Departure Tax in 2026: What Happens When You Leave Canada?

– ITA s.128.1 | CRA Form NR73

You have accepted a role abroad.
You are relocating your family.
You plan to “move for a few years.”

Then someone says:

“Be careful — Canada taxes you when you leave.”

They are referring to Departure Tax.

Under Income Tax Act (ITA) s.128.1, Canada imposes a deemed disposition of certain property when an individual ceases to be resident.

In simple terms:

When you leave Canada, the Act may treat you as if you sold most of your assets — even though you did not.

Let us examine what that means.

 

First Principle: Canada Taxes Based on Residency

Canada taxes individuals on worldwide income while they are resident.

When you cease to be resident:

• Canada loses the right to tax your future worldwide income
• But it preserves tax on gains accrued while you were resident

This is achieved through the deemed disposition mechanism in s.128.1.

 

What Is the Deemed Disposition Rule?

When you become a non-resident:

You are deemed to have:

1. Disposed of most of your capital property at fair market value (FMV), and
2. Immediately reacquired it at that same FMV.

This triggers capital gains tax on accrued gains — even without a sale.

This is commonly referred to as “departure tax.”

 

What Property Is Included?

Generally included:

• Public company shares
• Private company shares
• Investment portfolios
• Rental properties (subject to exceptions)
• Foreign investments

Excluded property includes:

• Canadian real property (in most cases)
• RRSPs, RRIFs, TFSAs
• Pension plans
• Certain employee stock options

The rules are nuanced.

 

Example Scenario

You own:

• Investment portfolio purchased for $500,000
• Fair market value at departure: $900,000

Accrued gain: $400,000

Upon departure, you are deemed to have realized the $400,000 gain.

Tax applies at capital gains inclusion rates.

No actual sale occurs.

But tax is payable.

 

Principal Residence

If you own a principal residence:

It may not be subject to departure tax if it remains Canadian real property.

However:

Future sale as a non-resident triggers separate non-resident withholding rules.

Departure tax and non-resident real estate rules operate independently.

 

Can Payment Be Deferred?

Yes.

Under s.128.1, you may elect to defer payment of departure tax.

However:

• Security may be required
• Interest may apply
• Reporting obligations remain

This is not automatic relief.

Proper planning is required before departure.

 

Timing Matters

Residency is a question of fact.

Key factors include:

• Residential ties (home, spouse, dependants)
• Social and economic ties
• Duration of absence
• Intention

You cannot simply declare non-residency.

It must be supported by facts.

 

What Is Form NR73?

Form NR73 – Determination of Residency Status (Leaving Canada) is an administrative tool.

It allows individuals to request CRA’s opinion on residency status.

Important:

Filing NR73 is not mandatory.

And CRA’s opinion is not legally binding.

It is a disclosure-based assessment tool.

Many sophisticated taxpayers seek professional analysis before submitting NR73.

 

Partial-Year Residency

In the year of departure:

• You are taxed as a resident up to the departure date
• Non-resident rules apply afterward

Departure date determines deemed disposition timing.

Precise date matters.

 

Foreign Tax Credit Planning

If you move to a country with:

• Higher tax rates
• Capital gains taxation

Double taxation risks may arise.

Canada’s tax treaties may provide relief.

Pre-departure planning is essential.

 

Corporate and Family-Owned Enterprise Considerations

If you own:

• Shares in a Canadian corporation
• Shares in a holding company
• Interests in a family trust

Departure tax may apply to those shares.

This can create:

• Significant immediate tax liability
• Estate planning disruption
• Cash flow challenges

Pre-departure reorganizations may mitigate exposure.

 

Common Misunderstandings

“I’m just leaving temporarily — no tax applies.”
Residency determination governs, not intention alone.

“If I don’t sell, I don’t owe tax.”
Deemed disposition applies.

“My RRSP is taxed immediately.”
Registered plans are generally excluded from departure tax.

“Filing NR73 guarantees non-resident status.”
It provides CRA’s administrative view, not a binding ruling.

 

Strategic Planning Before Leaving Canada

Before departure:

• Review accrued capital gains
• Obtain FMV valuations
• Consider crystallization planning
• Assess eligibility for deferral
• Evaluate treaty implications
• Structure corporate holdings appropriately

Departure tax planning must occur before residency changes — not after.

 

Final Thoughts

Under ITA s.128.1, Canada imposes a deemed disposition of most capital property when an individual ceases residency.

This can create immediate capital gains tax — even without selling assets.

Form NR73 may assist in determining residency, but careful analysis is essential before filing.

For entrepreneurial families and globally mobile professionals, cross-border transitions require disciplined planning.

At Shajani CPA, we integrate residency analysis, corporate structuring, and treaty planning with statutory precision.

Because leaving Canada should not mean leaving tax strategy behind.

Tell us your ambitions, and we will guide you there.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2026 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.