Departure Tax Calculator for Incorporated Business Owners
Leaving Canada while keeping your corporation. Work out the deemed disposition on your shares, the tax due, whether to post security instead of paying, and the corporate residency risk nobody warns you about.
tax on departure
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The Deemed Disposition
| Item | Basis | Amount |
|---|
Pay Now or Post Security
| Item | Pay on Departure | Post Security |
|---|
Corporate Residency Risk
| Factor | Your Position |
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Filings on Departure
| Form | Purpose | Applies |
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Points That Decide This
What to Do Next
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Disclaimer: On ceasing to be resident in Canada an individual is generally deemed by subsection 128.1(4) to have disposed of each property at fair market value, with exceptions for certain property including real property situated in Canada, Canadian resource property, and property used in a business carried on through a permanent establishment in Canada. Shares of a private Canadian corporation are generally subject to the deemed disposition. The resulting capital gain is included in income at the applicable inclusion rate, and personal tax rates used here are indicative Ontario combined marginal rates that vary with the individual’s other income and circumstances. The lifetime capital gains exemption is available only in respect of qualified small business corporation shares meeting the tests in section 110.6, including a holding period test and asset tests measured over the twenty-four months preceding the disposition, and whether shares qualify is a question of fact requiring review. Form T1243 reports the deemed disposition, and Form T1161 is required where the fair market value of all properties owned on emigration exceeds CAD 25,000, subject to specified exclusions, with penalties for late filing. Under section 220(4.5) an individual may elect to defer payment of the tax on the deemed disposition by providing acceptable security to the Minister, and no interest accrues on the deferred amount while adequate security is maintained. Corporate residency for Canadian tax purposes turns on where central management and control is exercised as well as the place of incorporation, and a corporation incorporated in Canada is generally deemed resident in Canada, though a treaty tie-breaker may apply where another country also asserts residency; the consequences of a change in corporate residency, including a deemed year end and a corporate emigration tax, are significant. Canadian-controlled private corporation status turns on control, and a change in the residency of controlling shareholders can affect it. Part XIII withholding on dividends paid to a non-resident is 25% subject to reduction under an applicable treaty. This page is general information, not tax advice, and emigration planning should be undertaken with advice well before the departure date.
You Are Taxed on a Sale That Never Happened
On the day you cease to be resident in Canada you are generally treated as having sold your assets at fair market value. Shares of your private corporation are caught.
No money changes hands. The company is still yours. You have a tax bill anyway, and on a founder’s shares with a nominal cost base the gain is close to the entire value of the business.
This is the number that surprises people, and it arrives at the worst possible time. You are moving countries, dealing with immigration and housing, and the CRA wants tax on a gain you have not realised in cash. Nobody plans for it because nobody expects to be taxed on something they still own.
You Do Not Have to Pay It Immediately
This is the relief that matters most and it is under-used. You may elect to defer payment of the tax on the deemed disposition by providing acceptable security to the Minister, and no interest accrues while adequate security is maintained.
For an owner whose wealth is locked inside a company that is still trading, that is the difference between an orderly departure and being forced to extract cash or borrow at exactly the wrong moment.
| Pay on Departure | Post Security | |
|---|---|---|
| Cash needed now | The full amount | None |
| Interest | n/a | None while security is adequate |
| Effort | None beyond paying | Arranging acceptable security |
| Suits | Owners with liquidity | Owners whose wealth is in the company |
The Exemption Is the Biggest Lever
Where the shares are qualified small business corporation shares, the lifetime capital gains exemption can eliminate a very large part of the gain. It is by far the largest single variable on this page.
The tests are strict and measured over the twenty-four months before the disposition, covering a holding period and the composition of the company’s assets. A company carrying substantial passive investments or excess cash frequently fails the asset tests without the owner realising.
Purification takes time, which is why the departure date is a planning input rather than a fact. Where the tests are close to being met, moving cash or investments out of the company before departure can change the tax dramatically. Doing that six months ahead is possible. Doing it the week you leave is not.
The Company Can Accidentally Emigrate With You
This is the part almost nobody warns owner-managers about, and it is the most dangerous item on the page.
Corporate residency turns on where central management and control is actually exercised, not only on where the company was incorporated. If you are the sole director and you are now making every decision from Dubai or London, the argument that the company is still managed from Canada becomes difficult.
A change in corporate residency brings a deemed year end and a corporate emigration tax. That is a far larger problem than the personal departure tax and it is entirely avoidable with planning.
- Keep a genuine Canadian director who actually participates in decisions
- Hold board meetings in Canada and minute them properly
- Make real decisions there, not paper resolutions signed abroad
- Keep the management substance in Canada rather than following you out
Appointing a nominal Canadian director who signs whatever is sent to them does not work. The test is where control is genuinely exercised. A structure that exists only on paper is exactly what a residency review is designed to look through.
CCPC Status May Go Too
Canadian-controlled private corporation status depends on control. Once the controlling shareholder is non-resident, that status can be lost, and with it the small business deduction.
The company then pays the general rate on all its active business income. On five hundred thousand dollars of income that is a swing of over seventy thousand dollars a year, every year, and it is separate from anything else on this page.
Dividends Get Withheld On Afterwards
Once non-resident, dividends from your Canadian company attract Part XIII withholding at twenty-five percent, reduced under an applicable treaty.
The destination matters here. Treaty countries generally reduce the rate substantially, and where no treaty relief is established the full statutory rate applies. That is an ongoing cost of the arrangement rather than a one-off departure item.
What This Calculator Does Not Cover
- Whether your shares qualify for the exemption, which needs review
- The destination country’s tax on you and on the dividends
- The corporate emigration tax if the company becomes non-resident
- The actual date you cease residency, which is a question of fact
- Provincial variations and your full personal tax picture
- Immigration and residency in the destination
Start this six to twelve months before you leave, not after. Our departure tax service covers the valuation, the elections, the security and the corporate residency planning.
Frequently Asked Questions
Common questions on leaving Canada with a corporation.
Related Calculators and Guides
More tools for owners leaving Canada.
Plan This Before You Book the Flight
Tell us your departure timeline and the company’s position. We will value the shares, test the exemption, arrange the security election and put the corporate residency structure in place before you go.