If you’re a Canadian resident planning to leave the country for good, there are several tax implications you need to be aware of. Whether you’re moving for work, retirement, or simply to explore new opportunities abroad, it’s important to understand how your departure will affect your taxes.

In this blog post, we’ll discuss the key tax implications of leaving Canada permanently and provide some tips on how to minimize your tax burden.

Tax Residency and Departure Tax

When you leave Canada, you’ll need to determine your tax residency status for the year. If you’re no longer considered a resident of Canada for tax purposes, you’ll be subject to a departure tax on certain property that you own.

The departure tax applies to individuals who have been Canadian residents for at least 10 years and who are emigrating to another country. The tax is based on the fair market value of your property on the day you leave Canada and is calculated as a percentage of the property’s value.

The departure tax is designed to ensure that Canadian residents who leave the country pay their fair share of taxes on any gains they’ve made on their property while living in Canada. However, there are some exceptions and exemptions to this tax, so it’s important to speak with a tax professional to determine if you’re eligible.

Canadian Income Tax

Even if you’re no longer a resident of Canada for tax purposes, you may still be required to file a Canadian tax return. This is especially true if you still have Canadian source income, such as rental income from a property you own in Canada or if you’re receiving pension or social security payments from the Canadian government.

If you’re receiving Canadian source income, you’ll need to file a Canadian tax return each year and report your worldwide income. However, you may be eligible for tax credits or deductions based on the tax treaty between Canada and your new country of residence.

Foreign Taxes

If you’re a resident of another country, you’ll also need to determine your tax obligations in that country. Many countries have tax treaties with Canada that are designed to avoid double taxation, but you’ll need to speak with a tax professional to understand how your tax obligations will be affected.

One important thing to note is that if you’re a resident of the United States, you’ll still be required to file a US tax return and report your worldwide income, even if you’re no longer a resident of Canada for tax purposes.

Minimizing Your Tax Burden

If you’re leaving Canada permanently, there are several ways you can minimize your tax burden. One option is to sell any property you own in Canada before you leave. This can help you avoid paying departure tax on the property’s fair market value.

Another option is to take advantage of tax treaties between Canada and your new country of residence. Many tax treaties provide for credits or deductions for foreign taxes paid, which can help reduce your overall tax liability.

Finally, it’s important to speak with a tax professional before you leave Canada. They can help you understand your tax obligations, identify any exemptions or exceptions that may apply to you, and develop a tax strategy that minimizes your overall tax burden.

Conclusion

Leaving Canada permanently can be an exciting and life-changing decision, but it’s important to understand the tax implications before you go. By taking the time to understand your tax obligations, you can minimize your tax burden and enjoy your new life abroad without any unexpected tax surprises. Remember, the key is to speak with a tax professional and develop a tax strategy that works for you.