Departure tax

What is treated as sold

The deemed disposition applies to most property, including shares, jewellery, paintings and collections. It is not a separate tax. The resulting gain is an ordinary capital gain, taxed using the usual one-half inclusion rate. You calculate it on Form T1243 and carry it to Schedule 3 of your return.

Several things are outside the rule. They include Canadian real property, Canadian business property carried on through a permanent establishment, and registered plans such as RRSPs, RRIFs, TFSAs and pensions. Property you owned when you last became a resident is also excluded if you were resident for 60 months or less in the previous 10 years.

An illustrative example

Suppose you leave Canada owning shares that cost $50,000 and are worth $80,000 on your departure date. You are treated as selling them for $80,000, which gives a $30,000 gain. At the one-half inclusion rate, $15,000 is added to your income for the year of departure. The actual sale, if any, comes later at a new cost base of $80,000. These numbers are illustrative only.

Reporting and deferral

If all the property you owned when you left was worth more than $25,000, you must file Form T1161 listing it, even if you do not otherwise have to file a return. Cash, registered plans and personal-use items worth less than $10,000 each are left off. The late-filing penalty is $25 a day, with a $100 minimum and a $2,500 maximum.

You can elect on Form T1244 to defer paying the tax until you actually sell, without interest. The election is due April 30 of the year after you leave. If the federal tax owing on the deemed gain is more than $16,500, you must provide adequate security.

If you come back

If you become a resident again, you may be able to elect to unwind the deemed disposition for property you still own, which can reduce or remove the earlier tax. The request is due by the filing due date for the year you return.

What to discuss with your accountant

Gather purchase records and market values for each asset on your departure date, and decide the date your residency ends. Ask whether to defer, what security the CRA would accept, and how the rules interact with any tax in your new country. See also capital gains and tax residency.