A Canadian moving to Portugal faces a charge on the way out and a charge on the way in, and the two are usually discovered in the wrong order. The one that costs most is not the departure tax, which at least has a name people have heard. It is the account everybody was told was tax free.
The TFSA is not tax free in Portugal
A Tax-Free Savings Account is tax free because Canadian law says so. Portuguese law says nothing about it at all, and that is the whole problem. Three steps get you to the answer, and each of them is ordinary law rather than a special rule.
- A Portuguese resident is taxed on worldwide income under CIRS art. 15 n.º 1. The account being outside Portugal changes nothing.
- The CIRS contains no exemption for a foreign savings wrapper. The income inside it is taxed by its own Portuguese category — interest and dividends as capital income, disposals as gains — exactly as if the wrapper were not there.
- The foreign tax credit cannot rescue it. CIRS art. 81 n.º 1 makes the credit the lesser of the tax paid abroad and the Portuguese fraction. Canada charges nothing on a TFSA, so the tax paid abroad is zero, and the lesser of zero and anything is zero.
Two things we do not settle, and would rather say so than invent. Contributing to a TFSA while you are non-resident of Canada carries a Canadian charge — the rate and its mechanics are a CRA question and we do not state them here. And the Portuguese categorisation of a specific fund inside a TFSA depends on what the fund actually is, which is a per-holding question for your accountant rather than a page.
Departure tax: nothing is sold, the tax is real
On ceasing Canadian residence, you are deemed to have disposed of certain property at fair market value and taxed on the resulting gain. There is no sale and no cash. There is a bill.
One exception is worth knowing: short-term residents — 60 months or fewer of residence in the prior 10 years — may be exempt from the departure charge on property they owned before arriving in Canada.
| Period | What is reported |
|---|---|
| 1 January to departure date | Worldwide income |
| Departure date to 31 December | Canadian-source income only |
So a Canadian who is already a Portuguese resident may still owe a Canadian return for the year of the move, and further Canadian returns after it for Canadian-source income.
Canadian residence is not a day count
Canada weighs residential ties — a home, a spouse, dependants, and a list of secondary ties. Days matter but do not decide, and the 183-day rule applies only to somebody without significant residential ties. Portugal, meanwhile, decides residence on art. 16: more than 183 days in any 12-month period, or a home held in a way that implies you intend to keep it.
These are different shapes of test, not different thresholds of the same test, and both can answer yes at once. Portuguese residence begins on the first day of the stay and ends on the last day of presence, so the Portuguese side of a mid-year move is a straightforward split. The Canadian side is a judgement about ties.
Pensions, and the calculation the convention requires
The Portugal–Canada convention, signed in Ottawa on 14 June 1999, puts pensions and annuities in article 18 — and it is the one convention in this set that requires arithmetic rather than a lookup.
| Paragraph | Effect |
|---|---|
| 18(1) | The state of residence may tax pensions and annuities |
| 18(2) | The source state may also tax periodic payments, capped at the lesser of 15% of the gross above CAD 12,000 and the rate a resident of that state would have paid |
| 18(4)(a) | War and veterans' pensions are exempt in the residence state, to the extent they are exempt at source |
The article 18(2) cap is written for periodic payments. A lump-sum withdrawal from an RRSP is not a periodic payment, so on the article's own terms the cap does not reach it — and what Canada then withholds domestically is not something our sources settle. If you are choosing between drawing an RRSP as a lump sum and converting to a RRIF and drawing periodically, that choice has a treaty consequence and should be priced before it is made.
What you file in Portugal
Relief runs through CIRS art. 81 and article 22 of the convention: an ordinary credit, being the lesser of the Canadian tax paid and the Portuguese tax attributable to that income, capped at the treaty rate and carried forward five years where it cannot be used.
| Item | Where |
|---|---|
| Canadian pension, RRSP or RRIF income, and the Canadian tax paid | Anexo J |
| Income inside a TFSA | Anexo J, by category — it is not exempt |
| Any Canadian bank or securities account | Folha de rosto, quadro 11 — no threshold |
| Gains on Canadian shares or property | Anexo G / G1 |
Quadro 11 catches more than people expect: an account that earned nothing is still declared, being authorised to move somebody else's account is enough, and a foreign branch of a Portuguese bank counts as foreign. The window is 1 April to 30 June, and 30 June does not move for a weekend.
Is my TFSA still tax free if I live in Portugal?
No. Portugal taxes residents on worldwide income under CIRS art. 15 n.º 1 and has no exemption for a foreign savings wrapper, so the income inside a TFSA is taxed by its Portuguese category. The foreign tax credit does not help, because CIRS art. 81 n.º 1 gives the lesser of the foreign tax paid and the Portuguese fraction — and Canada charged nothing.
Should I close my TFSA before moving to Portugal?
That is a decision to take with advice on both sides, not a default. What is settled is that keeping it does not keep the exemption: from the day Portuguese residence begins, the income inside it is Portuguese-taxable and there is no foreign tax to credit against it.
What is the Canadian departure tax?
On ceasing Canadian residence you are deemed to have disposed of certain property at fair market value and are taxed on the gain, without any sale taking place. Short-term residents — 60 months or fewer of residence in the prior 10 years — may be exempt on property they owned before arriving in Canada.
When exactly do I stop being a Canadian resident?
On the latest of the day you leave, the day your immediate family leaves, and the day you become resident elsewhere. Moving ahead of your family pushes the date later than most people assume.
Does Portugal tax my CPP or OAS?
Article 18(1) of the Portugal–Canada convention gives the residence state the right to tax pensions, and article 19 expressly excludes pensions from the government-service rule — so there is no blanket exemption for a Canadian public pension. Canada keeps a capped source right under article 18(2) on periodic payments.
How much can Canada withhold on my pension?
Under article 18(2), source-state tax on periodic pension payments cannot exceed the lesser of 15% of the gross amount above CAD 12,000 and the rate you would have paid as a resident of Canada. It is a computation per payment, not a single rate.
Is a lump-sum RRSP withdrawal covered by the 15% cap?
The cap in article 18(2) is written for periodic payments, so on the article's own terms a lump sum falls outside it. What Canada withholds domestically on a lump sum is a CRA question our sources do not settle — get it answered before choosing between a lump sum and a RRIF.