Where Do Canadian Expats Pay Taxes When Working Abroad?

Figuring out how and where to pay taxes when you leave Canada is an essential step if you plan to live or work abroad. Statistics Canada estimates millions of Canadians live outside the country, and many of them face complex tax and financial decisions. Before you move, take time to plan and consult qualified advisors who understand cross-border tax rules.

Do I still pay taxes in Canada if I move abroad?

The answer depends on your residency status for tax purposes. One of the first actions to take is determining whether the Canada Revenue Agency (CRA) will consider you a resident or a non-resident. You can get professional help from a chartered accountant or file an NR73 with the CRA to clarify your situation. Generally, short absences under six months don’t affect residency, but leaving for longer—and especially on an open-ended basis—means you should seek expert guidance.

When you leave Canada permanently or for an indefinite period, you will usually need to file an exit tax return reporting income up to the date you ceased residency. The CRA determines residency by examining factors such as your residential ties to Canada, how long you’ll be away, the purpose of your move and your intended continuity of stay abroad. In particular, the CRA looks closely at:

Where you live
Where your spouse lives
Where your dependants live

If you and your immediate family establish habitual residence outside Canada, you are likely to be treated as a non-resident. However, retaining significant ties—like owning an empty house that you haven’t rented out—can create a “grey area.” In some cases, you may continue to be considered a deemed or factual resident of Canada, so professional advice is strongly recommended.

Expect to file two tax returns in your first year abroad: your Canadian exit return covering income up to the date you left, and a tax return in your new country of residence covering income from the date you arrive. If you’re unsure whether your move is temporary or permanent, discuss your plans with a financial planner or tax professional.

Once you are officially a non-resident and you establish residency in another country, you generally don’t need to file routine Canadian tax returns unless you continue to receive Canadian-source income or dispose of Canadian property after departure.

What is departure tax?

When you become a non-resident, the CRA may apply an exit tax on unrealized capital gains for certain non-registered investments in the year you leave. This “departure” or “exit” tax treats some assets as if they were disposed of at the time you cease Canadian residency, triggering taxable capital gains. You must report these presumed dispositions using the appropriate CRA forms.

Certain accounts and assets are exempt from departure tax: principal residences, registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), first home savings accounts (FHSAs) and registered education savings plans are typically excluded. However, gains on non-registered investments and private company shares are subject to tax on departure unless specific deferral provisions apply. Consult a tax planner to understand exemptions and possible deferral options.

For example, if you bought stocks for CA$100,000 that are worth CA$200,000 when you leave, the CRA may tax the unrealized CA$100,000 gain as part of your exit tax calculation.

How are registered accounts and pension income treated abroad?

Registered accounts and pension income can be taxed differently once you live outside Canada. Growth inside a TFSA is tax-free in Canada, but many countries tax TFSA growth for residents. RRSPs are often recognized as tax-deferred in countries that have tax treaties with Canada, but you must never assume treaty treatment without confirmation.

As a non-resident, withdrawals from RRSPs and payments such as Canada Pension Plan (CPP) and Old Age Security (OAS) may be subject to Canadian withholding tax. The payer will usually withhold tax at a rate determined by domestic Canadian rules or by the provisions of a tax treaty with your new country of residence. Withholding rates can be as high as 25%, though tax treaties may reduce that rate.

Non-residents sometimes file a Canadian tax return to recover some withholding tax—for instance, rental income filers can elect to file and report actual expenses to reduce taxable income and possibly receive a refund of excess withholding.

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Before you choose a destination, check how tax treaties between Canada and your prospective country affect withholding rates and treatment of pensions, dividends and other Canadian-source income. Your tax advisor can help model the likely taxes based on your expected Canadian income and the treaty provisions.

What additional costs should expats expect?

Beyond taxes, moving abroad brings other expenses: shipping household goods, travel costs for family visits, different banking and currency transfer fees, and private insurance. Banks often charge unfavourable exchange rates, so look into money transfer services that offer better rates.

Many major international transfer services provide competitive exchange rates; likewise, CPP and OAS payments can often be directed to foreign bank accounts. Also remember provincial health coverage usually lapses after a period abroad—often six to eight months—so secure private health insurance for extended stays and consider disability and life insurance where needed. If your employer does not provide these benefits overseas, budget for them.

Build an emergency fund covering three to six months of expenses—more if you don’t have guaranteed employment overseas. This safety net is especially important for expats who face unfamiliar job markets and higher relocation risks.

Talk with other expats and local professionals

Learning from other expatriates can reveal practical tips and common pitfalls. Many newcomers find local bureaucracy and tax rules confusing at first, and language barriers can complicate matters. Before relying on local advisors, gather as much background information as possible and prepare specific questions about residency, tax deductions, company structures, documentation and payment schedules.

Also investigate country-specific immigration or tax incentives. Some countries offer special visas and tax regimes to attract remote workers and professionals; these programs can provide real tax advantages depending on your situation.

Expect complications and plan accordingly

Moving abroad often involves administrative hurdles: residency cards, social insurance numbers, proof of employment and more. Having a job lined up before you move reduces stress and simplifies access to benefits like healthcare and registration numbers in many countries.

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Keep your taxes in good standing

Trying to avoid filing tax returns by claiming to live “nowhere” isn’t a solution. Canada does not permit stateless residency for tax purposes; if you maintain stronger ties to Canada than to another country, you may still be considered a resident. Failing to file when required can lead to penalties, legal action, and future complications accessing government benefits.

The federal government and CRA publish guidance to help Canadians prepare for emigration and understand filing obligations. Working with one or more tax professionals—often both Canadian and local advisors—will help you sever ties properly when appropriate, register correctly in your new country and report income in the right jurisdictions. That preparation is an investment that can prevent costly surprises later.