The Complete Guide to Leaving Canada: Tax and Financial Considerations

Moving abroad is increasingly attractive to Canadians, whether for retirement in a warmer climate, exciting work opportunities in international markets, or simply the adventure of experiencing life in a different culture. However, the financial and tax implications are significantly more complex than most people realize when they first start planning their international move, and the surprises can be expensive—sometimes costing tens or even hundreds of thousands of dollars.

This comprehensive guide covers everything you need to know before packing your bags and what you'll need to manage after you've settled into your new home abroad.

Understanding Tax Residency

A common and costly misconception: Simply leaving Canada doesn't automatically end your Canadian tax obligations.

Canada separates physical residency (where you actually live day-to-day) from tax residency (where you're legally required to pay taxes). You can physically leave Canada, establish a home thousands of kilometres away, and still remain fully liable for Canadian taxes on your worldwide income. This catches many expatriates completely off guard when they discover they're still required to file Canadian tax returns and pay Canadian tax on their global earnings years after leaving the country.

How Tax Residency is Determined

The Canada Revenue Agency (CRA) uses a sophisticated framework of primary and secondary ties to determine your tax residency status. Rather than relying on a simple checklist, they examine the overall pattern of your connections to Canada.

Primary Ties (even a single primary tie is usually enough to maintain tax residency):

• Having a home in Canada available for your exclusive use - This means you can return anytime without needing permission or waiting for tenants to vacate

• Leaving a spouse or common-law partner in Canada - Even if you're working abroad

• Leaving dependent children in Canada - For example, children attending Canadian schools

Secondary Ties (multiple ties can collectively establish or support tax residency):

• Personal property - Furniture stored in Canada, vehicles registered in your name, significant belongings

• Social ties - Memberships in Canadian clubs, professional organizations, gyms, religious communities, or maintaining close personal relationships

• Economic ties - Canadian bank accounts, investment accounts, credit cards, continuing employment with a Canadian company (even remotely), Canadian business interests

• Provincial health insurance coverage - Maintaining active coverage

• Driver's licenses and vehicle registrations - In your name in a Canadian province

• Canadian passport - Though less significant on its own

• Professional organization memberships - Active memberships in Canadian professional bodies

The CRA evaluates the overall pattern and strength of your ties rather than mechanically checking boxes. You can request an opinion on your specific tax residency status by filing Form NR-73, but here's the important caveat: this opinion is non-binding. The CRA can later change their position based on new information or a different interpretation of your circumstances, so the opinion provides guidance rather than absolute certainty.

For comprehensive details, review the CRA's official information on determining residency status.

The "Ordinarily Resident" Rule

Here's where intentions matter as much as actions, and where many people's assumptions about tax residency fall apart. Canadian tax law includes what's called the "ordinarily resident" concept, which considers not just your current physical situation but also your future intentions and the customary pattern of your life.

If you plan to eventually return to Canada—for example, as a temporary digital nomad planning a two-year adventure, on an international work assignment with a defined end date, or as an academic on sabbatical—you may well remain a Canadian tax resident for the entire period you're away, regardless of how many months or even years you spend outside the country.

Think of it this way: if Canada remains your home base, the place you "ordinarily reside" even if you're temporarily elsewhere, then for tax purposes, you haven't really left at all. This is particularly relevant for professionals on international assignments, academics on sabbatical, or anyone who views their time abroad as a temporary chapter rather than a permanent lifestyle change.

Tax Treaties

When you become a tax resident in a country with a tax treaty with Canada, the treaty's "tie-breaker" rules may automatically resolve conflicting residency claims between the two countries. Canada has tax treaties with nearly 100 countries, which you can explore through the Department of Finance's treaty information page.

These treaties prevent double taxation and typically provide reduced withholding rates on Canadian-source income. Countries without treaties face higher withholding rates and more complex tax situations.

Before You Leave

Filing Your Final Return

When you file your final Canadian tax return as a resident:

• Indicate your departure date on the return

• Provincial and federal credits will be pro-rated based on your departure date

• You'll no longer be entitled to GST/HST credits or Canada Child Benefit

• Inform all financial institutions of your non-resident status—this is mandatory, as they have reporting obligations

The CRA provides detailed guidance through Guide T4058, Non-Residents and Income Tax.

Departure Tax

Canada imposes a "deemed disposition" rule on certain assets when you cease to be a tax resident. This means you're treated as having sold these assets at fair market value on your departure date, triggering capital gains tax—even though you haven't actually sold anything. The policy rationale is straightforward: Canada wants to tax the appreciation that occurred while you were a Canadian resident before you move that wealth beyond Canadian tax jurisdiction.

Exempt from departure tax:

• Registered accounts - TFSA, RRSP, RESP, FHSA remain completely exempt

• Real estate located in Canada - Whether primary residence, rental property, or vacation home

• Cash - Including Canadian and foreign currency

• Personal-use items - Under certain value thresholds

Subject to departure tax:

• Non-registered investment accounts - All taxable accounts with stocks, bonds, ETFs, mutual funds

• Valuable collections - Fine art, jewelry, classic cars, or other collectibles above certain values

The tax bill can be genuinely substantial if you have significant unrealized gains. For example: If you have a $500,000 non-registered investment portfolio with $200,000 in accumulated gains (50% inclusion rate), you'll face immediate capital gains tax on that $100,000 taxable gain—potentially $30,000 to $50,000 or more depending on your marginal tax bracket and province.

Deferral option: You may defer paying this departure tax by filing Form T1244 (Election to Defer Payment of Tax on Income Relating to the Deemed Disposition of Property) and providing appropriate security to the CRA. This allows you to postpone the actual tax payment until you sell the assets in the future, though interest will accrue on the deferred amount. More details are available in Income Tax Folio S5-F1-C1.

Your Home

Your primary residence significantly impacts tax residency:

Keeping a home for your exclusive use typically maintains tax residency, even if you're physically absent for years. The key word is "exclusive"—meaning you can return anytime without permission or waiting for tenants.

Renting to arm's-length third parties (unrelated tenants at market rates) may not be considered a significant tie, though other factors still matter. This is different from letting family stay there, which maintains the residential tie.

Maintaining homes in both Canada and your destination triggers treaty "tie-breaker" rules based on your centre of vital interests—where your personal and economic life is primarily centred.

Banking and Investments

Banking: Maintaining a Canadian chequing or savings account is generally acceptable for non-residents and counts as a secondary tie. It's actually quite practical for managing ongoing Canadian obligations like property taxes, insurance payments, or receiving Canadian-source income. Some international banks offer global transfer programs—American Express Global Transfer, HSBC Expat, and Scotiabank International Banking—that help you establish credit and banking relationships in your new country based on your Canadian credit history. This can be invaluable when you're starting fresh somewhere new and don't have a local credit history.

Investments - The Big Surprise: This is where most people face their biggest shock, and it's a restriction that almost nobody knows about until it's too late. Here's what happens: when you inform your Canadian brokerage that you're now a non-resident, the vast majority will immediately convert your account to what they call "liquidate only" or "close only" status.

What this means in practice:

• You can continue to hold your existing investments

• You can receive dividend and interest income

• You can sell securities whenever you want

• You cannot buy new securities

• You cannot reinvest dividends through DRIPs (Dividend Reinvestment Plans)

• You cannot make any new contributions

• You cannot rebalance your portfolio by buying

This restriction exists because of complex regulatory and compliance requirements surrounding non-resident accounts, and most retail brokerages (TD Direct Investing, Questrade, CIBC Investor's Edge, etc.) simply choose not to offer full trading services to non-residents due to the compliance burden and liability.

Your options:

• Transfer to a local brokerage in your destination country - Though this can trigger taxable events in Canada, may involve currency conversion costs, and may be complicated by cross-border transfer rules

• Work with wealth managers who specialize in cross-border clients and can handle the compliance requirements of managing accounts for non-residents - Usually requires higher account minimums ($250,000+)

• Liquidate positions before leaving and reinvest once you're established in your new country - Accepting the tax consequences of realizing gains and the market timing risk of being out of the market

• Interactive Brokers - One of the few brokerages that does allow non-resident Canadians to maintain full trading privileges, though you'll need to transfer your account before you leave

Insurance and Healthcare

Health Insurance: Provincial health coverage ends when you become a non-resident. International expat health insurance typically costs $1,000+ monthly depending on your age, coverage level, health history, and destination country. Budget accordingly—this is often a larger expense than people anticipate.

Life Insurance: Contact your provider before leaving. Some policies remain valid anywhere, while others may be invalidated by moving to certain countries or engaging in higher-risk activities. Don't discover this after you've already moved.

Legal Documents

Wills and powers of attorney prepared under Canadian provincial law may not be valid in your destination country. Each jurisdiction has different requirements for legal documents. Consult with legal professionals in both Canada and your destination to ensure proper coverage of assets and that someone can make decisions on your behalf if needed.

After You Leave

Withholding Taxes

This surprises almost everyone: Even though you're no longer a Canadian tax resident and no longer required to file annual Canadian tax returns on your worldwide income, you will absolutely continue to pay Canadian tax on income that originates from Canadian sources. These withholding taxes typically range from 15% to 25% depending on the income type and whether Canada has a tax treaty with your country of residence.

Canadian-source income includes:

• CPP and OAS payments - Usually 25% withholding without a treaty, 15% or less with a treaty

• RRSP/RRIF withdrawals - 25% without a treaty, often 15% with a treaty (some treaties provide 0% on periodic payments)

• Dividend and interest income from Canadian accounts - 25% without a treaty, typically 15% with a treaty for dividends

• Royalties - 25% without a treaty, varying rates with treaties

• Rental income - 25% gross withholding (though Section 216 election can help)

The institution or person paying you this income is legally required by Canadian law to withhold the appropriate tax at source before sending you the payment. The tax is deducted automatically before the money ever reaches your foreign bank account—you don't have a choice in this matter.

Treaty benefits are substantial: Tax treaties typically provide much more favourable treatment than the default withholding rates. For example:

• The Canada-Mexico treaty reduces dividend withholding from 25% to 15%

• The Canada-United States treaty reduces RRSP/RRIF periodic payment withholding to 0% in many cases

• The Canada-UK treaty provides reduced rates on various income types

However, if you move to a country that doesn't have a tax treaty with Canada (many countries in South America, Africa, Southeast Asia, and the Caribbean don't have treaties), you'll face the full 25% statutory withholding rates on most income types. This can significantly reduce your after-tax income and should be factored into your destination country selection if you'll be receiving substantial Canadian-source income.

Section 216 and 217 Elections

For certain income types, you can elect to file a Canadian tax return as a non-resident to potentially reduce your tax below the flat withholding rates:

Section 217: For pension income (CPP, OAS, RRSP/RRIF). This allows you to file a Canadian tax return as a non-resident and receive a basic personal amount exemption. For low income seniors living in a non-treaty country, this can make a significant different to tax burden.

Section 216: For rental property income. Allows you to be taxed on net rental income (after expenses) rather than gross receipts.

These elections are particularly valuable for lower-income individuals who would otherwise face flat withholding rates exceeding what they'd pay under progressive taxation. Details are in CRA Guide T4058.

Selling or Renting Your Canadian Home as a Non-Resident

This is perhaps the most financially painful surprise awaiting Canadians who maintain their home after moving abroad: If you sell your Canadian home after becoming a non-resident:

• You cannot claim the Principal Residence Exemption that would otherwise shelter the capital gain

• Capital gains tax applies on the full appreciation since you originally bought the property

• The lawyer or notary handling the sale must withhold 25% of the gross sale price (not 25% of your gain)

Example of the cash flow impact: On a $1 million home sale, the lawyer must withhold and remit $250,000 directly to the CRA, regardless of your actual tax liability. Even if you originally purchased the home for $950,000 and your actual taxable capital gain is only $50,000 (resulting in perhaps $12,500 in actual tax owed), that full $250,000 still gets withheld immediately.

The withheld amount isn't lost forever—you can file a Canadian non-resident tax return (Section 116) to report the actual disposition and your real tax liability, and the CRA will eventually refund any excess withholding. However, in the meantime, a substantial portion of your sale proceeds is held by the government. This can create serious cash flow problems if you were counting on that money for a property purchase in your new country, paying off debts, or other immediate needs. The refund process can take several months.

For rental properties: The situation requires even more advance planning. Before the sale can legally close, you must obtain what's called a clearance certificate from the CRA, which confirms that all your tax liabilities related to the property (including any owing rental income tax) have been properly addressed. This certificate can take several weeks to obtain, so you need to build this timeline into your sale planning and notify your real estate lawyer well in advance. Information about applying for a clearance certificate is available through the CRA's non-resident property sale information pages.

Canadian Benefits Abroad

CPP: No residency requirement. Payments can be made in local currency to foreign accounts anywhere in the world.

OAS: Requires 20 years of Canadian residence after age 18 to receive payments while living abroad (longer than the 10-year domestic requirement). Also payable in local currency to foreign accounts.

GIS: Guaranteed Income Supplement is only payable to Canadian residents. Once you've left Canada for more than six months, payments cease entirely. More information is available through Service Canada.

CCB: Canada Child Benefit qualification depends on whether you remain a tax resident of Canada, not physical location.

Registered Accounts

While you can legally maintain TFSAs, RRSPs, RESPs, and FHSAs as a non-resident, here's the critical warning that catches many people off guard: most countries won't recognize these accounts' tax-advantaged status under their own tax laws.

The TFSA trap: Your Tax-Free Savings Account, which grows completely tax-free in Canada and has tax-free withdrawals, may be fully taxable in your new country of residence. Many countries will tax:

• Annual investment income (dividends, interest, capital gains) within the account as it's earned

• Withdrawals from the account as taxable income

• The account itself may be subject to annual wealth taxes in some jurisdictions

This completely undermines the purpose of a TFSA and can result in double taxation—paying tax in your country of residence on income that Canada doesn't tax.

The RRSP complexity: Some countries recognize the tax-deferred status of RRSPs under treaty provisions (the U.S. generally does, for example), while others don't. In countries without specific treaty language protecting RRSPs, you might find yourself paying tax on investment income inside your RRSP even before you withdraw it. When you do withdraw, you'll face both Canadian withholding tax (15-25%) and potentially taxation in your country of residence, though you may get a foreign tax credit.

Wealth taxes: Some countries (France, Spain, Norway, Switzerland at the cantonal level) impose annual wealth taxes on your worldwide assets regardless of whether those assets are sheltered from taxation in their country of origin. Your registered accounts would be included in the wealth tax calculation based on their total market value.

Before leaving Canada, it's absolutely essential to consult with a cross-border tax professional who understands both Canadian tax law and your destination country's specific treatment of Canadian registered accounts. Depending on your destination, account values, and retirement timeline, you might actually be financially better off collapsing these accounts and paying Canadian tax before you leave, rather than dealing with more complex and potentially more expensive foreign tax treatment over many years.

Currency Risk

A frequently overlooked factor that doesn't make it onto most people's pre-departure checklists: currency exchange rate movements can profoundly impact your financial security and standard of living abroad, sometimes quite dramatically and quickly. If you receive Canadian-dollar-denominated income (CPP, OAS, RRIF withdrawals, rental income) but spend in your local currency, exchange rate movements directly affect your purchasing power and can improve or devastate your financial situation based on factors entirely outside your control.

Real-world examples of currency impact:

Between early 2021 and late 2022, the Japanese yen depreciated approximately 30% against the Canadian dollar. A retiree living in Japan and receiving $50,000 CAD annually in Canadian pensions suddenly had 30% more purchasing power in local terms without any change in their Canadian-dollar income. Their rent, groceries, and healthcare effectively became 30% cheaper in Canadian-dollar terms.

Conversely, the British pound has experienced significant volatility in recent years. During periods of pound strength (like late 2014 when £1 = $1.85 CAD), Canadian retirees in the UK found their pensions couldn't buy as much as they had budgeted for. A $3,000 monthly pension that previously provided £2,000 in spending power suddenly only provided £1,600—a painful 20% reduction in purchasing power.

This risk affects developed nations just as much as emerging markets—you can't simply assume exchange rates will remain stable by choosing "safer" countries. Even currencies like the Euro, Swiss Franc, and Australian Dollar have seen 15-20% swings against the Canadian dollar within single-year periods.

Strategies to manage currency risk:

• Build 15-20% flexibility into your budget to accommodate exchange rate swings

• Consider maintaining some investments denominated in your local currency to create a natural hedge

• Choose countries where the Canadian dollar has historically been strong and stable, though past performance doesn't guarantee future results

• Use limit orders and set alerts to take advantage of favourable exchange rates when transferring money

• Consider currency hedging strategies through your investment portfolio if you have substantial assets

Special Situations

Extended Absences (Not Permanent)

If you're planning a temporary departure with intent to return, different rules may apply. The CRA considers your plans when determining tax residency. Provincial health insurance can often be maintained for absences under 24 months if approved in advance—much simpler than obtaining private international insurance.

Snowbirds

Canadian snowbirds must watch the U.S. "substantial presence test." If present in the U.S. for 31+ days in the current year and 183+ days over a three-year period (using a weighted formula), you're required to file U.S. tax returns.

However, you can file IRS Form 8840 (Closer Connection Exception) to claim you have a closer connection to Canada despite the day count. Most snowbirds qualify, but you must file proactively each year.

"Flag Theory" and Being Stateless

In Canadian tax law, you cannot be "stateless" for tax purposes—you must be a tax resident somewhere. Even establishing residency in a tax haven doesn't eliminate withholding taxes on Canadian-source income. Without a tax treaty, you'd actually face higher statutory withholding rates rather than lower taxes.

Key Takeaways

• Don't assume leaving Canada automatically ends tax obligations—residential ties matter more than physical location

• Tax treaties provide significant benefits compared to non-treaty countries

• Departure tax on non-registered investments can be substantial (tens or hundreds of thousands)

• Most Canadian brokerages restrict non-resident accounts to liquidation-only

• Your Canadian home creates major tax implications whether kept or sold

• Withholding taxes on Canadian income continue indefinitely (15-25%)

• Provincial health coverage ends—budget $1,000+ monthly for international insurance

• Registered accounts may lose tax advantages in your destination country

• Currency risk can significantly impact your financial position over time

Professional Advice is Essential

This guide provides an overview, but every situation is unique. Before making a permanent or extended move abroad, consult with:

• A cross-border tax professional (CPA or tax lawyer) with expertise in both Canadian and your destination country's tax laws

• A financial advisor familiar with expat issues (investment restrictions, currency risk, cross-border structuring)

• Legal counsel in both Canada and your destination country for wills, powers of attorney, and estate planning

The CRA's Income Tax Folio S5-F1-C1, "Determining an Individual's Residence Status" provides official guidance and is essential reading for anyone planning to leave Canada.

Moving abroad can be an incredibly rewarding experience. With proper planning, professional guidance, and a clear understanding of the tax and financial implications, you can make your international move successfully while avoiding expensive surprises.