Departure tax logistics

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scorpionman
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Departure tax logistics

Post by scorpionman »

I read in the year you leave you have to pay departure tax on unrealized deemed gains but only if over 100,000 cad.

Just wondering how does CRA know when you sell this under 100,000 (presumably a tax of around 14,000 payable) because you have no reporting or assets in the country at the point when you sell?

Also if you have rrsp space and anticipate over 100,000 in unrealized deemed gains ,should you contribute in the year that you leave but BEFORE the date you set as the exit date to offset the deemed gains tax?

Also If you have say 100,001 in gains does this mean you must pay the departure tax or does the rrsp contribution on that year reduce the gain to under 100,000 or is that a different separate calculation. I don't see much on the internet about the logistics of this.

Sounds like timing must be very carefully planned.
OhGreatGuru
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Re: Departure tax logistics

Post by OhGreatGuru »

Your information is faulty. There is no 100K exemption. Go to the source http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... .html#dptx and read the facts instead of relying on "read somewhere"

It is not a "departure tax". Under normal circumstances, you are permitted to defer capital gains until you "realize" them by selling the securities. But if you are leaving the country, thus leaving our tax jurisdiction, you have to pay up on a "deemed disposition". To do otherwise would enable you to escape the capital gains gains tax entirely.

PS. I stand corrected - even CRA calls it a "Departure Tax"
Last edited by OhGreatGuru on 30 Jun 2017 20:21, edited 1 time in total.
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AltaRed
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Re: Departure tax logistics

Post by AltaRed »

If going to the USA, there is another important wrinkle to avoid double taxation IF the taxpayer physically sells that asset while resident in the USA. See last paragraph of http://taxca.com/blog-2015-7/

This is to avoid 'deemed dispostion' cap gains taxes in Canada upon departure and yet again if disposing of the asset while in the USA. This may, or may not, be a new feature of the tax treaty because I was not aware of it the last time I "emigrated" from Canada in 2001. What I did then was to make sure that all my investments were in order before I left Canada so that I would not be selling them while a resident of USA. Those I was uncertain about keeping long term.... were sold while I was still a tax resident of Canada.

Added: The confusion on the $100k may be around the need to post security or not for 'not paying' the deemed disposition of taxes. See the "Security for Departure Tax" heading on Page 5 of https://www.assante.com/advisors/brenau ... idency.pdf which may, or may not, still be applicable. It seems a bit at odds with form T1244 http://www.cra-arc.gc.ca/E/pbg/tf/t1244/t1244-16e.pdf
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scorpionman
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Re: Departure tax logistics

Post by scorpionman »

Sorry I meant you can elect to defer capital gains tax on up to one hundred thousand without posting security. But the issue is the same , if no security how do they know when you sell it ?

I'm still curious about whether you can defer this departure tax by contributing to your rrsp before you leave. Since the date of departure is not always a known date before hand , I'm thinking one should just max out the space in the year they leave just in case unrealized gains increase. I can also see a scenario what if they claim your departure date is before the contribution? Since it is a self assessed departure date , it can be open to interpretation.
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