What departure tax is
When you emigrate and become a non-resident for tax purposes, Canada applies a deemed disposition: you’re treated as having sold most of your property at fair market value on your departure date and immediately reacquired it. Any accrued gains become taxable that year — even though you didn’t actually sell anything. This is commonly called departure tax.
Why your cost base matters most here
The deemed gain is fair market value minus your adjusted cost base. An overstated FMV or an understated ACB inflates the departure-tax bill. Because you’re crystallizing years of accrued gains at once, an accurate cost base on every holding is worth more here than in any ordinary filing.
What’s generally exempt
Not everything is caught. Canadian real property, certain business property, RRSPs, RRIFs, and TFSAs, and some pension interests are generally excluded from the deemed disposition (they have their own rules on emigration). It largely bites non-registered investment portfolios.
You can elect to defer
You can generally elect to defer paying the departure tax until you actually sell the property, often by posting security with the CRA — useful when the tax is large and you don’t want to sell to pay it. Departure is a complex, high-stakes filing, so this is very much a get-professional-advice situation.
The capital gains reserve for emigrants
Because a deemed disposition produces no actual cash, you are eligible for a capital gains reserve — spreading the gain over up to 5 years (minimum 20% per year). This can keep you out of the highest bracket and preserve income-tested benefits.
The reserve requires you to file a Canadian return each year to bring back the deferred portion, and the CRA typically requires security (a letter of guarantee). Combined with the section 220(4.5) election to defer the departure tax entirely until actual sale, this gives emigrants two mechanisms to manage the cash-flow hit.