Canada · Tax regime
Canadian Departure Tax (deemed disposition on emigration, ITA s.128.1)
Standing regime, unchanged for 2026. On ceasing Canadian residence you are deemed to have disposed of most capital property at fair market value and immediately reacquired it at the same amount, realising the accrued gain. Related: the proposed increase in the capital gains inclusion rate from 50% to 66.67% was deferred in January 2025 and then CANCELLED on 21 March 2025 — the inclusion rate remains 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 US, the tax follows residence rather than citizenship — so a Canadian citizen can genuinely leave the system — but the price of the exit is a one-time realisation of every accrued gain on the way out, and Canada charges it whether or not you sell anything.
The facts
- Total landed cost
- 50% of accrued worldwide gains included in income and taxed at marginal rates — effectively ~22–27.5% of the gain depending on province
- Physical presence
- Ceasing residence is a facts-and-circumstances test — severing residential ties, not merely buying a ticket
- Family
- applied individually; a spouse or minor children remaining in Canada is one of the strongest indicators that residence has NOT ceased
- Permanent residency
- n/a
- Citizenship
- n/a
- Language test
- n/a
- Dual citizenship
- Permitted
- Requirements
- deemed disposition of most capital property at FMV on ceasing residence50% inclusion rate taxed at marginal ratesForm T1243; Form T1161 where total property FMV exceeded CAD 25,000optional deferral election on Form T1244 by 30 April of the following year, with security above CAD 16,500 federal tax
- 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 — including the private company shares that dominate most UHNW balance sheets — is caught.
- 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 — required even where no tax is owed, with penalties for late filing.
- You can elect under s.220(4.5) on Form T1244 to defer payment (no interest) until actual disposition, but the election must be made by 30 April of the year after emigration, and where the federal tax on the deemed disposition exceeds CAD 16,500 (CAD 13,777.50 for former Québec residents) you must post adequate security.
- Residence does not end because you say it did. Retaining a home available for use, a spouse or dependants in Canada, or significant secondary ties will keep you resident and taxable on worldwide income.
- Private company shares are the usual problem: 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 — so the accrued gain is taxed either on the way out or at the end. Departure planning and estate planning are the same exercise.