Leaving Canada When Your Work Permit Ends: Your Last Tax Return

Leaving Canada after a work permit expires: the short answer

Whether you are a temporary foreign worker or on a post-graduation work permit, your Canadian tax residency usually ends when you leave and cut your ties, not on the day the permit expires. A work permit is only a secondary residential tie (Folio S5-F1-C1, ¶1.14). Your last return, for the year you leave, reports your world income up to that day and Canadian income after it, such as pay for work you did in Canada.

A case stops being simple when any of these apply:

• You were resident in Canada for more than 60 of the last 120 months, so property you brought with you can be deemed sold.
• You hold shares or crypto bought in Canada, which are deemed sold when you leave, or you hold stock options or RSUs.
• You keep a condo or other Canadian property, or you lived in Quebec, which has its own return.
• Your spouse or children stay behind, or you move to a third country rather than home.

What to gather: final pay stubs and your T4, proof of your departure date (ticket, lease end, new address), year-end and departure-date statements for every account, the cost of anything you bought in Canada, and access to CRA My Account from outside Canada with your new address and direct deposit.

Does your tax residency end the day your permit expires or the day you leave?

Residency follows your ties to Canada, not your immigration status. The CRA usually treats you as non-resident from the latest of the day you leave, the day your spouse or partner and dependants leave, and the day you become resident elsewhere (CRA).

A worker going back to the country they lived in before Canada is the common exception: residency usually ends on the day you leave, even if your spouse stays briefly to sell the home or the children finish a school year already in progress (Folio S5-F1-C1, ¶1.23). Staying in Canada after the permit lapses, or leaving a home and family here, can keep you resident. The full date rules and the proof to keep are in the date you become a non-resident of Canada.

What your last Canadian tax return reports

The return for the year you leave splits at your departure date (CRA):

Tell the CRA your departure date; the return for that year is the usual way to do it. Moving expenses for a move out of Canada are generally not deductible. Which credits you get in full or prorated is covered in the part-year resident return.

Which of your things face departure tax, and why property you brought is usually spared

Leaving Canada deems you to sell most property at fair market value, but a short stay protects what you owned on arrival. If you were resident in Canada for no more than 60 months in the preceding 120 months, property you owned when you last became resident, or inherited after, is not deemed sold (Income Tax Act s. 128.1(4)(b)(iv)). Count every month you were resident, including years on a study permit before the work permit: study plus work can pass 60 months.

Work out the gain on each deemed sale on Form T1243 and report it on your return. You can elect on Form T1244, by April 30 of the year after departure, to defer paying the tax until you actually sell; security is needed only if the federal tax deferred is more than $16,500 (CRA). See deferring departure tax.

If your reportable property was worth more than $25,000 in total when you left, you also file Form T1161 listing it (CRA). Leave out Canadian cash and bank deposits, RRSPs, TFSAs, FHSAs and pensions, property the short-stay rule protects, and personal items worth less than $10,000 each (s. 128.1(10)); see the list of properties form. Send Form T1161 by your filing due date even if you file no return; a late form costs $25 a day, from $100 to $2,500 (CRA; s. 162(7)). The short-stay rule in depth is in leaving Canada within five years of arriving.

Pay that arrives after you leave: final pay, vacation pay and bonus

Pay for work you did in Canada stays taxable in Canada even when it arrives after you leave. Final pay, vacation pay and a bonus are employment income reported on your T4 and return. Severance paid after you leave is usually a retiring allowance with 25% non-resident tax withheld unless a treaty lowers it, and a section 217 return may recover part of it (T4058). The detail is in severance and final pay after leaving Canada.

RRSP, TFSA and FHSA you opened on the permit: what to decide before you go

None of these accounts is deemed sold when you leave, so you can keep them; the choice is when to take the money out.

• RRSP: cashed out before you leave, the withdrawal is ordinary income on your last return. Cashed out after, it has 25% withheld unless a treaty lowers it; a section 217 return may get back part or all of that (T4058). See RRSP cash-out before or after leaving.
• TFSA: you can keep it, and contribute up to your departure date. You get no new room for any year you are non-resident from January to December (the year you leave still gives the full limit), and contributions while non-resident face a tax of 1% a month. Withdrawals while abroad come back as room only if you become resident again (CRA). Your new country may tax TFSA income.
• Bank and brokerage accounts: you can usually keep them; tell each institution you are now a non-resident. See Canadian bank and brokerage accounts after leaving.
• FHSA: its own rules on leaving are in the FHSA when you leave Canada.

Can I get my CPP back when leaving Canada?

Generally no: the law refunds employee contributions only for an overpayment in a year, and leaving Canada is not one; your contributions stay credited toward a pension. An overpayment can arise, for example, when two employers together deducted more than the yearly maximum. It is refunded when you file: claim it on line 44800 of your last return (Service Canada, CRA). If you miss it, you have four years after the end of that year to apply (Canada Pension Plan, s. 38). Quebec workers pay into the QPP, a separate plan.

Can you collect CPP from abroad later?

Yes. A CPP retirement pension can be paid outside Canada from age 60 if you made at least one valid contribution (Service Canada). If Canada has a social security agreement with your home country, time in both countries can be combined to qualify, but each country pays only for its own periods (Service Canada). Keep your social insurance number and pay records; you apply when you reach pension age.

Benefits and credits that stop when you leave, and who to tell

As a non-resident you generally cannot receive the Canada child benefit, the Canada Groceries and Essentials Benefit, or related provincial payments (CRA). Tell the CRA your departure date (how to tell the CRA you are leaving), and contact it right away if payments keep arriving after you leave. Repaying amounts received after leaving is covered in benefits after leaving Canada.

Coming back later on a new permit or as a permanent resident

Earlier stays still count if you come back. The short-stay rule looks at all your residence in the 120 months before you leave next time, so two permits can together pass 60 of the last 120 months and end the protection (s. 128.1(4)(b)(iv)). If you return still owning property that was deemed sold, you can elect in writing, by the filing due date for the year you return, to unwind that deemed sale (CRA). See moving back to Canada after paying departure tax, and for permanent residents abroad, permanent resident status and tax residency.

Example

All figures are in Canadian dollars and illustrative.

Engineer returning home after four years

An engineer on a work permit in British Columbia goes back to her home country on August 31. She reports C$70,000 of salary to that date. Her flat at home, owned before she came, is not deemed sold: four years is under 60 of the last 120 months, and she had no earlier stay in Canada. Her Canadian brokerage account cost C$30,000 and is worth C$40,000, so she reports a C$10,000 deemed gain on Form T1243. Her flat abroad and Canadian bank balance are left off the list, so the C$40,000 account alone is her reportable property, and she files Form T1161.

Worker with an RRSP

A worker leaves with a C$20,000 RRSP. Cashed out after he leaves, C$5,000 (25%) is withheld unless a treaty lowers it, and a section 217 return may recover part of it. Cashed out before, the C$20,000 is taxed on his last return at his own rates. Which costs less depends on his other income that year.

Cook resident six years

A cook resident in Canada for six years (72 months) leaves with shares in a home-country company, bought before arrival and worth C$50,000 when he arrived. They are now worth C$60,000. Six years is more than 60 of the last 120 months, so the shares are deemed sold: his cost is their C$50,000 value on arrival (each value converted to Canadian dollars at that day's exchange rate), so he reports a C$10,000 gain on Form T1243 and files Form T1161.

Different for you?

• You hold stock options, RSUs or shares bought in Canada: see departure tax on stock options and RSUs and our individual tax service.
• You keep a condo or home in Canada and may rent it: see keep or sell your home when leaving Canada; renting it brings yearly non-resident filings, see individual tax service.
• You lived in Quebec, or your family stays behind: a separate Quebec return applies, and your departure date turns on your facts. See individual tax service.
• You still have Canadian income in later years: see do you file every year after leaving Canada.
• You missed returns for earlier permit years: see non-resident Canadian return and catch-up and individual tax service to file them with your last return.
• You are moving to the US on a new visa: see moving from Canada to the US.