What's an exit tax? Gad Saad says he's getting a big bill to leave Canada over rising antisemitism

Gad Saad says he is leaving Canada due to rising antisemitism, and the tax bill on his way out has left him numb.

Saad, a professor of marketing at Concordia University and author of the best-selling book Suicidal Empathy, posted Thursday night about what an “exit tax” would cost him to leave Quebec and Canada.

“Following a very difficult meeting with my accountant, I just found out how much it is going to cost me,” Saad said in a post on X. “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 says two things are pushing him out. The tax system, which he says makes it nearly impossible to save enough to retire, and the government’s immigration policies, which he says have made Canada unsafe for his family as Jewish Canadians.

National Post spoke with two tax specialists about how the rule, also known as a “departure tax,” works. Kim Moody is the founder of Moodys Private Client in Calgary and writes for the Financial Post. David Rotfleisch is a tax lawyer and chartered accountant at Rotfleisch and Samulovitch in Toronto. Their answers have been edited and condensed for clarity and length.

What is the exit tax?

Rotfleisch: The exit tax is a bit of a misnomer. 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. The most common one that’s going to affect all of us is the deemed disposition on death. When we die, all of our assets are deemed to have been disposed of, and the CRA collects tax on the accrued capital gain. The exit tax is another deemed disposition, on departure.

Moody: 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 gets taxed, and what is exempt?

Moody: The most common exceptions are Canadian real estate that is held personally, and registered plans, like RRSPs, RRIFs and TFSAs. 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.

Rotfleisch: 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. 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.

So a house wouldn’t be part of the bill?

Rotfleisch: The reason taxable Canadian property is excluded is because if you are a non-resident who sells a Canadian residence, there is a 25 per cent gross withholding tax unless you file the appropriate tax returns. So the CRA will get paid when the property is sold. They don’t need to collect the tax when you leave the country.

Saad says he is paying tax on money he never paid tax on. What does that mean?

Rotfleisch: It’s the unrealized gains he’s talking about. 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.

What if someone cannot pay the bill all at once?

Rotfleisch: You can actually post security. You don’t have to come up with cash. 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: They will accept adequate security. Today they will accept private company shares. If you’re a business owner and you leave Canada holding those private company shares, they will accept those shares as security if they’re satisfied that the business is an ongoing business.

Can the tax bill be reduced or fought?

Moody: You’re stuck, and you’ve got to pay the tax. It’s not a tax on value. It’s a tax on gains. And there are opportunities for deferral.

Rotfleisch: 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.

Does the United States have the same thing?

Rotfleisch: 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.

Is this happening to other people?

Moody: This is not a new phenomenon. I’ve been ringing the alarm bell on this for the last decade. The only thing that’s new is Gad Saad has high profile and made it known that he’s leaving.

• 'The West is really a miracle': Gad Saad deconstructs Suicidal Empathy
• Automatic tax filing is coming, but the government's plan still misses the mark

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