares departure returns and the elections that go with them, and you can book a review before you set a date.
