leaving and returning to Canada

Leaving And Returning To Canada

Residency has significant implications on the tax obligations of an individual.  Canadian residents pay tax on their worldwide income and non-residents pay tax only on certain income they earn in Canada. 

Sometimes it is advantageous to change residency for Tax and Tax Planning or for Estate Planning.  The timing of leaving from or returning to Canada and the assets you hold at that time may affect your immediate tax liability.  Sometimes people leave for other than tax reasons, but tax still applies upon departure.

Deemed dispositions

When a person ceases to be a resident of Canada, they are deemed to have disposed of certain types of property at its fair market value when leaving Canada and to have immediately reacquired them for the same amount.  A person then has to report a capital gain or capital loss that results from the deemed disposition on their tax return (due on April 30 the year following the departure) and pay the resulting tax.

We can assist you to achieve the maximum departure tax deferral

A departing taxpayer can elect to defer payment of tax on income arising from the deemed disposition of property, regardless of the amount.  A departing taxpayer could then pay the tax when the property is actually sold.  If the deferral election is made, interest does not start to accrue on the amount deferred until such time as the property is sold.

At Granville Law Group we can advise you on:

  • Optimum tax structures when leaving Canada in order to minimize taxes and tax reporting;
  • Ascertaining non-resident status,
  • Tax consequences of becoming a non-resident, including departure tax and future tax obligations;
  • Tax consequences of returning to Canada, and
  • Timing of reacquiring Canadian residency status.

Contact Granville Law Group and schedule a free, 30-minute consultation with our lawyers. Call us at 604-669-6580 

1. What are the tax implications of leaving Canada?

Leaving Canada can trigger departure tax, which taxes the unrealized gains on your assets as if they were sold at fair market value.

2. What is departure tax?

Departure tax is a tax levied on the unrealized gains of an individual’s assets when they cease to be a Canadian resident.

3. How can I defer departure tax?

You may defer departure tax by providing security to the Canada Revenue Agency (CRA), allowing you to pay the tax at a later date.

4. What happens to my tax residency when I leave Canada?

Your tax residency status changes, and you may be considered a non-resident for tax purposes, affecting your tax obligations.

5. Can I maintain ties to Canada while being a non-resident?

Yes, but significant ties like owning a home or having dependents in Canada can impact your non-residency status.

6. What are the tax obligations upon returning to Canada?

Upon returning, you will regain your tax residency status and be subject to Canadian taxes on your worldwide income from the date of return.

7. How does owning property in Canada affect my tax residency?

Owning property in Canada depending on how you use it may be a significant tie that influences your tax residency status and obligations.

8. What are the steps to re-establish Canadian residency for tax purposes?

Re-establishing residency involves resuming physical presence in Canada and re-establishing significant residential ties such as a home and family connections.

9. How can Granville Law Group assist with departure and return tax planning?

The firm can provide legal advice on managing departure tax, deferral options, and ensuring compliance with tax obligations upon return.

10. What is the impact of temporary absences from Canada on tax residency?

Temporary absences typically do not affect your tax residency status, but prolonged absences may require re-evaluation of your residency status, availability of benefits (such as medical services) and applicable tax obligations.