Moving back to Canada: tax in your first year after years abroad

Moving back to Canada: the tax rules in your first year

You become a Canadian tax resident again on the day you re-establish residential ties, usually the day you settle back in Canada. From that day your first return reports your income from everywhere in the world. Most property you own, in Canada or abroad, other than Canadian real estate and similar property, is treated as bought that day at its fair market value (Income Tax Act, s. 128.1(1)).

A return is simple when you held only cash and ordinary investments abroad. It needs professional judgment when you kept a Canadian rental or home, paid or deferred departure tax, receive a foreign pension, never filed while away, or are unsure of your return date.

What to gather:

• Proof of the date you settled back: lease or purchase, move, job start, family arrival
• Statements showing the value of every foreign account, property and crypto holding on that date
• Your departure-year return, with Forms T1243 and T1161 if you filed them, and proof of any departure tax paid or security posted
• Foreign income slips and foreign tax paid after the return date
• Your TFSA history from the years away

When does Canadian tax residency restart for a returning Canadian?

Residency restarts when you again have enough residential ties in Canada; for most people that is the first day they live here again (CRA). Citizenship never decided it, on the way out or on the way back.

The significant ties are a home in Canada, a spouse or common-law partner in Canada and dependants in Canada. Secondary ties include a car or furniture, Canadian bank accounts and credit cards, a driver's licence and provincial health coverage (CRA). Ties rarely land on one day: a family may arrive months before the worker, or a home may be bought before the move. If the date is unclear, you can ask the CRA for an opinion with Form NR74. The full ties test is in Canadian tax residency.

One check comes first: if you kept your significant ties the whole time, the CRA may say you never stopped being resident. If it does, the return-date rules below do not apply and the years abroad are treated as resident years, unless a tax treaty's tie-breaker made you resident of the other country (s. 250(5)).

What is different from a newcomer's first return when you lived here before?

A returning Canadian files the same part-year return as a newcomer: enter the date you became resident, report world income from that date, and claim some federal non-refundable credits, such as the basic personal amount, prorated by the days you were resident (CRA). For the months before that date, the same return also reports Canadian employment or business income and taxable capital gains from selling taxable Canadian property. If that Canadian-source income was 90% or more of your world income for that part of the year, you can claim the remaining credits in full. The general first-return items are in your first year as a Canadian tax resident.

A spouse or child coming to Canada for the first time is a newcomer in their own right, with their own residency date.

Your history adds five things a newcomer does not have:

• Property that faced departure tax when you left, which you may unwind
• Canadian property you kept, which never left the Canadian tax system
• TFSA room and withdrawals from before and during the years away
• RRSP room and contributions from the years away; see contributing to an RRSP or TFSA after leaving Canada
• Possible open items from the years abroad: unfiled returns, a balance owing, or a departure the CRA never recorded

What cost do your foreign investments, property and crypto get when you come back?

When you become resident, you are treated as selling and immediately buying back each property you own at its fair market value, except taxable Canadian property (s. 128.1(1)). That value becomes your cost when you later sell (CRA). Canada taxes growth from your return date on; if you unwind departure tax on the property (below), the departure gain is also taxed when you sell.

This covers a foreign brokerage account, a home or rental abroad, crypto, and private company shares that are not taxable Canadian property (next section). No form reports the reset on arrival, but the CRA tells you to keep a record of each value on the date you arrived. Use statements dated on or near that day, and an appraisal for real estate.

A US citizen does not get this reset on the US side, and a person still filing in another country may not either. Selling later can give two different gains. See foreign income on a Canadian return and, for US accounts, keeping a US brokerage account after moving to Canada.

Property you kept in Canada while away: why its cost does not reset

Canadian real estate gets no new cost when you return: it keeps the cost it had just before you came back, which may differ from what you paid if you rented out your home while away (s. 45(1)). Taxable Canadian property is left out of the arrival reset (s. 128.1(1)(b)), and Canadian real estate was also left out of the departure deemed sale (CRA). Canada kept the right to tax it the whole time.

Taxable Canadian property includes real estate in Canada, property of a business carried on in Canada, and unlisted shares that got more than half their value from Canadian real estate, resource or timber property at any time in the last 60 months (some listed shares too, if you and related people held 25% or more) (s. 248(1)). Shares of a private company are taxable Canadian property only if they meet that look-back test; check each holding. Such shares were still deemed sold when you left, so their cost on return is the departure value unless you elect to unwind that sale (below) (s. 128.1(4)(b)).

Rent received before your return date stays under the non-resident rules: 25% is withheld on the gross rent, and you can file a separate section 216 return for that year, due within two years after the year ends (six months if you filed Form NR6), which taxes the net rent and refunds any excess (s. 216). Rent from the return date goes on your regular return, so tell your tenant or agent the date. See non-resident landlords.

A home or rental kept while away also raises other questions: rent reported as a non-resident, the years the home stops counting as a principal residence, and a change in use. See keep or sell your home when leaving Canada and selling your home after leaving Canada.

Still own property that faced departure tax? The unwinding choice and its deadline

If you still own property that was deemed sold when you left, you can elect to undo some or all of that departure gain. The election is a written request filed by your filing due date for the year you become resident again (CRA; s. 128.1(6)). That date is usually April 30, or June 15 if you or your spouse or common-law partner carried on a business.

The election works only for property you owned without a break from departure to return. For property other than taxable Canadian property, the reduction is capped at the property's value on the return date, and it also lowers the arrival cost. The CRA reassesses the departure year to apply it. If you deferred the departure tax with Form T1244, the CRA says you may now have to pay the deferred tax; the election can reduce it, and some or all of your security may be returned (CRA).

How much comes back, what happens to deferred tax and security, and how to write the request are in moving back to Canada after paying departure tax. If you miss the deadline, the CRA can still accept a late election at its discretion if you apply within ten calendar years after the end of the return year, and a penalty then applies: $100 for each complete month late, up to $8,000 (s. 220(3.2) and (3.5); Income Tax Regulations, s. 600).

What happens to your TFSA: room for the years away and withdrawals you made abroad

You earn no new TFSA room for any year you were non-resident for the whole year. You get the full annual limit, $7,000, in the year you return (CRA).

Withdrawals made while you were non-resident are added back to your room only once you become resident again. If you contributed while non-resident, a tax of 1% a month applies to those contributions until you withdraw them or become resident again. Check your room before contributing; an excess is taxed at 1% a month.

Applying again for the GST/HST credit (now the Canada Groceries and Essentials Benefit) and Canada child benefit

Benefits restart only once the CRA has your first return back or an application; applying starts them sooner. The Canada Groceries and Essentials Benefit replaced the GST/HST credit in July 2026; filing your return gets you considered for it, or you can apply as a new resident (CRA). Without children, use Form RC151 for the year you became resident.

With children, the CRA's steps for returning residents are Form RC66, Canada Child Benefits Application, with Schedule RC66SCH, Status in Canada/Statement of Income (CRA). If your spouse or common-law partner was non-resident during any part of a year, also file Form CTB9, Canada Child Benefit – Statement of Income, for each such year.

Foreign pensions, accounts and the foreign property report from your first year back

From the return date, foreign pensions, interest, dividends, rent and wages go on your Canadian return, with a credit for foreign tax where the rules allow it. Some foreign pensions are treated differently under a treaty. See foreign income on a Canadian return.

Form T1135 is needed when the total cost of specified foreign property is more than $100,000 at any time in the year (s. 233.3). After the arrival reset, cost generally means the value on the return date. The law exempts only an individual who "first became resident" in Canada in the year (s. 233.7); a returning former resident should not count on it. If your foreign property cost more than $100,000 at any time in your return year, file Form T1135 for that year. See property outside Canada.

Unfinished business from the years away: unfiled returns, a CRA debt, or never telling the CRA you left

Open items from the years abroad can change your first return back.

• Canadian income while away and returns never filed: see non-resident Canadian return and catch-up.
• A balance owing from the departure year or later: see CRA tax debt while living abroad.
• You never told the CRA you left, or it still lists you as resident: see left Canada without telling the CRA. Your return date, cost reset and TFSA room all depend on the CRA accepting that you were non-resident.

Example

These examples are illustrative and use Canadian dollars.

Foreign brokerage account

A Canadian returns from Singapore on July 1 after eight years. Her Singapore brokerage account cost C$120,000 and is worth C$200,000 on July 1. For Canadian tax its cost becomes C$200,000. If she sells it the next year for C$210,000, Canada taxes a C$10,000 gain. Her first return reports world income from July 1, plus any Canadian employment or business income she earned before it.

Shares that faced departure tax

He left Canada in an earlier year and his shares, which are not taxable Canadian property, were deemed sold at C$100,000, a C$40,000 gain he reported. He comes back still owning them, now worth C$130,000.

• Departure year: C$40,000 gain reported; tax paid. Had he deferred it, the deferred tax may fall due on his return.
• Return year: he can elect, by his filing due date, to unwind some or all of that gain. The CRA reassesses the departure year.
• Cost after return: C$130,000 without the election. If he unwinds the full C$40,000, his cost becomes C$90,000, so the C$40,000 departure gain is taxed when he later sells instead.

TFSA room

While abroad she withdrew C$10,000 from her TFSA and earned no new room for her full non-resident years. In her return year her new room is that year's annual limit plus the C$10,000 she withdrew, on top of any unused room from before she left.

Different for you?

• You kept a Canadian rental or home while away: its cost never reset, rent before and after your return date is reported differently, and principal residence years need a review. Get individual tax help.
• You paid or deferred departure tax and still own the property: the unwinding election has a short deadline. Read moving back to Canada after paying departure tax and get individual tax help.
• You receive a foreign pension or still file in another country: see foreign income on a Canadian return and get individual tax help.
• You are coming back from the US with US accounts: see keeping a US brokerage account after moving to Canada.
• Your return date is unclear or the CRA says you never left: see Canadian tax residency and left Canada without telling the CRA, and get individual tax help.
• You never filed while away or owe the CRA from those years: see non-resident Canadian return and catch-up and CRA tax debt while living abroad, and get individual tax help.
• You kept a Canadian corporation and ran it from abroad: where it was managed can change its residency. See corporation residency after the owner moves abroad and get individual tax help.
• You are moving to Canada for the first time: see your first year as a Canadian tax resident.