Departure tax refers to the deemed-disposition rules in section 128.1 of the Income Tax Act that apply when a person ceases to be a Canadian tax resident. On emigration, the individual is generally treated as having sold most of their property at fair market value, crystallizing accrued capital gains in the year of departure even though nothing has actually been sold.
Some property is excluded, including Canadian real estate, certain Canadian business property, and registered accounts such as RRSPs, RRIFs, and TFSAs. A taxpayer can elect to defer payment of the departure tax by posting acceptable security, and must report property above a value threshold on a prescribed form. Pre-departure planning is generally the only clean window to manage the outcome, because options narrow once residency has ended.