It is important to understand what is needed before you leave Canada. Getting your Spanish visa sorted is half the job. Leaving Canada correctly is the other half.

In the year you leave Canada, you file a single tax return known as a departure return. This is your final return as a Canadian tax resident. It reports your worldwide income from January 1 up to your departure date. After that point, you are generally taxed as a non-resident, meaning Canada only taxes certain Canadian-source income (such as rental income or investment income).

Your departure date is not simply when you board a flight. It is typically the date you sever significant residential ties with Canada and establish them elsewhere. This includes factors like giving up your home, relocating your spouse or dependents, and establishing a primary residence abroad.

The Deemed Disposition 

On your departure date, the CRA treats you as having sold most of your assets at fair market value. This is called the deemed disposition, and it can trigger capital gains tax on unrealised gains - even though you haven't actually sold anything.

Assets subject to deemed disposition include non-registered investment accounts, shares in private companies, rental properties, and most foreign assets. Assets generally exempt include your principal residence (up to the applicable exemption), RRSPs, RRIFs, and TFSAs.

If you have a non-registered investment portfolio that has grown significantly, calculate your potential deemed disposition exposure before you set a departure date. In some cases, it makes sense to crystallise gains or losses in the year before departure to manage the tax impact. This is one of the most compelling reasons to work with a cross-border tax adviser before you leave, not after.

If you are uncertain whether you have truly severed Canadian tax residency, you can file an NR73 (for individuals who have already left Canada) or NR74 (for those planning to leave) with the CRA. These forms ask the CRA to make a formal determination of your residency status based on your specific circumstances.

Filing an NR73 or NR74 is not required, but it provides certainty and has value when the alternative is years of ambiguity about whether you owe Canadian taxes. If you have significant Canadian ties remaining after your move (property, dependants, business interests), consider requesting a formal determination.

Provincial healthcare does not continue indefinitely once you leave Canada. Each province has its own rules, but most will end coverage after a defined period of absence or once you establish residency elsewhere.

The exact timelines vary, but the practical takeaway is simple: do not assume your Canadian health coverage remains valid while living in Spain. Before leaving:

• Notify your provincial health authority
• Confirm your coverage end date
• Ensure your Spanish health insurance is active from the moment you arrive

Gaps in coverage are avoidable with basic planning.

If you are receiving or approaching eligibility for CPP or OAS, notify Service Canada of your change in residency status. As a non-resident, Canadian withholding tax applies to these payments - the rate under the Spain-Canada tax treaty is 25% for lump sums and 15% for periodic payments.

Service Canada will issue an NR4 slip annually showing the amounts paid and tax withheld. You will need this for your Spanish tax return to claim the foreign tax credit.

If you have not yet applied for CPP or OAS and are planning to do so from Spain, applications can be submitted from abroad through Service Canada's international agreement process.

Closing every Canadian account before you leave is neither necessary nor always advisable. What matters is notifying your financial institutions of your change in residency status so they apply the correct non-resident withholding rates to any income generated.

Your bank, investment broker, and any mutual fund companies need to know you are a non-resident. Failure to notify them results in incorrect withholding - either too much (which you then have to reclaim) or too little (which creates a compliance problem). Update your address to your Spanish address and confirm your non-resident status in writing with each institution.

TFSA Rules for Non-Residents

The TFSA is one of the most misunderstood accounts for Canadians moving to Spain. The confusion comes from the fact that Canada and Spain treat the same account in completely opposite ways and both treatments apply simultaneously once you are a Spanish tax resident.

What Canada Does

From Canada's perspective, your TFSA remains exactly what it has always been, that is a tax-sheltered account. Growth inside the account - dividends, interest, capital gains, continues to accumulate with no Canadian tax, even after you become a non-resident. You can keep the account open indefinitely. The Canadian tax treatment does not change because you moved.

The one thing you cannot do as a non-resident is contribute. Any contributions made after your departure date are subject to a 1% monthly penalty tax on the excess amount for every month it remains. This compounds quickly if not corrected. Stop contributing the moment you leave Canada and notify your financial institution of your non-resident status.

What to do before you leave

Max out your TFSA before your departure date. Because the account continues growing tax-free for Canadian purposes even while you are abroad, the more you have in it before you leave, the more benefit you capture from that Canadian tax sheltering. The contribution room you do not use before departure cannot be recovered by contributing after.

What Spain Does

Spain does not recognise the TFSA as a tax-sheltered account. From Spain's perspective, it is a standard foreign investment account, and income generated inside it - dividends received, interest earned, capital gains realised, is taxable in Spain annually as part of your worldwide income.

This means the same dividends and gains that Canada exempts from tax inside your TFSA, Spain will want to tax each year. You declare this income on your Spanish tax return and pay Spanish income tax on it at the applicable rate.

In simple words:

The same account, in the same year, is treated two completely different ways:

• Canada: TFSA growth is tax-free. No reporting required. No tax owed.
• Spain: TFSA growth is taxable income. Must be declared annually. Tax owed at your marginal Spanish rate.

There is no foreign tax credit available to offset this because Canada charges no tax on TFSA income, there is nothing to credit against Spain's tax bill. 

What This Means Practically

For Canadians with large TFSAs generating significant annual income- dividends from a dividend portfolio, for example, this is a meaningful ongoing cost. Some Canadians reassess their asset allocation inside the TFSA before leaving, shifting toward growth-oriented holdings that generate less annual taxable income and more unrealised gains. Others consider whether the account structure still makes sense at their income and asset level once Spanish tax is applied. These are decisions worth discussing with a cross-border tax adviser before your departure date, not after.

Before you board that flight, work through the following:

• Calculate your deemed disposition exposure and plan accordingly.
• File your departure return with the CRA for the year of departure.
• Submit NR73 or NR74 if your residency status is uncertain.
• Notify all Canadian financial institutions of your non-resident status.
• Stop TFSA contributions from your departure date.
• Notify Service Canada if you receive CPP, OAS, or expect to apply.
• Cancel or confirm the end date for provincial health coverage.
• Ensure Spanish private health insurance is active from your arrival date.
• Keep documentation supporting your move (lease, registration, etc.).