Moving Back to China: Departure Tax and Overseas Income

What do I owe Canada or the US when I leave: departure tax and exit tax?

Leaving Canada can trigger tax on gains before you sell investments. Leaving the US raises a separate question: when tax residence ends and whether expatriation rules apply.

Canada: Residence depends on your ties to Canada and any treaty, not your PR card or flight date alone (Canadian tax residency). On becoming non-resident, Canada generally treats certain property as sold at market value, creating departure tax. Canadian real estate and registered plans are excepted, and so is property you owned when you last became resident if you were resident no more than 60 months in the preceding 120 months. To defer paying, file Form T1244 by April 30 of the year after departure; security may be required. Québec residents also file Revenu Québec's own departure forms. See the Canadian departure guide for the calculation and returns. CRA: leaving Canada, departure property rules.

US: A move does not end green-card tax residence. It ends when you give up the card on Form I-407, a final order finds it abandoned or removes you, or you claim treaty residence in China and notify the IRS on Forms 8833 and 8854. A green card held in at least 8 of the last 15 tax years makes you a long-term resident, so ending it can trigger expatriation rules, and Form 8854 goes with that year's return. See the US departure guide for the return and the exit-tax guide for who is a covered expatriate, before you give up a green card or citizenship. IRS: residency dates, expatriation tax, Form 8854 instructions.

Will China treat me as a tax resident, and from when?

China treats an individual as resident if the individual has Chinese tax domicile, or has no Chinese tax domicile but spends at least 183 days in China during a calendar tax year. Resident status generally brings worldwide income into the Chinese tax calculation. Individual Income Tax Law, Article 1.

Chinese tax domicile means habitual residence arising from household registration, family or economic interests; a domiciled individual cannot avoid resident treatment by staying under 183 days. Implementation Regulations, Article 2.

Without domicile, residence is tested over the calendar year, and a day counts only if you are in China for a full 24 hours. Announcement 2019 No. 34, section II.

The landing date is not necessarily when Chinese obligations start: if domicile continued while you were abroad, you were resident in those years and overseas income was reportable then. If domicile changes in the return year, the rules do not settle how income received before the move is treated; confirm with the responsible Chinese tax authority.

Do my Chinese registration, foreign passport or PR status decide the answer?

No single document decides domicile. Household registration is relevant evidence, but the test also considers family and economic interests; none of a Canadian or US passport, PR status, a green card or cancelled registration settles it by itself. Implementation Regulations, Article 2.

Announcement 2026 No. 21, Article 11, in an offshore-trust announcement, says a person with foreign nationality or foreign long-term or permanent residence, but whose main economic interests come from within China, may be determined to be domiciled in China. The officials' question-and-answer text says the same in general terms. How offices apply it beyond offshore trusts is not yet settled. A domiciled person has no six-year exemption.

If you cancelled your Chinese registration when emigrating, the law required a tax settlement first; keep that filing. Individual Income Tax Law, Articles 10 and 13.

Does China tax my Canadian rent, interest, dividends and gains?

China generally includes overseas rent, interest, dividends and taxable gains in a resident individual's income, subject to exemptions and treaty rules. Keeping the money outside China does not remove it. Individual Income Tax Law, Articles 1–2.

Announcement 2020 No. 3, section I treats rent from property used abroad, interest and dividends from foreign payers, and gains on foreign property or investments as overseas-source income. Source follows the underlying activity, property and payer: work performed in China does not become overseas-source income because a foreign employer pays it into a foreign account. Implementation Regulations, Article 3.

The statutory rate for interest, dividends, leasing and asset-transfer income is 20%, applied to the Chinese taxable amount; a Canadian return's net income is not automatically that amount. For rent, the law starts from each month's rent less 20%, or less RMB 800 when the month's rent is RMB 4,000 or less. Interest and dividends are taxed on each payment in full. A gain is the proceeds less original cost and selling taxes and fees; China may set the cost where records are incomplete. Individual Income Tax Law, Articles 3 and 6, Implementation Regulations, Articles 14 and 16–17.

A separate 2008 finance-ministry notice reduces the rate on an individual's income from letting out a residence. It does not say whether it reaches residential property outside China, so which rate applies to a rented-out home abroad is unsettled. Notice on housing-rental tax policies, Part II(1).

What is the six-year rule, and who qualifies?

The six-year exemption applies only to people without Chinese tax domicile. It can exempt income that is both sourced outside China and paid by an overseas entity or individual, with the required filing with the responsible tax authority. Implementation Regulations, Article 4.

That income stays exempt while you have had fewer than six years in a row of 183 days or more in China; tax on worldwide income starts in the seventh such year. The count restarts after a year under 183 days or a single absence of more than 30 days in such a year; shorter trips are not added together. Announcement 2019 No. 34, section I. The exemption does not cover China-source income or overseas-source income paid by a Chinese payer.

With Chinese domicile there is no automatic grace period. Gather travel records for the current and preceding six years, evidence for your domicile position and any exemption filing. A foreign passport or permanent residence alone does not show that domicile has ended.

How and when do I declare overseas income in China?

A Chinese resident individual receiving overseas income must declare it and pay any tax due from March 1 through June 30 of the following year, identifying the income and any exemption or foreign tax credit claimed. Individual Income Tax Law, Article 13.

The official Form B also asks a filer without Chinese domicile for days in China in the year and years already resident. Announcement 2020 No. 3, sections VII–VIII and XII sets the deadline, office and currency rules, and Implementation Regulations, Article 32 the conversion date.

Bringing your own savings to China is not one of the income types in Individual Income Tax Law, Article 2; what they earn is.

How do I credit tax already paid in Canada or the US?

China allows a credit for qualifying foreign income tax, limited to the Chinese credit limit for income from that country. Paying foreign tax does not automatically eliminate the Chinese declaration or any additional Chinese tax. Individual Income Tax Law, Article 7.

Calculate Chinese tax first, find the country-specific limit, then apply eligible foreign tax. Any excess can carry forward for up to five years against unused limits for income from the same country. Keep the foreign tax authority's payment evidence for the income year. Implementation Regulations, Articles 21–22.

The credit excludes tax incorrectly charged, tax the treaty does not permit, interest and penalties, refunded tax, and foreign tax on income already exempt in China. If official payment evidence genuinely cannot be obtained, the announcement permits a foreign return or authority-confirmed payment notice together with matching bank payment evidence. Evidence that arrives later can support a claim for the original income year, going back no more than five years. Announcement 2020 No. 3, sections IV and X.

A Canadian departure-tax charge and a later Chinese tax on an actual sale concern different years and bases, since China measures a gain from original cost. The credit rules do not provide that the earlier charge offsets the later tax, so a credit for that mismatch cannot be assumed.

What if Canada or the US also treats me as resident?

If two countries treat you as resident, the treaty decides which counts as your country of residence, and the two treaties decide it differently. Citizenship and address changes alone do not settle the issue.

See Canada–China Article 4 and US–China Article 4 and supplementary protocol paragraphs 2 and 5.

Treaty residence does not remove every source-country tax. Canadian property rent can remain taxable in Canada under Canada–China Article 6 (see non-resident landlords and non-residents selling Canadian property), with Chinese credit relief under Article 21; US–China relief is in Article 22. For a long-term green card holder, claiming foreign treaty residence can itself trigger expatriation consequences, so that position needs review before it is filed. Form 8854 instructions.

What happens to my RRSP, TFSA, 401(k) and home?

You can generally keep them, and leaving does not by itself force a sale: Canada leaves Canadian real estate and registered plans, including RRSPs and TFSAs, out of the departure-tax deemed sale. CRA: departure property rules. What is unsettled is how China treats their earnings and withdrawals; a foreign account label does not establish Chinese exemption or deferral.

RRSP withdrawals can face Canadian non-resident withholding (see the non-resident return guide). A non-resident can usually keep a TFSA, but contributions made while non-resident can bring a monthly Canadian tax: see leaving Canada and the TFSA penalty guide. CRA: TFSA non-residency rules.

US–China Article 17 addresses pensions for past employment; whether a 401(k) payment qualifies needs review. Neither the Individual Income Tax Law nor Announcement 2020 No. 3 mentions RRSPs, TFSAs or 401(k) plans, so neither annual taxation nor withdrawal-only taxation should be assumed. US–China treaty.

What should I do first about a Chinese overseas-income notice?

Do not ignore the notice or reply from memory: start with its deadline, the years and the income it covers.

1. Keep the notice, delivery date, deadline and requested years. Verify the issuing office through its official contact details.
2. Reconstruct residence for each year: leave dates, China day counts, household registration, family location and economic interests.
3. Match the requested amounts to interest, dividends, rent, sale proceeds and original capital; retrieve purchase costs rather than treating all proceeds as gains.
4. Obtain foreign returns, assessments, payment receipts and refunds, and identify any six-year exemption filing or treaty position.
5. Before you reply, get coordinated advice if multiple years, disputed domicile or conflicting country treatments are involved. Then confirm the response procedure with the office before its deadline.

Undeclared or unpaid overseas-income tax falls under China's Tax Collection and Administration Law and can affect your tax-credit record (Announcement 2020 No. 3, section XIII). Late payment adds 0.05% of the unpaid tax per day; a late return can be fined up to RMB 2,000, or RMB 2,000 to RMB 10,000 if serious; not filing and not paying can bring a fine of 50% to five times the unpaid tax. Refusing to file after the tax office tells you to, and leaving tax unpaid, counts as evasion, which has no recovery limit; otherwise the office can generally recover unfiled tax for three years, or five years in special cases. Tax Collection and Administration Law, Articles 32, 52 and 62–64, reply on undeclared tax.

These steps are preparation, not a prescribed procedure: the legislation sets reporting and credit duties but not how an office handles a notice. Individual Income Tax Law, Articles 10 and 13, Implementation Regulations, Article 22.

For Canadian accounts: Canadian financial institutions report accounts of non-residents to the CRA, and China is on the CRA's list of participating jurisdictions for exchanging that information. A report shows that an account exists, not how much tax is due. CRA: financial account information reporting.

Example

An individual returns from Canada, is treated as Chinese-domiciled for the full income year (so no six-year exemption), and keeps a Canadian rental condo.

All amounts below are illustrative renminbi (RMB) equivalents, after currency conversion. Assume Chinese tax on the Canadian rental income and the applicable credit limit are both RMB 30,000. Final eligible Canadian income tax paid on that income is RMB 20,000, supported by payment records, with no refund.

The Chinese credit is RMB 20,000, leaving RMB 10,000 of Chinese tax. The overseas income still needs declaration. If eligible Canadian tax were instead RMB 40,000, the current credit would be limited to RMB 30,000; the excess RMB 10,000 could carry forward subject to the same-country limits and five-year rule.

These assumed tax amounts illustrate the credit mechanism; they do not calculate either country's rental tax base. Implementation Regulations, Article 21.

Different for you?

• Canadian departure tax or final return: Leaving Canada.
• Non-citizen US departure or 401(k) distribution: Leaving the US.
• Giving up a green card or citizenship, or claiming foreign treaty residence: US exit tax.
• Keeping US citizenship: Filing while living abroad.
• A US person's home in Canada or China: Property abroad.
• Chinese or Canadian accounts while US reporting duties continue: Foreign account reporting.
• A company you own or control outside China: the Chinese tax authority may adjust where a resident individual's low-tax foreign company holds back profits without a business reason; whether a Canadian or US company is caught depends on the facts. Individual Income Tax Law, Article 8. See non-resident owners of a Canadian corporation and our cross-border tax service.
• A trust set up under Canadian, US or other foreign law: Announcement 2026 No. 21 taxes a Chinese tax resident on property put into a foreign trust and on its income each year, paid out or not. Tax unpaid on transfers from 2023 through 2025 can be paid without a late fee within 90 days from the announcement's effective date (it is dated July 24, 2026). These cases need the deed, funding dates and residence history reviewed together: cross-border tax service.
• Uncertain Chinese domicile, foreign retirement accounts, mismatched credits or an overseas-income notice: Cross-border tax service. These cases need the Canadian or US filings and the Chinese position handled together. Gather travel dates, household registration history (and any settlement filed on cancelling it), family and home details, account transactions, foreign returns, tax receipts and the notice.