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Residency

Stacks of Euro coins and banknotes on a desk, set against the backdrop of a Portuguese flag
  • Beware Factual Residency: Leaving Canada doesn't guarantee you're non-resident for tax purposes. Strong ties like family, property, or accounts in Canada can make you a "Factual Resident," subjecting you to Canadian tax as if you never left.

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  • Portugal-Canada Tax Treaty: Under this treaty, if you meet the criteria for a Portuguese Resident, Canada automatically considers you a non-resident, simplifying your tax situation. You'll only owe tax on Canadian-based assets/income.

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Departure Tax

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  • Deemed Disposition: Upon leaving Canada, certain assets (even ones you haven't sold) are treated as sold and repurchased at fair market value, potentially triggering a capital gain for tax purposes.
  • Assets Subject to Deemed Disposition: This includes shares, jewellery, art, and collections.
A Portuguese tax form alongside Euro banknotes, coins, a calculator and national flag

Exceptions

  • Canadian real estate and resource properties
  • Canadian business property with a permanent establishment
  • Certain retirement plans, education/disability savings plans, and trust interests
  • Personal use items under $10,000 CAD
  • Reporting Requirements:
  • If your total asset value exceeds $25,000 CAD, you must file additional forms detailing all assets (domestic and foreign), excluding exempt items.
  • You can defer paying departure tax without incurring interest, but additional forms and potential security are required for amounts exceeding $16,500 CAD.

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Key Takeaways

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  • Leaving Canada doesn't automatically erase your tax obligations. Understand the concept of Factual Residency and its implications.
  • The Portugal-Canada tax treaty offers a simplified tax situation for Canadians residing in Portugal.
  • Departure tax can apply to certain assets upon leaving Canada. Exemptions and reporting requirements exist.
  • Deferring departure tax is possible with specific formalities.

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Disclaimer: The guidance above should not be fully relied upon and does not constitute formal instructed professional advice. In relation to tax advice in Portugal, please engage and instruct a regulated professional for all tax advice and structured financial planning. Please contact Portugal Pathways if you would like an introduction to one of our professional advisors.

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