The Tax Checklist Before You Leave Canada

The decision to retire abroad is exciting. The tax consequences of leaving Canada are not. What catches most Canadians completely off guard is that departing Canada is treated by the CRA as a taxable event — even if you have not sold a single asset.

The good news: with proper planning, most of the tax consequences of leaving Canada can be minimized or deferred. The bad news: most of the best strategies require 12 months or more of lead time. If you are already six weeks from your departure date, your options have narrowed significantly.

Step 1: Establish Your Departure Date and Residency Status

Your tax obligations change the moment you become a non-resident of Canada. CRA determines residency based on several factors — not just where you physically are. Ties to Canada (home, spouse, dependents, bank accounts, driver’s licence, health card) all affect when and whether you are considered to have severed residency.

In your year of departure, you file a part-year resident return covering the period January 1 to your departure date. After that, you file as a non-resident.

Choosing your departure date strategically can matter for tax purposes. Departing earlier in the year versus later can affect which tax year the deemed disposition falls in, and how your final part-year income is taxed.

Step 2: Understand Deemed Disposition (Departure Tax)

This is the one that surprises almost everyone. On the day you leave Canada, the CRA deems you to have sold most of your assets at fair market value — even though no actual sale occurred. Any accrued capital gains on those assets become taxable in your final Canadian tax year.

Assets subject to deemed disposition include:

• Non-registered investment accounts (stocks, ETFs, mutual funds)
• Rental and investment properties outside Canada
• Business interests (depending on structure)
• Some Canadian private company shares

Assets exempt from deemed disposition include:

• Canadian real estate (subject to different rules)
• RRSPs and RRIFs
• Registered pension plans
• TFSAs
• CPP and OAS entitlements

If your non-registered investment portfolio has significant unrealized gains, departure tax can be a large bill. There are strategies to reduce it: realizing gains in lower-income years before departure, using capital losses to offset gains, or electing to defer the tax by posting security with CRA. All of these require planning well in advance.

Step 3: Your Principal Residence

If you own a home in Canada and sell it before you leave — while you are still a resident — the full principal residence exemption applies and no capital gains tax is owing. If you keep the home and rent it out after departure, the exemption is no longer available for the years you are a non-resident, and you will be taxed on gains accrued from your departure date forward.

For many Canadians, selling the family home before departure and capturing the full principal residence exemption is one of the most tax-efficient moves available.

Step 4: RRSP and RRIF Strategy Before Departure

Your RRSP does not disappear when you leave Canada — but the rules change significantly. As a non-resident, RRSP and RRIF withdrawals become subject to Canadian withholding tax, typically 25% (reduced by tax treaty with many countries).

Before departure, consider whether strategic RRSP withdrawals make sense while you are still a resident. If your income will be lower in the years immediately before leaving — perhaps due to semi-retirement — drawing down the RRSP at a lower Canadian marginal rate may be preferable to facing 25% withholding as a non-resident.

You can continue to hold your RRSP as a non-resident. You cannot make new contributions.

Step 5: TFSA — Act Before You Leave

The TFSA is one of the most misunderstood accounts in the context of emigration. Key points:

• You cannot contribute to your TFSA after becoming a non-resident — contributions attract a 1% per month penalty tax
• You can keep your existing TFSA and the funds continue to grow tax-free in Canada
• If you move to the United States, the IRS does not recognize the TFSA as tax-free — gains inside the account are taxable in the US and require complex US reporting. Most Canadians moving to the US choose to withdraw their TFSA before departure
• For other countries, maintaining the TFSA is generally simpler, though your new country of residence may tax the income

Step 6: Investment Accounts and Brokerage Access

Many Canadian brokerages cannot legally hold accounts for non-residents. Before you leave, contact your investment accounts and confirm whether they will continue to service you. Some will; many will not. If they require account closure, you need time to transfer or liquidate — which may trigger capital gains.

This is one of the most practically disruptive aspects of leaving Canada and requires attention well before your departure date.

Step 7: Notify CRA of Your Departure

You are required to notify CRA of your change in residency. This is done through your final Canadian tax return — marking the departure date and filing as a part-year resident. You also need to notify Employment and Social Development Canada if you are receiving or will receive CPP or OAS.

The notification process matters for withholding tax rates. If CRA does not have your correct non-resident status on file, payments may be withheld at the wrong rate.

Step 8: Provincial Health Coverage

Most provincial health plans (including Alberta Health Care) require you to be physically present in the province for a certain number of months per year to maintain coverage. If you leave and do not cancel your coverage, you may be billed for premiums you are not entitled to. If you cancel and then return temporarily, there may be a waiting period before re-enrollment.

The Pre-Departure Checklist Summary

Item	Timing
Engage a fee-only financial planner with non-resident expertise	12+ months before departure
Model departure tax on non-registered investments	12+ months before departure
Decide whether to sell principal residence before departure	12+ months before departure
Review RRSP drawdown strategy	12–6 months before departure
Decide on TFSA — keep, withdraw, or restructure	6–3 months before departure
Contact all Canadian brokerages re: non-resident policy	6–3 months before departure
Update beneficiary designations on all accounts	6–3 months before departure
Notify Alberta Health Care of departure	1 month before departure
File final part-year Canadian tax return	April 30 of following year