Departure tax
Departure tax is the tax on the deemed disposition of most of your property at fair market value on the day you cease to be a resident of Canada.
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Key facts
| Category | Personal tax |
|---|---|
| Also known as | emigration tax, deemed disposition on emigration |
| Triggered by | Ceasing to be a resident of Canada |
| Mechanism | Deemed disposition of most property at fair market value on the departure date |
| Excluded | Canadian real property, registered plans, and certain pension rights |
| Reported on | Form T1243, with T1161 listing property above the reporting threshold |
| Authority | Canada Revenue Agency; Revenu Québec |
What it means in practice
Ceasing Canadian residency is treated as selling nearly everything you own at market value that day and immediately reacquiring it — so unrealised gains become taxable even though nothing was sold. Some property is excluded, including Canadian real estate, RRSPs and TFSAs, and registered pension interests. You can elect to defer the tax by posting security with the CRA rather than paying it in the year of departure. Residency for tax purposes turns on residential ties, not on citizenship or on the date you boarded a plane. Getting the departure date wrong changes both the tax and the filing obligations, and Québec residents have a parallel provincial process.
Tax on gains you have not realised
Departure tax is charged on accrued gains as if you had sold everything on the day you left, even though nothing was sold and no cash was received. For a shareholder of a private company or a holder of a long-held portfolio this can be a very large amount payable in a year with no corresponding proceeds. Security can be posted with the CRA to defer payment until the property is actually disposed of, and no interest accrues on the deferred amount. This is the mechanism most departing shareholders rely on, and it has to be arranged rather than assumed. Determining the date residency ceased is often the harder question. It depends on residential ties — home, spouse and dependants, and secondary ties such as bank accounts, memberships and a driver's licence — not on the date of the flight.
FAQ
Does my RRSP get taxed when I leave?
What if I return to Canada later?
Need this applied to your situation?
A definition only gets you so far. Talk to a Montréal CPA about what this means for your return — in English or French.