Moving to or leaving Canada with crypto: departure tax and your starting cost

Moving countries is a big change for taxes, and crypto is no exception. Canada has two rules that matter here: a deemed sale when you leave, and a fresh starting cost when you arrive. Neither is specific to crypto, but both apply to it, because the CRA taxes crypto under the normal rules for property.

This guide explains both, using the CRA’s guidance for emigrants and newcomers. For the general rules on crypto tax, see crypto tax in Canada.

Who counts as leaving

According to the CRA, you’re generally an emigrant for tax purposes if you leave Canada to live in another country and sever your residential ties with Canada. Ties that are almost always significant include a home, a spouse or common-law partner, and dependants. If you keep significant ties, you may still be a factual resident and taxed as one.

For the year you leave, you report your world income in Canadian dollars for the part of the year you were a resident, and you enter your departure date on your return.

Leaving: the deemed disposition

The CRA explains that when you leave Canada, you’re considered to have sold certain types of property at their fair market value (FMV), even if you haven’t sold them, and to have immediately reacquired them for the same amount. Any resulting capital gains are reported on your return for the year you leave. This is what people call departure tax.

What’s not included

The CRA lists property that isn’t subject to the deemed disposition, including:

• Canadian real or immovable property, Canadian resource property and timber resource property;
• Canadian business property, including inventory, if the business is carried on through a permanent establishment in Canada;
• registered plans and similar rights, such as pension plans, annuities, RRSPs, RRIFs, RESPs, RDSPs and TFSAs.

Crypto you hold directly, on an exchange or in your own wallet, isn’t on that list. So when you emigrate, it’s generally treated as sold at its value on the day you leave. Crypto ETFs held inside a TFSA or RRSP fall under the registered-plan exception. See crypto ETFs in a TFSA or RRSP.

If your crypto activity amounts to a business, the treatment may differ. See crypto tax in Canada for how the CRA tells capital and business income apart.

Paying the tax later

You don’t have to pay departure tax straight away. The CRA says you can elect to defer the payment of tax on the deemed disposition, regardless of the amount, by 30 April of the year after you emigrate.

If the federal tax owing on the deemed disposition is more than $16,500 (more than $13,777.50 for former residents of Quebec), you have to provide adequate security to the CRA.

Reporting what you own

If the fair market value of all the property you owned when you left Canada was more than $25,000, the CRA says to complete Form T1161, List of Properties by an Emigrant of Canada. The form’s instructions explain which property to include.

An example of leaving

Amira bought bitcoin for $20,000 while living in Toronto. She moves to Portugal and severs her ties with Canada when it’s worth $50,000.

• On her final Canadian return, she’s treated as having sold it for $50,000: a $30,000 capital gain, of which half is taxable.
• She can elect to defer paying that tax. The federal tax on a $15,000 taxable gain is well below the $16,500 threshold, so no security is required.
• Her property is worth more than $25,000, so she checks the instructions for Form T1161 and files it.

For capital gains, half of the gain is included in income under the CRA’s rules. See crypto tax in Canada.

Arriving: a fresh starting cost

The rule for newcomers works the other way. The CRA says that when you immigrate, it considers you to have sold certain property you owned and to have immediately reacquired it at a cost equal to its fair market value on the date you became a resident.

In practice:

• gains built up before you arrived aren’t taxed in Canada;
• the FMV on your arrival date becomes your cost for working out future gains or losses;
• from the date you become resident, you report your world income, including crypto disposals, in Canadian dollars.

The CRA’s examples of property include shares, jewellery, paintings and collections, and it advises you to keep a record of the FMV of your property on the date you arrived.

An example of arriving

Daniel moves to Vancouver from abroad with ether he bought for the equivalent of C$8,000. On the day he becomes resident, it’s worth C$15,000.

• His Canadian cost is C$15,000.
• If he later sells for C$18,000, his Canadian capital gain is C$3,000, not C$10,000.
• If the price falls and he sells for C$12,000, he has a C$3,000 capital loss.

The country he’s leaving may have its own rules on that earlier gain, including its own exit rules. Check them before you move.

A checklist before you leave

1. Work out your departure date and whether you’ll really sever your residential ties.
2. List every crypto holding, on exchanges and in your own wallets, and its value in Canadian dollars on that date.
3. Separate registered accounts: crypto ETFs in a TFSA or RRSP fall under the exception.
4. Estimate the gain on what you hold directly, and decide whether to elect to defer the tax by 30 April of the following year.
5. Check Form T1161 if your property is worth more than $25,000.
6. Check the tax rules in your new country before you move.

Records to keep

For both moves, the value on the day matters, so keep:

• a statement or dated screenshot of every exchange account and wallet on the day you leave or arrive;
• the price source you used, converted to Canadian dollars;
• your purchase records, which you’ll still need for anything acquired after you arrive;
• copies of Form T1161 and any deferral election.

The CRA’s record-keeping guidance for crypto applies throughout. See how to report crypto on your Canadian tax return.

Moving is one of the situations where professional advice pays for itself, especially with large holdings or ties in more than one country.