(CANADA) — The Canada Revenue Agency requires people who leave Canada in the middle of a tax year to split that year into a resident period and a non-resident period on their departure-year return.

That filing, often described as a Canada Emigrant Tax Return, reports world income in Canadian dollars up to the date a person stops being a Canadian tax resident. After departure, the person generally pays Canadian income tax only on Canadian-source income.

The return also tells the agency when tax residency ended, determines which benefits and credits may stop, and can trigger extra forms if Canada treats property as sold on departure. Those rules apply even if the person did not make an actual sale.

Residency status comes first

CRA says a person who leaves Canada but keeps residential ties in Canada is usually still a factual resident and not an emigrant.

A different result applies if the person is also treated as resident of another country under a tax treaty. In that case, the person may be a deemed non-resident, and CRA applies the same rules it uses for emigrants.

Temporary absences do not automatically end residency. A person who leaves for a job assignment, study, travel or family reasons may still remain taxable in Canada as a resident, while someone who settles abroad, moves family and weakens Canadian ties has a stronger case for emigrant status.

The departure date requires a closer calculation

CRA says a person who leaves Canada to settle in another country usually becomes a non-resident on the latest of three dates: the date they leave Canada, the date their spouse or common-law partner and dependants leave Canada, or the date they become resident of the country where they settle.

That means a physical move date does not always control the return. If one spouse leaves in June, children leave in August and tax residence in the new country starts in September, CRA’s latest-of-three-dates approach can push the departure date later.

That date affects the split between resident-period income and non-resident-period income. It also determines which provincial or territorial tax package the person must use.

Provincial tax packages and Quebec

CRA says taxpayers should file with the package for the province or territory where they lived on the date they left Canada. Someone living in Ontario at departure uses the Ontario package, while someone in British Columbia uses the British Columbia package.

Quebec follows a separate path. CRA directs taxpayers who were resident in Quebec before leaving to Revenu Québec for Quebec filing information.

Income reporting shifts sharply

Up to the departure date, CRA requires world income from all sources inside and outside Canada.

That can include Canadian employment income, self-employment income, business income, interest, dividends, rental income, foreign salary, foreign bank interest, foreign dividends and capital gains realized before departure. Timing matters; income earned before the departure date can belong to the resident period even if payment arrives later.

After a person becomes a non-resident, the return changes. CRA says only certain Canadian-source income is reported on the return, while other Canadian payments fall under non-resident withholding tax at source.

Post-departure income can include pension income, RRSP or RRIF payments, rental income, dividends, employment income, business income, or gains from taxable Canadian property. CRA says some of that income may be handled entirely through withholding, while some may still require a return or an election.

The section 217 election

One election can matter after departure. CRA says a person receiving certain Canadian income after leaving may benefit from electing under section 217 to include that income on a return, even though withholding tax is usually the final Canadian tax obligation on that income.

Pensions and similar payments often fall into that discussion. CRA does not treat a section 217 election as automatic; the result depends on income, credits, withholding and treaty position.

Departure tax on deemed dispositions

Departure can also create a tax bill on assets that were never sold. CRA says it treats certain property as if it were sold at fair market value on the day the person leaves Canada and immediately reacquired for the same amount.

That deemed disposition can produce a capital gain, often called departure tax. Shares, funds, crypto and other property can fall into that calculation even when the taxpayer keeps holding the asset after moving abroad.

CRA says taxpayers who must calculate gains or losses on property deemed disposed of when they ceased to be resident should complete Form T1243, Deemed Disposition of Property by an Emigrant of Canada, and include the resulting gains or losses on Schedule 3. The form is part of the tax calculation, not only a disclosure filing.

Form T1161 requirements and penalties

A second form can apply even when no tax is owing. CRA says a person whose total property had a fair market value of more than CAD 25,000 when leaving Canada must complete Form T1161, List of Properties by an Emigrant of Canada, and attach it to the return.

That form lists properties inside and outside Canada. CRA excludes some items from the Form T1161 calculation, including cash and bank deposits, many registered plans, certain property owned by short-term residents, and personal-use property with fair market value under CAD 10,000.

Still, the threshold can be crossed quickly. Brokerage accounts, foreign shares, crypto, mutual funds and foreign property interests can push an emigrant above CAD 25,000 even where the person owes no departure tax.

CRA sets a separate penalty for filing Form T1161 late. The agency says the charge is CAD 25 per day, with a minimum of CAD 100 and a maximum of CAD 2,500.

The penalty applies because Form T1161 is an information return as well as a compliance requirement. CRA says it must be sent on or before the filing due date where required, even if the taxpayer does not have to file a return.

Postponing departure tax with Form T1244

People who face departure tax but do not have cash from an actual sale can ask to postpone payment. CRA says taxpayers can elect on Form T1244 to defer tax on income relating to deemed disposition of property until the property is actually sold or otherwise disposed of.

The election deadline is April 30 of the year after emigration. CRA says adequate security is required if the federal tax owing on the deemed disposition is more than CAD 16,500, or more than CAD 13,777.50 for former residents of Quebec.

Government payments and credits after departure

Leaving Canada also affects government payments. CRA says people should tell the agency the date they leave Canada because non-residents are generally not eligible for the GST/HST credit or the Canada Child Benefit, including certain related provincial or territorial payments.

Families that keep receiving those amounts after departure can face repayment demands. CRA says taxpayers should contact the agency immediately if those credits or payments continue after they become non-resident.

Provincial and territorial credits can also disappear. CRA says those credits are generally unavailable unless the person was a resident of Canada on December 31.

A mid-year departure can therefore leave someone taxed partly as a resident for the year but unable to claim credits usually tied to year-end residence. That is one reason a Canada Emigrant Tax Return cannot be prepared like a normal full-year resident return.

Moving expenses and registered accounts

Moving costs usually do not soften the blow. CRA says a person generally cannot deduct moving expenses for a move out of Canada.

One narrow exception remains for full-time students. CRA says a deduction may be available if the person left Canada to take post-secondary courses at an educational institution in another country and received a taxable Canadian scholarship, bursary, fellowship or research grant to attend that institution.

Registered accounts raise separate issues. CRA says a person who holds a Tax-Free Savings Account when leaving Canada can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals.

Non-residents cannot keep contributing, however, and TFSA contribution room does not grow during non-residence. CRA also points departing taxpayers to special rules for the Home Buyers’ Plan and Lifelong Learning Plan.

Electronic filing limitations

Electronic filing may also be limited. CRA’s EFILE guidance says certain emigrant returns are excluded from EFILE, including emigrant returns for specified years with Form T1243, Form T1244 and or Form T1161.

The same guidance says emigrant returns for 2023, 2024 and or 2025 may otherwise be accepted through EFILE in some cases. Tax software users can find that special emigrant forms force the return out of the electronic system.

Record-keeping and common mistakes

Record-keeping becomes central once a move is planned. CRA’s guidance points to the value of keeping the physical departure date, spouse and dependant departure dates, proof of residence in the new country, lease termination or home sale records, Canadian and foreign property records, investment statements, fair market value reports on the departure date, adjusted cost base records, T-slips, foreign income records, Canadian-source income after departure and benefit notices.

The most sensitive numbers are the departure date, the fair market value of relevant assets on that date, the adjusted cost base of those assets, and the income earned before and after departure. Errors in those figures can affect residency, withholding, gains, credits and penalties all at once.

CRA’s examples of common mistakes point to the same pressure points. Taxpayers often file as full-year residents without entering a departure date, report post-departure income the same way they reported resident income, ignore Form T1161 because no tax is payable, fail to value property on the departure date, keep receiving GST/HST credit or CCB after leaving, or contribute to a TFSA while non-resident.

Each mistake points back to a basic rule in Canadian departure filings: residency does not end simply because a plane ticket was booked or a border was crossed. The Canada Revenue Agency looks at residential ties, the latest applicable departure date, the character of income after departure and whether property reporting forms apply.

A Canada Emigrant Tax Return therefore does more than close a file for someone moving abroad. It tells CRA when Canadian tax residence ended, what income belongs to the resident part of the year, what Canadian-source income remains taxable after departure, and whether Form T1243, Form T1161 or Form T1244 must accompany the return.