Do you have to pay taxes in Canada if you no longer live there?

Taxation issues after moving from Canada are a concern for many expats. Understanding your tax obligations is critical to avoiding penalties, double taxation, and legal problems. The answer to this question depends on several key factors: your residency status for tax purposes, the type of income you receive from Canadian sources, and whether there are tax treaties between Canada and your new country of residence.

Determining your residency status

The Canada Revenue Agency (CRA) determines residency status not based on citizenship, but on your “substantial ties to Canada”. Even if you have physically left the country, you may remain a tax resident if you maintain significant ties: your own home in Canada, a spouse or children living in the country, bank accounts, provincial health insurance, and other economic ties.

If you do not have significant ties to Canada and are in the country for less than 183 days in a calendar year, the CRA will generally classify you as a non-resident. However, even non-residents have certain tax obligations on income from Canadian sources.

Tax obligations of non-residents

Non-residents of Canada are required to pay taxes only on income earned from Canadian sources, unlike residents, who declare their worldwide income. Taxable income for non-residents includes:

  • Employment income earned in Canada, including salaries and remuneration for work performed in Canada. Business income from operating a business through a permanent establishment in Canada is also taxable at the regular rates.

  • Income from the rental of Canadian real estate is taxed at a rate of 25% as a withholding tax at source. However, owners may file Form NR6 to pay tax on net rental income instead of gross income.

  • Pension payments, including Canada Pension Plan (CPP) and Old Age Security (OAS), are also subject to a 25% withholding tax. Dividends from Canadian corporations and investment income are taxed at the same rate.

  • Capital gains from the sale of Canadian real estate are taxable. Starting in 2025, the withholding tax rate for non-resident sellers of real estate has increased from 25% to 35%.

Impact of tax treaties

Canada has over 90 bilateral tax treaties that can significantly reduce the tax burden on non-residents. These treaties avoid double taxation and can reduce withholding tax rates. For example, under the treaty with the US, the withholding tax rate can be reduced for certain types of income.

To take advantage of tax treaty benefits, non-residents must:

  1. file Form NR301 (Declaration of Eligibility for Benefits under a Tax Treaty)
  2. provide a certificate of residence from the tax authority of their new country of residence

Departure Tax

When changing residency status, Canada applies the concept of deemed disposition — conditional disposal of property. This means that a person is considered to have sold all their assets at fair market value on the date of departure. Half of the capital gain is included in taxable income.

However, some assets are exempt from this rule, including:

  • Canadian real estate
  • Canadian business property
  • Pension plans (RRSP, RRIF)
  • Assets of individuals who have been residents of Canada for less than 60 months during a 10-year period

Practical recommendations

If you are planning to move from Canada, it is important to do the following in advance:

  • determine your future tax status (complete Form NR73 to obtain an official CRA conclusion)

  • keep detailed records of your ties to Canada and your new country of residence

  • for income from Canadian sources as a non-resident, consider filing a voluntary tax return (Section 216 or Section 217 returns), which may result in a refund of overpaid taxes

  • Consult with tax advisors in both jurisdictions to optimize your tax planning.

Conclusion

The tax obligations of former Canadian residents depend on their new residency status and the type of income from Canadian sources. Non-residents pay taxes only on Canadian income, usually through withholding at a rate of 25%, which may be reduced through tax treaties. Correct determination of residency status, understanding the exit tax, and utilizing international treaty benefits will help minimize the tax burden and ensure compliance with Canadian tax laws even after moving abroad.