Frequently Asked Questions

Exit tax, officially called "departure tax," is triggered when you cease to be a Canadian tax resident. The Canada Revenue Agency (CRA) treats you as having sold most of your worldwide assets at fair market value on your departure date - even though you haven't actually sold anything. This "deemed disposition" generates capital gains that are taxed on your final Canadian tax return.

What's included: Stocks, bonds, mutual funds, cryptocurrency, business interests, real estate outside Canada, and other capital property.

What's excluded: Your principal residence (if eligible for exemption), Canadian real estate (taxed when actually sold), RRSPs/RRIFs (taxed when withdrawn), TFSAs, and personal-use property.

The tax rate depends on your income level but is generally around 25-27% of the capital gain (50% of the gain is taxable at your marginal rate).

Exit tax varies dramatically based on your assets and their unrealized gains. Here are typical scenarios:

Conservative investor with $500,000 in stocks/bonds with $150,000 in gains: ~$20,000-$25,000 exit tax

Entrepreneur with $2M business value, purchased for $200,000: ~$240,000-$270,000 exit tax

Cryptocurrency holder with $3M in Bitcoin, original cost $400,000: ~$350,000-$400,000 exit tax

High-net-worth individual with $10M diversified portfolio with $4M in gains: ~$500,000-$600,000 exit tax

The only way to know your exact exposure is through a detailed calculation of each asset's adjusted cost base, current fair market value, and applicable exemptions. This is what we do in the Pre-Departure Consultation.

Not necessarily. You have three options:

Option 1 - Pay on departure: Include the exit tax in your final Canadian tax return and pay by the filing deadline (April 30 or June 15 of the following year).

Option 2 - Post security and defer: Provide acceptable security to the CRA (letter of credit, bank guarantee, or Canadian property as collateral) and defer payment. You'll eventually pay when you actually sell the assets or after a certain period.

Option 3 - Elect to pay in installments: For certain eligible property, you may be able to pay the tax in up to 6 annual installments (though interest will apply).

Most of my high-net-worth clients use Option 2 to maintain liquidity and defer the tax burden. The optimal strategy depends on your cash flow, investment plans, and destination country's tax system.

No - tax treaties do not eliminate Canada's exit tax. The deemed disposition happens regardless of where you move.

However, tax treaties do matter for:

• Avoiding double taxation on future income after you leave
• Determining residency if you have ties to both countries
• Reducing withholding tax on Canadian-source income (pensions, dividends, rentals)
• Treaty relief provisions that may reduce your ongoing Canadian tax obligations

For example, if you move to Dubai (which has a tax treaty with Canada), the treaty won't eliminate your exit tax, but it will ensure you're not taxed by both countries on the same income going forward.

Key point: Exit tax is triggered by ceasing Canadian residency, not by where you move. Proper planning is essential regardless of your destination.

This gives you time to:

• Calculate your exact tax exposure
• Explore restructuring options (trusts, holding companies if beneficial)
• Implement tax-loss harvesting strategies
• Arrange security with CRA if deferring payment
• Establish genuine tax residency in your destination country
• Prepare Form NR73 and supporting documentation

Minimum timeline: 6 months before departure

You can still implement effective strategies, but your options are more limited.

Already left Canada?

I can still help with:

• Late-filed departure tax returns
• CRA disputes about your residency status
• Post-departure compliance
• Fixing errors in previously filed returns

The earlier you plan, the more money you'll save. A client who consults me 12 months ahead has far more options than one who calls 2 weeks before their flight.

Good news: RRSPs and RRIFs are NOT subject to exit tax. They remain tax-deferred even after you leave Canada.

However, you will face:

Withholding tax on withdrawals:

• 25% if you withdraw up to $5,000
• 25% if you withdraw $5,001-$15,000
• 25% if you withdraw over $15,000
• Reduced rates under tax treaties (often 15% for most countries, 10% for US)

My advice:

• Leave your RRSP/RRIF in Canada after departure
• Make strategic withdrawals based on your destination country's tax treaty
• Ensure you file the appropriate forms (NR301, NR302) to claim treaty benefits and reduce withholding
• Consider the timing of withdrawals relative to your other income

Example: A client moving to Portugal (15% treaty rate) structured RRIF withdrawals over 10 years, saving $60,000 compared to the default 25% withholding.

NOT subject to exit tax when you leave - you don't pay deemed disposition on Canadian real property.

BUT taxed when you actually sell:

When you later sell your Canadian rental property as a non-resident, you must:

1. Notify CRA in advance - File Form T2062 at least 10 days before closing
2. Obtain a clearance certificate - CRA will calculate and collect 25% of the gross sale price (or a lower amount if you provide details)
3. File a Canadian tax return - Report the actual capital gain and claim back any excess withholding

Ongoing obligations while you own it:

• File annual Section 216 returns reporting rental income
• 25% withholding tax on gross rents (unless you elect under Section 216 to be taxed on net rental income, which is usually better)

My role: I help you structure the rental income reporting to minimize tax, ensure compliance with Section 116 when selling, and maximize your refund of withheld amounts.

The CRA uses a facts-and-circumstances test based on your residential ties to Canada. It's not just about where you physically live.

Primary ties (most important):

• Home in Canada
• Spouse/common-law partner in Canada
• Dependents in Canada

Secondary ties (considered together):

• Personal property in Canada (furniture, car)
• Social ties (memberships, clubs)
• Economic ties (Canadian bank accounts, credit cards)
• Provincial health insurance
• Canadian driver's license
• Professional memberships in Canada
• Mailing address in Canada

To successfully depart, you must:

• Sever most ties, especially primary ties
• Establish genuine ties in your new country (lease/purchase property, open local bank accounts, obtain local ID, join community)
• Spend significant time in your new country (at least 6+ months per year)
• File Form NR73 with CRA for a formal determination

Common mistake: Keeping too many ties "just in case" - this can result in CRA claiming you're still a resident, meaning you owe Canadian tax on worldwide income PLUS exit tax when you actually leave.

My role: I assess your ties comprehensively, advise which must be severed vs. which can be maintained, and prepare your NR73 submission to CRA.

They're completely different systems - don't confuse them!

Canada's Exit Tax (Departure Tax):

• Applies to anyone ceasing Canadian tax residency (citizens and non-citizens alike)
• Based on deemed disposition of assets
• Calculated at normal capital gains rates (~25% of gains)
• Can often be deferred with security
• No wealth threshold - applies to all tax residents leaving Canada

US Exit Tax (Expatriation Tax under IRC 877A):

• Applies only to US citizens and long-term green card holders who renounce citizenship/surrender green card
• Only applies if you meet the "covered expatriate" criteria: 
  • Net worth over $2M USD, OR
  • Average annual income tax over ~$190,000 for past 5 years, OR
  • Failure to certify tax compliance for past 5 years
• Mark-to-market regime (deemed sale of all worldwide assets)
• First $866,000 USD excluded (2025 amount, indexed annually)
• Gain above exclusion taxed at 23.8% (20% capital gains + 3.8% net investment income tax)

Key difference: Canada's exit tax applies to everyone leaving; the US exit tax only applies to citizens/green card holders who formally renounce/surrender status AND meet the covered expatriate thresholds.

If you're a dual Canadian-US citizen or Canadian with a green card: You need planning for BOTH systems. This is highly complex and requires coordination between Canadian and US tax advisors.

You can absolutely return to Canada! Exit tax does not prevent you from:

• Visiting Canada as a tourist (up to 6 months per year)
• Moving back to Canada permanently in the future
• Owning property in Canada
• Maintaining Canadian citizenship (exit tax doesn't affect citizenship)

What happens if you return:

Short visits (tourism): No tax implications as long as you're clearly a non-resident (living abroad, no primary ties to Canada).

If you become a resident again:

• You "immigrate" back to Canada for tax purposes
• Your assets receive a step-up in cost base to fair market value on the date you return
• You start fresh - future gains are only taxed from your return date forward (this is actually a benefit!)
• You'll file Canadian tax returns on worldwide income again

Example: You left Canada in 2026 with $2M in assets, paid exit tax on $500K in gains. You return in 2030 when those same assets are worth $3M. Your new Canadian cost base is $3M, not $2M - so the $1M gain while you were abroad is never taxed by Canada.

Snowbird situation: If you spend winters in the US but maintain a home and ties in Canada, you're likely still a Canadian resident and exit tax doesn't apply. True exit tax only applies when you genuinely sever residency.

My advice: Plan your initial departure properly, maintain clear non-resident status while abroad, and if you return, ensure you properly document your re-entry date for the step-up in cost base.