The Accounting and Tax

Does the Canada Revenue Agency (CRA) Know if You Leave the Country?

Yes, the Canada Revenue Agency (CRA) can become aware if you leave the country, especially if your departure affects your tax obligations or residency status. While there isn’t a specific “exit notification” process for individuals leaving Canada, certain systems and actions can alert the CRA to your absence. Here’s how this works and what you should know.

How Does the CRA Find Out You’ve Left Canada?

Several factors can inform the CRA of your departure:

1. Filing a Departure Return

• When you leave Canada and sever your residency ties, you’re required to file a final tax return (departure return) for the year of your departure.
• This return notifies the CRA that you’re no longer a resident for tax purposes.

2. Changes to Your Address

• If you update your address with the CRA to one outside Canada, it signals that you may have moved.
• Banks, employers, or investment accounts tied to your CRA profile may also report address changes.

3. Social Benefits Programs

• If you’re receiving government benefits like the Canada Child Benefit (CCB), Old Age Security (OAS), or GST/HST credits, and you notify these programs of your departure, the CRA may also be alerted.

4. Information Sharing Agreements

• Canada participates in international agreements like the Common Reporting Standard (CRS) and tax treaties with other countries.
• Financial institutions in the country you move to may report your account details to the CRA, particularly if you’re still earning income in Canada.

5. Your Employer or Tax Withholding

• If your Canadian employer issues a Record of Employment (ROE) stating that you left due to relocation abroad, the CRA may receive this information.
• Similarly, withholding tax applied to payments sent to non-residents can indicate your departure.

What Happens If the CRA Knows You’ve Left?

When the CRA determines that you’ve left Canada, they assess your tax residency status to decide how to treat your income and tax obligations. This is based on:

1. Residential Ties: Do you maintain a home, family, or other significant connections in Canada?
2. Intentions: Is your departure temporary or permanent?
3. Country of Residence: Do you establish ties elsewhere, and does Canada have a tax treaty with that country?

If you’re considered a non-resident for tax purposes, your tax obligations change:

• Income Earned in Canada: You’ll pay a withholding tax on certain types of Canadian income (e.g., rental income, pensions).
• Worldwide Income: Non-residents are not taxed on income earned outside Canada.

Do You Need to Notify the CRA When You Leave?

While there’s no legal requirement to proactively notify the CRA that you’re leaving Canada, it’s a good idea if your tax situation changes. For example:

1. File Your Departure Return:
   • Include the date you became a non-resident.
   • Report any deemed dispositions of property (capital gains on certain investments).
2. Inform Benefit Programs:
   • Notify programs like the CCB or OAS to avoid overpayments.
3. Update Your Address:
   • Keeping the CRA updated ensures you receive important correspondence, including tax assessments.

What Are the Risks of Not Informing the CRA?

Failing to address your residency status properly can lead to complications, including:

1. Double Taxation: Without clear residency status, you might be taxed in both Canada and your new country of residence.
2. Benefit Overpayments: You may have to repay benefits if the CRA later determines you weren’t eligible while living abroad.
3. Penalties and Interest: Incorrect or incomplete tax filings could result in penalties.

Final Thoughts

The CRA doesn’t track every move you make, but through tax returns, financial records, and international agreements, they can determine if you’ve left the country. If your departure impacts your residency status or tax obligations, it’s best to address it proactively to avoid misunderstandings or penalties.

If you’re unsure about your situation, consulting a tax professional in Canada or financial advisor familiar with cross-border issues can provide clarity and ensure compliance with CRA rules.