Professor Gad Saad Expresses Shock Over Departure Tax Costs
Marketing professor and author Gad Saad has revealed that he is preparing to leave Canada, citing concerns over escalating antisemitism and a significant financial burden associated with departing the country. Saad, known for his work at Concordia University and his book Suicidal Empathy, shared his experience on social media, detailing the substantial cost of a Canadian “exit tax” upon his planned relocation.
In a recent online post, Saad described a “very difficult meeting with my accountant” that revealed the considerable sum required to leave Quebec and Canada. He expressed his dismay, stating, “No human being in a free society should have their hard-earned money stolen in this manner. I’m genuinely numb. I’m speechless.”
Saad indicated that two primary factors are driving his decision to leave: the Canadian tax system, which he asserts makes saving for retirement exceedingly challenging, and government immigration policies, which he believes have compromised the safety of Jewish Canadians.
Understanding Canada’s Departure Tax
Tax specialists explain that the so-called “exit tax” is not a distinct levy but rather a consequence of becoming a non-resident of Canada. This triggers a “deemed disposition” under the Income Tax Act, a legal principle where assets are treated as if they were sold, even if no actual sale has occurred.
“The exit tax is a bit of a misnomer,” explained David Rotfleisch, a tax lawyer and chartered accountant. “It’s payable when you become a non-resident of Canada, and it’s one of the deemed dispositions under the Income Tax Act. A deemed disposition means it’s a legal fiction. It’s not an actual disposition, but the Tax Act says you have disposed of something.” Rotfleisch noted that a similar concept applies upon death, where all assets are deemed sold, allowing the Canada Revenue Agency (CRA) to tax accrued capital gains.
Kim Moody, founder of Moodys Private Client, elaborated on the policy’s intent. “It’s a policy that’s been around forever. Any appreciation in value that you’ve accrued during the time that you’re a resident of Canada is deemed to be realized at that time. The policy intent is basically if you benefited from Canada’s economy and taxation regime, and you’re not going to pay tax in the future, then Canada wants to get its pound of flesh at the time that you leave.”
What Assets Are Subject to the Tax?
Certain assets are typically exempt from this departure tax. These commonly include Canadian real estate held personally and registered retirement savings plans, such as RRSPs, RRIFs, and TFSAs.
“The most common exceptions are Canadian real estate that is held personally, and registered plans, like RRSPs, RRIFs and TFSAs,” Moody stated. “The logic behind the exception is that if you die holding Canadian real estate, or if you eventually sell it during your lifetime, that’s when Canada gets its pound of flesh. So it’s a deferral more than anything.”
Conversely, assets like stock market portfolios and cryptocurrency holdings are generally subject to the departure tax. “If you have a stock market portfolio, when you leave the country, you’ve got to pay tax on that portfolio. Or if you have cryptocurrency, that’s a big one,” Rotfleisch observed. “We have a lot of clients in the crypto space who are hit with large departure tax additions. Pretty much anything other than real estate is going to get hit with departure tax.”
Taxing Unrealized Gains
Saad’s concern about paying tax on money he hasn’t yet realized stems from the nature of the deemed disposition. “It’s the unrealized gains he’s talking about,” Rotfleisch explained. “You bought a stock for $1. It’s worth $10 now. You haven’t sold it, you don’t have to pay any taxes as long as you stay in Canada. When he moves to the States, that $9 gets taxed as a deemed disposition. It’s an unrealized gain and you have to pay tax on it because you’re leaving the country.”
Options for Payment and Tax Reduction
For individuals unable to pay the full tax amount upon departure, arrangements can be made with the CRA. “You can actually post security. You don’t have to come up with cash,” Rotfleisch said. “You make arrangements with the CRA to post security. You go to the States, three years from now you sell the stock, you pay off the tax and get your security back.”
Moody confirmed that the CRA will accept “adequate security,” including private company shares, provided the business is deemed to be ongoing.
Regarding the possibility of reducing or challenging the tax bill, tax experts indicate limited options. “You’re stuck, and you’ve got to pay the tax. It’s not a tax on value. It’s a tax on gains,” Moody stated. Rotfleisch added, “There is no effective way to get rid of departure tax. If you transfer it into a corporation, the shares of the corporation are subject to departure tax. If you transfer it to a kid, that disposition is subject to capital gains. It’s really hard to get around it.”
International Comparisons and Broader Trends
When questioned about similar tax structures in the United States, Rotfleisch noted the differing approach. “Americans are taxable based on citizenship. If you become a Canadian resident, that does not affect your U.S. tax filing obligations. So they don’t need an exit tax. You have to renounce your U.S. citizenship in order to become exempt from U.S. taxation, and there are taxes involved in renouncing.”
Moody emphasized that the phenomenon of departure tax is not new. “This is not a new phenomenon. I’ve been ringing the alarm bell on this for the last decade,” she said. “The only thing that’s new is Gad Saad has high profile and made it known that he’s leaving.”
