Canada · Tax regime
Canadian Departure Tax (deemed disposition on emigration, ITA s.128.1)
This is the standing regime, unchanged for 2026. Once you cease Canadian residence, you are deemed to have disposed of most capital property at fair market value and immediately reacquired it at the same amount. That triggers the accrued gain. One related point: the proposed increase in the capital gains inclusion rate from 50% to 66.67% was deferred in January 2025, then cancelled outright on 21 March 2025. The inclusion rate stays at 50% for everyone, with no CAD 250,000 threshold and no two-tier system.
Canada is easy to enter and expensive to leave. Unlike the United States, its tax system follows residence rather than citizenship, so a Canadian citizen can genuinely leave the system behind. But the price of that exit is steep. You realise every accrued gain on the way out, in one go, and Canada charges it whether or not you actually sell anything.
The facts
- Total landed cost
- 50% of your accrued worldwide gains is included in income and taxed at marginal rates. In practice, that comes to roughly 22–27.5% of the gain, depending on the province.
- Route type
- Tax regime, not a visa
- Physical presence
- Ceasing residence comes down to a facts-and-circumstances test. It means severing your residential ties, not simply buying a plane ticket.
- Family
- This is applied individually. A spouse or minor children remaining in Canada is one of the strongest signs that residence has not actually ceased
- Permanent residency
- Not applicable
- Citizenship
- Not applicable
- Language test
- Not applicable
- Dual citizenship
- Permitted
- Requirements
- Deemed disposition of most capital property at fair market value on ceasing residence.A 50% inclusion rate, taxed at marginal rates.Form T1243, plus Form T1161 where total property fair market value exceeded CAD 25,000.An optional deferral election on Form T1244, due by 30 April of the following year, with security required above CAD 16,500 in federal tax.
- Some things are excluded from the deemed disposition: Canadian real property and resource property, Canadian business inventory and business property, RRSPs, RRIFs, RESPs, TFSAs, registered pension plans, interests in Canadian life insurance policies, and personal-use property under CAD 10,000. Everything else gets caught, including the private company shares that make up most UHNW balance sheets.
- Form T1243 reports the deemed disposition. Form T1161 lists all properties inside and outside Canada if their total fair market value exceeded CAD 25,000 on departure. This filing is required even where no tax is owed, and there are penalties for filing late.
- You can elect under s.220(4.5) on Form T1244 to defer payment, with no interest, until actual disposition. The election must be made by 30 April of the year after emigration. Where the federal tax on the deemed disposition exceeds CAD 16,500 (CAD 13,777.50 for former Québec residents), you must also post adequate security.
- Residence does not end just because you say it did. Keeping a home available for your use, a spouse or dependants in Canada, or significant secondary ties will keep you resident, and taxable on your worldwide income.
- Private company shares are the usual problem. They are illiquid, hard to value, and fully exposed. Valuation disputes with the CRA on departure are common, and expensive.
- Canada has no inheritance tax, but there is a deemed disposition at death. The accrued gain is taxed either on the way out or at the end. In practice, departure planning and estate planning are the same exercise.