Moving In or Out of Canada? How to File a Part-Year Tax Return

Moving in or out of Canada can be a life-changing decision—personally, professionally, and financially. One key responsibility that arises when you change your tax residency is filing a part-year tax return. Whether you’re entering Canada to work or study, or departing to live abroad, the Canada Revenue Agency (CRA) requires accurate reporting of your income and changes in residency. This blog provides a comprehensive guide on when and how to file a part-year tax return with the CRA.

1. Understanding Tax Residency in Canada

Your obligation to file taxes in Canada depends on your residency status. The CRA considers several factors in determining your tax residency, including the length of your stay, ties to Canada (home, spouse, dependents), and the purpose of your visit or departure.

1.1 Types of Tax Residency

• Resident: You maintain significant ties to Canada and are taxed on worldwide income.
• Non-resident: You live in another country and are only taxed on Canadian-sourced income.
• Deemed Resident: You live outside Canada but spend 183+ days in Canada and are not considered a resident of another country with a tax treaty.
• Part-Year Resident: You either entered or left Canada during the tax year and are taxed only on income earned during your Canadian residency period.

2. Who Needs to File a Part-Year Return?

You must file a part-year tax return if:

• You immigrated to Canada and established residential ties (home, spouse, dependents) during the year.
• You emigrated from Canada and severed residential ties during the year to become a non-resident.

In both cases, the CRA considers you a part-year resident and requires you to report income earned during your period of Canadian residency.

3. Key Dates and Deadlines

The deadline for filing a part-year return is the same as a full-year return:

• April 30 – For individuals with employment or general income
• June 15 – For self-employed individuals (balance due by April 30)

If you’re filing for a year in which you entered or exited Canada, make sure to indicate this clearly on your T1 return to avoid processing issues or reassessments.

4. Reporting Income: What’s Included?

For a part-year resident, your tax return should include:

4.1 Income While Resident in Canada

• Employment income earned while living in Canada
• Self-employment income during the resident period
• Interest, dividends, or rental income from both Canadian and foreign sources

4.2 Income While Non-Resident

• Only Canadian-source income is reported (e.g., pensions, rent from Canadian property)
• Subject to non-resident withholding tax (generally 25%)
• May require filing of Form NR4 or Section 216 return for rental income

5. Reporting the Date of Entry or Exit

When preparing your tax return, you must indicate the exact date you became or ceased to be a resident of Canada:

• Date of Entry: The date you moved to Canada and established ties
• Date of Departure: The date you left and severed major residential ties

This information is reported on page 1 of your T1 General return. CRA uses it to determine which portion of your income is taxable in Canada and how benefits and credits apply.

6. Claiming Tax Credits as a Part-Year Resident

Your access to tax credits is adjusted based on your residency period:

• Basic Personal Amount: Prorated based on the number of days you were a Canadian resident
• Other Credits: May also be prorated (e.g., age amount, disability amount)
• Refundable Benefits: GST/HST credit and Canada Child Benefit (CCB) eligibility depends on residency and immigration status

7. Completing Your T1 General Return

Filing a part-year return involves using the standard T1 General tax package for the year in question. Key steps include:

1. Indicating the date of entry or departure in the “Information about you” section
2. Including income earned worldwide during your residency period
3. Claiming allowable deductions and credits prorated for the number of days you were a resident
4. Using Schedule A or other required forms to claim foreign tax credits (if applicable)

Filing electronically (NETFILE) is allowed for most part-year returns, but if your situation is complex, paper filing may be recommended.

8. Foreign Tax Credit for Part-Year Residents

If you paid tax on foreign income earned while you were a Canadian resident, you may be eligible to claim a foreign tax credit to avoid double taxation. You’ll need:

• Proof of taxes paid abroad (e.g., tax slips, assessments)
• Details of foreign-source income and conversion to Canadian dollars
• Form T2209 – Federal Foreign Tax Credits

9. Departure Tax: Deemed Disposition of Assets

When you emigrate from Canada, you may be subject to a deemed disposition of certain property under Canada’s departure tax rules. This means you’re considered to have sold your assets at fair market value even though you haven’t actually sold them.

Departure tax applies to:

• Shares of Canadian and foreign corporations
• Real estate outside Canada
• Personal-use property (e.g., artwork, jewelry)

Excluded property includes Canadian real estate and RRSPs. If you owe departure tax, you may be able to defer payment by providing security to the CRA using Form T1244.

10. Special Considerations for Immigrants to Canada

If you’re immigrating to Canada, you are not taxed on income earned before your date of entry. However, you will be taxed on all worldwide income from the date you become a resident onward. You should:

• Keep records of all assets owned at the time of arrival (used to establish cost basis for future capital gains)
• Report any foreign property over $100,000 using Form T1135
• Open a CRA My Account for online access and future correspondence

11. When You May Need Professional Help

You should consider consulting a tax expert if:

• You own significant foreign assets or real estate
• You are eligible for treaty exemptions
• You received complex income such as stock options or foreign pensions
• You are unsure about whether you qualify as a factual or deemed resident

Correctly determining your status and reporting income appropriately can save you thousands in taxes and avoid CRA reassessments.

12. Final Thoughts

Filing a part-year tax return in Canada can be complex, but understanding the rules will help you stay compliant and avoid unnecessary penalties or overpaying taxes. Whether you’re arriving in Canada to start a new chapter or leaving for opportunities abroad, proper reporting of your income and residency status ensures a smooth transition in the eyes of the CRA.