Portugal vs Canada tax in 2026: departure tax, the treaty, pensions, property

Leaving Canada: ties, not days

Canada does not count days for people who leave; it looks at residential ties. You become a non-resident on the latest of the day you leave, the day your spouse and dependants leave, and the day you become resident in Portugal — provided you sever the main ties: the Canadian home sold or let on a long lease, the family out, the provincial health card, driver’s licence and memberships closed. Keep a home available and a spouse in Toronto and the CRA treats you as a factual resident, unless the treaty tie-breaker (permanent home, centre of vital interests, habitual abode, nationality) says Portugal.

Portugal, for its part, makes you resident after 183 days in a twelve-month window or from the day you keep a home here that looks like a habitual residence (IRS Code, art. 16.º).

• Departure tax: shares, funds and most other property are deemed sold at market value on the day you leave (Canadian real estate, RRSPs and pensions excluded)
• 25 % Canadian withholding on pensions, OAS, CPP and RRSP/RRIF payments to non-residents; the treaty caps periodic pensions at 15 % above CAD 12 000
• 14 % to 33 % federal brackets 2026, plus the province; 12,5 % to 48 % in Portugal
• 1 May 1981 social security agreement: CPP, OAS and Portuguese periods added together

Income tax, side by side

For a retiree on C$60 000 of pensions, Portuguese tax after the deduction and the split for a couple is in the same range as Ontario tax; for a single person it is somewhat higher. For a remote worker on C$150 000 Portugal is cheaper than any province — and cheaper still under IFICI. The provincial layer is what makes the Canadian side vary by 10 points.

The 1999 convention: what it settles

• Pensions (art. 18): taxable in Portugal as the residence state, and Canada may also tax at source — but on periodic pension payments the Canadian tax is capped at 15 % of the amount above CAD 12 000 a year (or the tax a Canadian resident would pay, if lower). Portugal credits the Canadian tax. Lump sums are outside the cap: a full RRSP withdrawal after leaving suffers the 25 % Part XIII rate. CPP and OAS are pensions for this purpose. Government-service pensions are not carved out — article 19 covers salaries only — so a federal public-service pension follows the same rule.
• Dividends (art. 10): 15 %, or 10 % for a company holding 25 %. Interest (art. 11): 10 % (arm’s-length interest is exempt under Canadian law anyway). Royalties (art. 12): 10 %.
• Capital gains (art. 13): property and property-rich shares where the property is; other gains in the residence state — except that Canada may tax a former resident’s gains for five years after departure on property held at that time if they were resident for 15 years or are Canadian nationals (art. 13 n.º 6), which dovetails with the departure tax.
• Employment: taxed where performed, 183-day exception.
• Relief (art. 22): credit in both countries.

The Canadian side after you leave

• Departure tax. Deemed disposition of shares, funds, crypto and other property at fair market value on the departure date; Canadian real property, RRSPs, RRIFs, TFSAs and pensions are excluded. The gain is reported on the final return (half included in income); the tax can be deferred with security (Form T1244); the list of property is filed on Form T1161 when the total exceeds $25,000.
• Part XIII withholding at 25 % on OAS, CPP, company pensions, RRSP and RRIF payments, rental income (with the option to file under section 216 at net rates). Under the treaty, periodic pension payments are reduced to the 15 % cap by giving form NR301 to the payer; a section 217 election (form NR5) can lower the tax further when your world income is small.
• OAS continues to be paid abroad after 20 years of Canadian residence, subject to the recovery tax above $95,323 of world income, reported on the OASRI return.
• TFSAs lose their meaning: Portugal taxes the income inside at 28 %, and no new contributions are allowed while non-resident.

The Portuguese side

Worldwide income at the progressive rates; the 4 587 € deduction on each pension; joint filing for couples. Canadian pensions, CPP and OAS are declared in annex J with the Canadian withholding credited (up to the Portuguese tax on that income, art. 81.º). RRSP withdrawals are pension income here; the capital component rule of art. 54.º rarely helps because contributions were deducted in Canada. Canadian dividends: 28 % with the 15 % credited; Canadian rental income: 25 % or progressive with credit. NHR is closed; IFICI (20 % on listed activities for ten years, foreign income exempt with progression) is open to Canadians who take a qualifying job and were not resident here in the previous five years — see NHR and IFICI for Canadians.

Property: IMT by bracket (7,5 % flat while you are still non-resident since May 2026, refundable when you become resident within two years), 0,8 % stamp duty, IMI at 0,3–0,45 % of the tax value, AIMI above 600 000 € — see property tax for Canadians.

Social security

The Canada–Portugal agreement (1981) lets you qualify for OAS with Portuguese residence periods and for a Portuguese pension with CPP periods; each country pays for its own years. There is no contribution issue for retirees; a Canadian employed in Portugal pays Portuguese contributions (11 % + 23,75 %); a Canadian company posting an employee needs a certificate of coverage from the CRA to keep CPP.

The order of the steps

Questions from Canadian clients