Moving abroad doesn’t automatically classify you as a non-resident for Canadian tax purposes. The Canada Revenue Agency assesses the ties you retain with Canada to determine your tax status. Knowing how to sever ties with Canada properly is essential to establishing whether you’ll owe Canadian tax on your worldwide income or only face withholding tax on certain Canadian-source income.
This guide breaks down the specific actions required to establish non-resident status, the documentation you’ll need, and the timeline for making a clean exit.
Primary Ties: The Most Critical Factors
The CRA identifies three primary ties that carry the most weight in residency determinations. Maintaining any of these creates a presumption that you remain a Canadian resident for tax purposes.
Home in Canada
Owning or renting a dwelling in Canada available for your personal use represents the strongest single tie to Canada. The CRA examines whether you’ve maintained a home that remains accessible to you, regardless of whether you actively use it.
Options for handling Canadian property:
Selling the property is the simplest method, as it clearly indicates the intention to leave permanently and removes any ongoing property obligations.
Renting at arm’s length involves leasing to unrelated parties under market-rate agreements, ensuring that the rental activity is genuine and not merely an arrangement with family or friends designed to maintain access.
Rental agreements require careful structuring. Avoid fixed-term leases that align with your planned absence. A one-year lease when you’re taking an 18-month contract abroad signals temporary departure. Instead, use standard residential leases that auto-renew, or month-to-month arrangements that do not specify a predetermined return date.
Subletting your rental apartment with an agreement to reclaim it upon your return, keeping keys to a property, and storing personal belongings at a Canadian home that you have “sold” to family members are all practices that do not work.
Spouse or Common-Law Partner in Canada
A spouse or common-law partner remaining in Canada creates the single strongest residential tie. This tie alone typically leads the CRA to determine that you’ve maintained Canadian residency, regardless of other factors.
Consider an executive accepting a three-year posting to Singapore. If their spouse remains in Toronto with the family home, the CRA will generally maintain the executive’s status as a Canadian resident for tax purposes throughout the posting. The executive would report worldwide income on Canadian tax returns despite physically residing in Singapore.
Limited exception: Relationship breakdown. If you’re separated or divorced, a former spouse remaining in Canada doesn’t create a residential tie. However, the CRA may request documentation proving the separation preceded your departure.
Dependents in Canada
Minor children who remain in Canada establish a significant residential tie. Adult children typically don’t create the same issue unless you’re providing substantial financial support.
The test focuses on dependency since an 18-year-old at university receiving tuition payments doesn’t necessarily create a tie if they’re otherwise independent. A 25-year-old living in your home while you pay their expenses creates a stronger connection.
Parents who maintain custody of minor children rarely succeed in establishing non-resident status while those children remain in Canada, even when the other parent has primary custody.
Secondary Ties: Building Your Case
Secondary ties individually carry less weight than primary ties, but multiple and secondary relations in combination can lead to a residency determination. The CRA examines the totality of your connections to Canada.
Personal Property and Belongings
Furniture, vehicles, recreational property, and personal effects left in Canada suggest you intend to return. The CRA views these items as indicators of your permanent home location.
Actions to take:
- Sell or donate furniture and household goods
- Sell vehicles or export them to your new country
- Dispose of recreational property like cottages or cabins
- Ship personal belongings to your new residence
Storing belongings in Canada undermines your position. Commercial storage facilities for your furniture and personal items indicate you’re maintaining a life in Canada and plan to resume.
Financial Accounts and Credit
Bank accounts, investment accounts, and credit cards represent ongoing financial connections to Canada. While maintaining some accounts may be necessary during the transition, the goal is to establish your financial life in your new country.
Bank accounts: Take the opportunity to close your chequing and savings accounts whenever possible. Many individuals continue to maintain a single Canadian account solely to receive Canadian-source income, such as pensions or rental payments. Keep this account minimal and focus on establishing your primary banking in your new country.
Investment accounts: Be aware that closing investment accounts might trigger capital gains taxes. Weigh the tax implications of liquidating investments against the benefits to your residency status. Many people hold onto their investment accounts as they transition to non-resident status, but this can complicate your situation.
RRSPs and TFSAs: Generally, you can keep these accounts open. Remember that withdrawing from RRSPs as a resident is subject to full taxation. Non-residents are not allowed to contribute to a Tax-Free Savings Account (TFSA). If they do make contributions, a penalty of 1% per month will be applied. Consider leaving your retirement accounts intact and accessing them later as a non-resident, which will be subject to withholding tax.
Credit cards: Cancel your Canadian credit cards and switch to cards available in your new country. Relying on a Canadian credit card as your primary payment method signals that you haven’t fully established your financial life abroad.
Provincial Health Insurance
Maintaining provincial health coverage creates a strong inference that you remain a resident of the province and therefore Canada. Cancel provincial health insurance before departure or immediately upon leaving. Provincial rules can differ, so it’s important to either cancel your plan or formally notify the relevant authorities to avoid any assumptions about residency.
Each province has different rules for maintaining coverage while temporarily absent. If you’re uncertain about your return plans, maintaining coverage suggests your absence is temporary. Cancel coverage to strengthen your non-resident position.
Driver’s License and Vehicle Registration
An active Canadian driver’s license and vehicle registration indicate ongoing presence in Canada. Surrender your provincial driver’s license and cancel vehicle registration and insurance.
Obtain a driver’s license in your new country. Many jurisdictions allow license exchange for Canadian licenses, making this a straightforward administrative step.
Professional and Social Memberships
Memberships in Canadian professional associations, unions, clubs, religious organizations, or recreational groups represent ongoing social ties. Cancel memberships that require Canadian residency or indicate you’re maintaining a presence in Canada.
Professional designations that require Canadian residency should be converted to non-resident status or cancelled. For example, lawyers or medical professionals should inform their provincial regulatory body of their departure and change their registration status.
Establishing Ties in Your New Country
Severing Canadian ties represents only half the equation. The CRA also examines whether you’ve established yourself as a resident of another country. Evidence of building a life abroad strengthens your position.
Legal Residence Status
Obtain formal residence status in your new country as quickly as possible. This will demonstrate a commitment to establishing yourself there permanently.
Residence permits, permanent residence cards, or citizenship applications all support your position that you’ve left Canada for good. Tourist visas or temporary work permits are weaker evidence, though they may be your only option initially.
Financial and Social Integration
Open local bank accounts and establish financial relationships in your new country. Obtain local credit cards, set up investment accounts, and conduct your financial affairs locally rather than continuing to rely on Canadian institutions.
Join local organizations, clubs, or professional associations. These memberships demonstrate social integration rather than maintaining your center of life in Canada.
Housing and Personal Property
Establish a permanent home in your new country. Purchase or lease long-term accommodation. Ship your belongings and furnish your new residence. These actions demonstrate that your new country has become your home, not Canada.
The Timeline for Severing Ties
Your residency status changes on a specific date: your departure date. The CRA considers you a part-year resident for your final tax year. You report worldwide income as a Canadian resident until your departure date, then only Canadian-source income afterward.
Before Departure
Complete as many tie-severing actions as possible before leaving Canada:
- Sell or arrange rentals for property
- Sell vehicles and personal property
- Cancel provincial health insurance
- Notify professional associations of your departure
- Close unnecessary bank accounts
First 90 Days After Departure
Complete the transition during your first three months abroad:
- Obtain residence documentation in your new country
- Open local bank accounts and financial services
- Get a local driver’s license
- Establish a permanent residence
- Close remaining Canadian accounts that aren’t needed
Return Visits to Canada
Frequent or extended visits to Canada undermine your non-resident status. The CRA examines both the frequency and duration of return trips.
While no specific rule limits your visits, spending significant time in Canada suggests you haven’t truly left. Consider someone who spends six months per year in their new country and six months visiting Canada. This pattern indicates residential ties remain strong.
Keep visits short and infrequent, particularly in the first year after departure. Document the purpose of each visit and maintain records showing your permanent home remains outside Canada.
Required Documentation
Maintain comprehensive records documenting your departure and establishment in your new country. If the CRA questions your residency status, this evidence becomes critical.
Essential Records to Keep
- Real estate sale agreements or rental contracts for Canadian property
- Proof of cancellation for provincial health insurance
- Letters confirming cancellation of memberships and professional designations
- Documentation of vehicle sales or export
- Correspondence with financial institutions regarding account closures
- Residence permits or visas for your new country
- Lease or purchase agreements for foreign residence
- Employment contracts or business registration in your new country
- Foreign tax returns and payment receipts
- Utility bills and other proof of foreign residence
Travel Records
Keep detailed records of your presence in Canada and abroad. Entry and exit stamps in your passport provide objective evidence. If you’re a frequent traveller, maintain a log showing dates of entry and exit for each country.
This documentation proves you weren’t sojourning in Canada for 183 days or more, which would trigger deemed residence regardless of your ties to Canada.
Form NR73: Requesting an Official Determination
Form NR73 (Determination of Residency Status) allows you to request an official CRA ruling on whether you’ve become a non-resident. Filing this form is optional, but it can provide certainty about your status.
When Filing Helps
Consider filing Form NR73 when:
- Your situation involves complexity or ambiguity about your ties
- You’re maintaining some secondary ties for practical reasons
- You want certainty before filing your tax return
- You have significant Canadian-source income and want to confirm withholding obligations
The CRA will review your situation and issue a determination letter confirming your status. This ruling provides protection if your circumstances match what you disclosed on the form.
When Filing Creates Risk
Filing Form NR73 invites CRA scrutiny. If your case is straightforward and you’ve cleanly severed ties, filing may be unnecessary. The form essentially asks the CRA to review your residency status, which could prompt questions you’d prefer to avoid.
If you’ve maintained primary ties like a spouse in Canada or a readily available home, the CRA will likely determine you remain a resident. This official determination can work against you.
Many individuals with clear-cut departures skip Form NR73 and file their final Canadian tax return as a part-year resident, declaring their departure date. This approach works when your facts strongly support non-resident status.
Tax Implications of Severing Ties
Becoming a non-resident triggers immediate tax consequences beyond the obvious benefit of ending worldwide income taxation. Understanding these implications helps you plan your departure effectively.
Deemed Disposition
The CRA treats your departure as if you sold most of your capital property at fair market value. This “deemed disposition” triggers capital gains tax on accrued appreciation, even though you haven’t sold anything.
Assets subject to deemed disposition include investment portfolios, business interests, and other particular capital property. Canadian real estate is exempt from deemed disposition but remains subject to Canadian tax when you eventually sell it.
This departure tax can be substantial. Consider someone with an investment portfolio that has appreciated by $500,000. The deemed disposition triggers tax on $250,000 of taxable capital gains, potentially resulting in tax liability exceeding $100,000.
RRSPs and TFSAs are not subject to deemed disposition and can remain open after you become a non-resident.
Read Also: Our complete guide about deemed disposition
Ongoing Canadian Tax Obligations
Non-residents remain subject to Canadian tax on Canadian-source income, typically through withholding tax:
- Pensions: 15% withholding (may be reduced under tax treaties)
- RRSP withdrawals: 15% withholding on periodic payments
- Rental income: 25% withholding, though you can elect to file a return and pay tax at regular rates
- Capital gains on Canadian real estate: 25% withholding on the gross proceeds (you can obtain a certificate of compliance for lower withholding)
Common Pitfalls When Severing Ties
Understanding where others fail helps you avoid the same mistakes. These issues regularly result in unexpected continued residency determinations.
Assuming Physical Absence Equals Non-Residence
Living abroad doesn’t automatically make you a non-resident. The CRA’s determination depends entirely on your ties to Canada, not your physical location.
Consider someone who moves to Dubai for work while their spouse and children remain in Vancouver in the family home. Despite living in Dubai full-time, the CRA will treat this person as a Canadian resident subject to tax on worldwide income. Physical absence matters far less than residential ties.
Maintaining “Just in Case” Ties
Individuals often preserve certain connections “just in case” they decide to return. This hedge undermines the fundamental requirement: demonstrating you’ve permanently left Canada.
Examples include keeping a bedroom available at a family member’s home, maintaining full furniture in storage, or preserving professional designations that require residency. Each of these suggests your departure might be temporary.
Incomplete Financial Transition
Continuing to conduct all financial affairs through Canadian institutions while living abroad signals you haven’t established yourself in your new country. Using your Canadian bank account for all transactions, paying bills from Canadian credit cards, and maintaining Canadian investment accounts as your primary holdings all weaken your position.
The solution involves active establishment abroad, not just passive departure from Canada. Open local accounts, obtain local credit, and shift your financial center of gravity to your new country.
Short-Term Contracts with Return Dates
Accepting an 18-month contract abroad with a predetermined end date creates ambiguity about whether you’ve truly left Canada. The CRA may view this as a temporary absence rather than emigration.
If you sever ties and establish residence abroad during a fixed-term contract, demonstrate through your actions that your departure is permanent regardless of the contract term. This means selling property, moving family, and establishing roots in your new country rather than maintaining everything in Canada for your expected return.
Insufficient Documentation
Failing to maintain records of tie-severing actions leaves you unable to prove your case if the CRA questions your status years later. Document everything: property sales, account closures, membership cancellations, and evidence of establishment abroad.
Working with Tax Professionals
Severing ties with Canada involves substantial tax and legal complexity. The deemed disposition can trigger significant tax liability. Mistakes in the process can result in continued Canadian residency and years of incorrect tax filing.
When to Seek Professional Advice
Consider professional guidance when:
- You own significant appreciated assets that will trigger a deemed disposition
- You’re maintaining some ties to Canada for practical reasons
- You own a Canadian business or professional corporation
- Your spouse or dependents are remaining in Canada
- You’re moving to a country with complex tax treaty provisions
- You plan to maintain significant Canadian-source income
Tax advisors can structure your departure to minimize deemed disposition tax, advise on which ties must be severed versus which can be maintained, and help you understand how tax treaties affect your situation.
What Advisors Can Do
Professional advisors help with:
- Calculating deemed disposition tax and planning strategies to reduce it
- Reviewing your ties and advising which must be severed
- Preparing Form NR73 if beneficial to your situation
- Filing your final Canadian tax return correctly
- Advising on ongoing Canadian tax obligations as a non-resident
- Coordinating between Canadian and foreign tax systems
Taking Action
Successfully severing ties with Canada requires systematic action across multiple areas of your life. The process goes beyond simply moving abroad. It demands that you demonstrate through concrete steps that Canada is no longer your home.
Start by eliminating primary ties: deal with Canadian property, relocate your family, or confirm your dependents don’t create ties. Then address secondary ties by closing accounts, cancelling memberships, and disposing of property. Simultaneously, establish yourself in your new country by obtaining legal residence, integrating financially, and building a life there.
Document every step. The CRA may question your status years after your departure, and comprehensive records will serve as your evidence.
For comprehensive guidance on all aspects of leaving Canada, including deemed disposition, tax planning, and compliance requirements, see our complete
Exiting Canada: Legal Exit Guide.
If you’re planning to leave Canada permanently and need professional advice on severing ties, tax implications, or determining your residency status, Harvey Law Corporation provides specialized guidance for high-net-worth individuals. Visit
Leaving Canada Permanently to learn more about our services.
How to Sever Ties with Canada: Official Sources
This guide is based on official Canada Revenue Agency publications and guidance:
Canada Revenue Agency. “Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status.” Available at: https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html
Canada Revenue Agency. “Leaving Canada (emigrants).” Available at: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html
Canada Revenue Agency. “Dispositions of property for emigrants of Canada.” Available at: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/dispositions-property.html
Canada Revenue Agency. “Determining your residency status.” Available at: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html
Tax laws and CRA interpretations change regularly. This information is current as of publication but should not be relied upon as legal or tax advice for your specific situation. Consult with harvey Law Group before making decisions about severing ties with Canada.
