Leaving Canada: departure tax, non-resident status, and where to go

The big difference from the US

Canada runs residence-based taxation. If you are a resident of Canada, you pay Canadian tax on worldwide income. If you are a non-resident, Canada taxes you only on certain Canadian-source income (rental, employment performed in Canada, and certain pensions). There is no citizenship-based tax. You keep your passport.

The exit mechanism is therefore becoming a non-resident, not renouncing. The US exit tax (and the covered-expatriate machinery) does not apply. But Canada has its own departure tax.

The Canadian departure tax (deemed disposition)

When you cease to be a Canadian resident, the Income Tax Act (section 128.1) treats you as if you sold most of your assets at fair market value the day you leave. The capital gains from that deemed disposition are reported on your final tax return. The rules are documented in CRA Income Tax Folio S5-F1-C1 ("Becoming and Ceasing to Be a Tax Resident of Canada").

How the CRA decides if you are a non-resident

Non-resident status is factual. The CRA looks at residential ties: a home in Canada, a spouse or dependants in Canada, personal property (car, furniture), social ties, a Canadian driver's licence, health coverage, and a Canadian bank account. A dwelling you retain (even rented out) is a strong primary tie and often the reason someone stays resident.

You can request a residency opinion by filing Form NR73 (Determination of Residency Status), but the determination is based on facts - the form does not create the status. See our tax residency calculator for the day thresholds of the country you are moving to.

Best countries for Canadians

The signals that suit a Canadian overlap with the American-fit lens: territorial tax, low personal rate, a digital nomad visa, and no exit tax of their own. One difference: a tax treaty with Canada matters more for Canadians (it lowers the 25% non-resident withholding on RRSP/RRIF withdrawals and gives residency tie-break clarity). We show treaty count as a proxy below - verify any specific Canada treaty separately.

1. 1
   🇧🇿 Belize3 treaties

   territorial tax (foreign income not taxed locally), a special regime exempts foreign income, 0% top personal rate, no worldwide taxation.

2. 2
   🇨🇷 Costa Rica12 treaties

   territorial tax (foreign income not taxed locally), a special regime exempts foreign income, no worldwide taxation, no exit tax.

3. 3
   🇸🇬 Singapore93 treaties

   territorial tax (foreign income not taxed locally), a special regime exempts foreign income, no worldwide taxation, no exit tax.

4. 4
   🇵🇦 Panama17 treaties

   territorial tax (foreign income not taxed locally), a special regime exempts foreign income, no worldwide taxation, no exit tax.

5. 5
   🇵🇾 Paraguay14 treaties

   territorial tax (foreign income not taxed locally), a special regime exempts foreign income, 10% top personal rate, no worldwide taxation.

6. 6
   🇬🇪 Georgia56 treaties

   Small Business Status / Virtual Zone IT Company exempts foreign income, no exit tax, digital nomad visa.

See the full ranked table in our best countries for American expats guide (the fit lens is similar for Canadians).

A sensible sequence for Canadians

1. Establish your new residency first. Move, get residency, and run the days through the tax residency calculator.
2. Sever Canadian ties. Sell or rent out the Canadian home at arm's length, move family, cancel provincial health coverage and the driver's licence where applicable.
3. Estimate the departure tax. List assets and approximate the deemed-disposition gains. Plan liquidity for the tax bill.
4. File the departure return. Final return to departure date, Form T1244 elections, NR73 opinion if you want one.
5. Manage Canadian-source income afterward. RRSP/RRIF withdrawals, rental income, and treaty withholding.

Frequently asked questions