Canada Revenue Agency
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Dispositions of property
Note
On this Web page, all dollar amounts are in Canadian funds.
Deemed dispositions
If you emigrate from Canada, you're considered to have:
- disposed of almost all your property at its fair market value on the day you emigrate; and
- re-acquired it for the same amount right after.
This is called a deemed disposition of your property. It applies to all your property, including taxable Canadian property, except the following:
- Canadian real or immovable property, resource property, and timber resource property (see the note below);
- Canadian business property (including inventory) if the business is carried on through a permanent establishment in Canada (see the note below);
- pensions and similar rights, including RRSPs (registered retirement savings plans), RRIFs (registered retirement income funds), and DPSPs (deferred profit-sharing plans);
- rights to certain benefits under employee profit-sharing plans, employee benefit plans, employee trusts, and salary-deferral arrangements;
- trust interests that were not acquired for consideration;
- property you owned at the time you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated;
- employee security options subject to Canadian tax;
- interests in life insurance policies in Canada (other than segregated fund policies).
Note
You may elect to declare a deemed disposition on the first two properties listed above. To declare a deemed disposition on these properties, use Form T2061A, Election by an Emigrant to Report Deemed Dispositions of Taxable Canadian Property and Capital Gains and/or Losses Thereon.
Reporting the deemed disposition
To report the deemed disposition on your income tax return, you must:
- calculate and include in your income the capital gain or capital loss that results from your deemed disposition.
To calculate your capital gains (or losses) relating to the deemed disposition of property, use Form T1243, Deemed Disposition of Property by an Emigrant of Canada.
Include on your Schedule 3, Capital Gains (or Losses), the capital gain (or loss) that you reported on Form T1243.
If the fair market value of all the property you owned when you left Canada is more than $25,000, you must include a list of your worldwide property holdings with your income tax return.
Exclude from your list any personal-use property valued at less than $10,000. Examples include:
- clothing;
- household goods;
- cars.
The tax owing on a deemed disposition is due by April 30 of the year after the tax year.
You can elect to defer the payment of tax on income relating to the deemed disposition -- regardless of the amount -- and pay it later, without interest, when you sell or otherwise dispose of the property.
- The election to defer tax owing does not apply to the deemed disposition of an employee benefit plan.
To elect to defer the payment of tax on income relating to the deemed disposition, use Form T1244, Election, Under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property.
If you make this election, it must be filed on or before April 30 of the year after the tax year.
If you elect to defer the tax owing on the deemed disposition and if the amount of federal tax owing is more than $14,500, you must provide acceptable security to cover any amount over $14,500. You are also required to provide security to cover any applicable provincial or territorial tax payable.
Contact the Revenue Collections Section of the tax services office in the region you resided before you left Canada to make acceptable arrangements before your return is due to be filed.
What if you return to Canada?
Unwinding a deemed disposition
If you ceased to be a resident of Canada after October 1, 1996, and you re-establish Canadian residency, you can elect to make an adjustment to the deemed dispositions you reported when you emigrated. This is referred to as an election to "unwind" a previous deemed disposition.
You can make this election to unwind if you still own some or all of the property deemed disposed of when you emigrated. If you make this election, the amount of the gain from the deemed disposition that you reported on your return for the year you emigrated can be reduced by the least of:
- the amount of the gain reported on your return for the year you departed;
- the fair market value (FMV) of the property on the date you immigrated;
- any other amount to a maximum of the least of the above-noted amounts.
The election to unwind may result in the reduction or elimination of the tax owing in respect of the gain from the previously reported deemed disposition of property on emigration. If you make this election and had previously elected to defer payment of the tax owing on the income from the deemed disposition, some or all of the security you may have furnished may be returned to you.
If you make this election to unwind, you must submit the request in writing on or before your filing-due date for the year you immigrate and become resident. You must also include a list of the properties you own and the fair market value of each property to which this election applies. Include this election and information with your return of income for the year you immigrate.
Previously deferred tax
When you immigrate to Canada, you are generally considered to have disposed of and to immediately reacquire most properties, you own on the date you immigrate. If you had previously elected to defer payment of the tax owing on the income from the deemed disposition of property on emigration, you may now have to pay the deferred tax.
For more information, contact the International Tax Services Office.
Disposing of property after you emigrate
As a non-resident, you may dispose of, or plan to dispose of, taxable Canadian property such as:
- Canadian real estate;
- Canadian business property;
- unlisted shares of a Canadian corporation.
For the procedures you must follow, please see the section called Disposing of certain types of Canadian property in the Non-residents and Income Tax guide. You can also refer to IC72-17, Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada - Section 116.