Immigrate to Canada: knowing tax implications prior arrival

You’ve made your decision, and you and your family have decided to immigrate to Canada. Before landing on Canadian soil, you need to know the different tax implications of immigrating to Canada. We have drawn up some essential elements for you to consider.

Upon arrival in Canada, under the Income Tax Act, you will be deemed to have sold all of your property (with exceptions) immediately prior to your immigration to Canada. At the same time, you will be presumed to have acquired these same assets again, so the book cost (adjusted cost base) will be equal to the fair market value. The logic behind this tax rule is simple: Canada will only tax the capital gain generated on your affected property during your period of Canadian tax residency.

Portrait of your belongings before your arrival

It will therefore be important to make a list of all your possessions immediately before your immigration to Canada since this will serve as the basis for calculating the capital gain on the actual disposition. In addition, you will need to file a Canadian income tax return and notify the tax authorities of your immigration to Canada.

As a Canadian tax resident

Upon arrival as a Canadian tax resident, your worldwide source income will be subject to Canadian tax. Before that date, only your Canadian-source income will be subject to tax in Canada.

The CRA also provides you with Form NR-74 Determination of Residency Status (Entering Canada) in order to obtain an opinion on your tax residency status. This form can therefore be used as a guideline, but should not be transmitted since the determination of the status is very complex and many gray areas exist. By submitting it, you are sort of asking the CRA to decide for you.

Property not covered by the deemed disposition

Although most property is covered by the deemed disposition, certain exceptions exist, namely:

  • taxable Canadian property;
  • property used in a Canadian business if the business is carried on through a permanent establishment in Canada;
  • the excluded rights, interests or interests of the taxpayer including registered plans and pension plans.

Back to Canada?

If you left Canada and returned to settle there in a subsequent year, choices will be available upon your return. For example, if certain goods were subject to departure tax and you still have them in your possession, you could choose to cancel this deemed sale and recover all or part of the departure tax. Additionally, if you were a resident of the United States prior to your immigration and have a Roth-IRA, a choice may be made upon arrival.

This article only covers some of the things to consider when you arrive or return to Canada. We advise you to make an appointment with one of our tax experts specializing in international tax to ensure that you do not forget anything. Welcome to Canada!

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About the author

Olivier Custeau, tax expert, B.A.A., M. Fisc., EA

Holder of a bachelor's degree in business administration (B.B.A) from Université Laval and a master's degree in taxation (M. Fisc.) from the Université de Sherbrooke, Olivier has developed expertise in American and international taxation by working in a renowned firm. Over the years, he has developed a keen interest in US taxation. In fact, he was awarded Enrolled Agent status in 2019, the highest level a professional can attain to represent clients to the Internal Revenue Service (IRS). Recognized for his rigorous, dynamic and human approach, Olivier is an asset to the team.