Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
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Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your correspondence of November 29, 1997, concerning the taxation of property when the owner leaves Canada. A copy of your correspondence was sent to this Department by the Honourable Hedy Fry, Secretary of State Multiculturalism and Status of Women, on February 19, 1998.
Although the confidentiality provisions of the Income Tax Act prevent me from discussing specific cases, I would like to explain that the Act currently provides that any individual or trust residing in Canada who owns taxable Canadian property may leave Canada without having to pay tax on this type of property at the time of departure. However, when the former resident sells the taxable Canadian property any capital gain realized on the sale is subject to tax in Canada unless the application of this law is affected by a tax treaty Canada may have made with the new country of residence.
The role of Revenue Canada is to administer and enforce the Act as passed by Parliament, while the Department of Finance is responsible for tax policy and any proposed changes to the legislation. The taxation of property leaving Canada was one of several tax policy issues raised in the Auditor General’s 1995 report. Those issues were subsequently considered by the House of Commons Standing Committee on Finance in its report released on September 18, 1996.
Even though the Committee found that the specific cases referred to in the Auditor General’s report were dealt with in accordance with the existing provisions of the Act, the Committee recommended that changes be made to the Act to address the tax policy issues. The Department of Finance responded to those recommendations on October 2, 1996, by announcing draft amendments to the Act, which, when enacted, will be effective as of that date. As a result, all persons, including trusts, who leave or transfer property from Canada, on or after October 2, 1996, will pay tax on most capital gains that have accrued in Canada up to the time of departure. Exceptions to this rule will include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed when they are sold.
I appreciate the opportunity to respond to your concerns.
Yours sincerely,
Denis Lefebvre Assistant Deputy Minister Policy and Legislation Branch
George Keable
957-2046
March 18, 1998
980488