Hi Dominic,
Thank you for posting your question on our Canadian Tax Forum and for reaching out directly. I’m happy to help you navigate the tax implications of your upcoming move to Italy. Please see my preliminary responses below:
Q1 – Keeping Your Canadian Home: Impact on Tax Residency?
Yes, you can keep your Canadian home. However, the key issue is whether you will continue to be considered a Canadian tax resident while living in Italy. Owning a home in Canada is a significant residential tie, and if CRA determines that your ties to Canada remain strong, you may continue to be taxed in Canada on your worldwide income—even while physically present in Italy for most of the year.
To sever Canadian tax residency:
- Sell or rent out your home at fair market value
- Close Canadian bank/investment accounts (RRSPs and GICs can remain, but TFSA gains become taxable after departure)
- Surrender your Canadian driver’s license, health card, and memberships
If you retain strong residential ties, CRA could deem you a factual resident even if you live abroad for 183+ days.
Q2 – Tiebreaker Rules under the Canada-Italy Tax Treaty
If both Canada and Italy consider you residents under their domestic laws, the tie-breaker rules under Article 4 of the Canada-Italy tax treaty apply in this order:
- Permanent home – If only available in one country, that country wins
- Centre of vital interests – Where your personal and economic ties are stronger
- Habitual abode – Where you spend more time
- Nationality – You are a dual citizen
- Mutual agreement – CRA and Italy will negotiate
You mentioned you’ll be in Italy 7–9 months/year and will apply for residency there. If your habitual abode shifts to Italy, and your primary home and spouse relocate there, this supports Italian tax residency. However, retaining strong ties to Canada (e.g., owning a home, bank accounts, etc.) could sway CRA’s assessment toward Canadian residency unless clearly severed.
Q3 – When to File the Departure Return?
You should file your Final Departure Return in the year your Canadian residency ceases, which will likely be 2025 if you:
- Move to Italy in December 2025,
- Apply for Italian residency,
- Sever ties with Canada as of December 2025.
Even if Italy takes time to approve your residency, you can still report your departure in your 2025 T1 return, and CRA may retroactively accept it based on supporting documentation (e.g., lease, deregistration letters, new Italian ID, etc.).
If you do not formally sever ties in 2025, then you must continue to file as a resident until 2026.
Next Steps
To proceed, I recommend booking a 30-minute consultation ($140 + HST) so I can review your full situation and advise you on:
- Departure tax on investments (TFSAs become taxable; RRSPs are not taxed at departure)
- Whether to file a Form NR73 to request a ruling from CRA
- Dual residency exposure and planning under the Canada-Italy treaty
- Reporting requirements post-departure (e.g., T1161, T1243, T1135 if applicable)
You can book the consultation here:
👉 https://madanca.com/contact-us
Please feel free to email me directly once you’re ready, or if you’d like to send documents in advance.
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