Canada tabled Budget 2026 on 5 November 2026. Its chapters are titled around investment, competitiveness, affordability and security. But the tax measures annex contains four proposals that matter specifically to people whose lives cross Canada's border: residents with property abroad, Canadians who have left and still own property at home, families whose trusts have beneficiaries overseas, and anyone holding a Registered Retirement Savings Plan.
One point first. A Canadian budget is a set of proposals. Tax measures become law only when Parliament passes the enacting legislation. The budget gives each measure a proposed start date, some of them already past, but until royal assent the details can still change.
Foreign property reporting: the T1135 line doubles
Canadian-resident individuals, corporations and trusts, and certain partnerships, must file the Foreign Income Verification Statement, Form T1135, if the total cost of their specified foreign property exceeds $100,000 at any time in the year. The Canada Revenue Agency's T1135 guidance uses the same figure today. In the budget's words, specified foreign property "generally includes most types of income-earning property held outside of Canada, other than personal property and property used in carrying on an active business".
Budget 2026 proposes to:
- raise the filing threshold from $100,000 to $200,000, and
- raise the ceiling for the simplified reporting method from less than $250,000 to less than $500,000, which the CRA would implement.
The measures would apply to taxation years that end after 2026. For an individual, whose tax year is the calendar year, that means the 2027 year, reported in 2028. The 2026 return still uses the $100,000 line.
Who notices
The people who gain most are the ones who have never been wealthy enough for the form to feel proportionate:
- Newcomers to Canada who kept a modest pension account, savings account or brokerage account in their country of origin.
- Returning Canadians who still hold a bank account from years abroad.
- Retirees with a small foreign investment account.
The threshold is measured on cost, not market value, and on the total of all specified foreign property, so several small accounts can still add up. And the duty to report foreign income on the tax return itself does not change. T1135 is an information return; raising its threshold changes who files the form, not what is taxable.
Non-residents selling Canadian property: less tied up at closing
The second proposal affects Canadians who have left the country but kept property there, and foreign owners of Canadian real estate.
Canada taxes non-residents on gains from taxable Canadian property, a category that includes Canadian real estate, resource property and certain shares whose value comes mainly from Canadian real property. To collect that tax, the law makes the buyer responsible. A purchaser who acquires such property from a non-resident must withhold part of the price and send it to the CRA, unless the seller obtains a clearance certificate first. To obtain the certificate, the seller must pay an estimate of the tax, post security, or show that no tax is owed.
The budget describes the current amounts: the buyer generally withholds 25% of the purchase price for capital property, and 50% for what the law calls specified taxable Canadian property, such as depreciable property and real property held as inventory. To obtain a clearance certificate, a seller of ordinary capital property remits 25% of the gain.
Budget 2026 proposes to cut those rates:
| Type of property | Buyer's withholding now | Proposed | Seller's remittance for a certificate now | Proposed |
|---|---|---|---|---|
| Capital property (other than specified) | 25% of the price | 15% of the price | 25% of the gain | 15% of the gain |
| Specified taxable Canadian property | 50% of the price | 30% of the price | An amount acceptable to the CRA | Same rules |
The budget's explanation is framed around corporate vendors: it notes that the current rates do not reflect the different tax rates of different sellers and can exceed the tax a non-resident company would owe. Table 4 itself does not distinguish between kinds of seller. Anyone relying on the lower rates should check the enacting legislation once it is published.
The package has two more parts:
- Section 85 rollovers. Where a non-resident transfers taxable Canadian property on a fully tax-deferred section 85 rollover, the withholding and remittance rules would no longer apply, provided the section 85 election is filed and the buyer notifies the CRA within 30 days.
- A stricter anti-avoidance rule. The existing rule that denies a tax-deferred rollover when the property is disposed of again within three years would be extended to five years, and would also catch later sales of property that derives its value from the transferred property. The rule targets series of transactions in which one of the main purposes was an exemption from Canadian tax, for example under a tax treaty.
These measures would apply to dispositions on or after 1 January 2027.
What it means in practice
For a Canadian living abroad who sells a former home or a rental condo in Canada, the change is about cash flow, not tax. The tax on the gain is still owed and still settled on a Canadian return. What changes is how much of the sale price is held back at closing while the clearance certificate is processed. Moving from 25% to 15% of the price leaves more of the proceeds in the seller's hands in the weeks or months before the final tax is settled.
Timing matters. A sale that closes in December 2026 would fall under the current rates; one that closes in January 2027 would fall under the proposed rates, if they are enacted as proposed.
Family trusts and non-resident beneficiaries: a workaround closes
The third proposal is aimed at a specific planning technique, and its proposed start date has already passed.
When a trust distributes property to a beneficiary, the law generally treats the trust as having sold that property at fair market value. A personal trust, often a family trust, can instead transfer property to a Canadian-resident beneficiary on a tax-deferred rollout, so that the gain is taxed only when the beneficiary later sells. A trust cannot roll out property to a non-resident beneficiary, apart from a limited group of assets that stay within Canadian tax. The point is to keep the accrued gain inside Canada's tax net.
The budget says that some planning has used indirect distributions to get around that rule, for example by rolling property out to a Canadian corporation whose shares are held by a non-resident. In the budget's words, this "may result in an indefinite deferral or the permanent avoidance of Canadian tax".
Budget 2026 proposes to broaden the denial. The rollout would be denied for any property transferred to a corporation, or a partnership, with a direct or indirect non-resident shareholder or partner. The measure would apply to distributions on or after Budget Day, 5 November 2026.
This is the measure most likely to matter to internationally mobile families. A family trust set up in Canada years ago often has beneficiaries who have since moved abroad: adult children working in London, New York or Singapore. Any plan to distribute trust property to them through a Canadian holding company now needs to be checked against the proposed rule, and from Budget Day the deferral cannot be assumed.
Canada's general rule on departure is a deemed disposition of most property when a resident leaves, set out in the Canada section of The Years You Owe: Why Exit Taxes Are Really Taxes on Time. The trust measure follows the same logic: gains that accrued in Canada should be taxed by Canada before they leave.
RRSPs: a consultation, not yet a measure
The fourth item is an announcement of intent. The government wants to merge the core features of the RRSP and the Registered Retirement Income Fund into a single "RRSP for life". That would remove the need to convert an RRSP into a RRIF by age 71, although people over 71 would still have to make minimum withdrawals.
The budget lists questions under consideration, including whether an RRSP could have a successor holder, as some other registered plans do, and whether the rules on death could allow direct tax-free transfers to a survivor's registered plan. It invites written submissions to the Department of Finance by 8 January 2027.
For Canadians abroad who keep an RRSP, the consultation is worth watching rather than acting on. The RRSP section does not propose any change to how withdrawals by non-residents are taxed, and the proposal does not yet have legislative text. The broader point, that tax-advantaged accounts are built for residents and behave differently once their holder leaves, is the subject of The Brief's essay A Tax-Free Account Is a Residence Benefit, Not an Asset You Can Take With You.
The pattern in the four measures
Taken together, the measures pull in two directions.
Compliance gets easier for people with modest foreign assets and for non-resident sellers with nothing to hide: fewer T1135 filers, a simpler form for more of those who still file, less money tied up at closing, and no withholding on fully deferred section 85 transfers.
Avoidance gets harder where the planning was designed to move accrued Canadian gains out of Canada's reach: indirect trust distributions to non-residents, and quick resales after a treaty-protected rollover.
That is a reasonable trade from the government's point of view, and it is useful to recognise it from the taxpayer's side. Canada is not becoming less interested in people who leave. It is becoming more targeted about which of them it watches.
A short checklist
- Living in Canada with foreign accounts or investments? Total their cost. Below $200,000 for the whole of 2027, T1135 should no longer be required for that year once the measure is enacted. For 2026, $100,000 still applies.
- Living abroad and selling Canadian property? Plan the clearance certificate early, and check whether a closing date before or after 1 January 2027 makes a difference to the amount withheld.
- Trustee or beneficiary of a Canadian family trust with family abroad? Review any planned distribution through a Canadian company now; the proposed rule applies from 5 November 2026.
- Holding an RRSP abroad? No action is needed yet. Watch the consultation, which closes on 8 January 2027.
The wider Canadian picture, including the departure return, residential ties and non-resident withholding, is on the Canada country page. The immigration side of Canadian policy was covered in Canada Will Rank Immigrants by the Wage of Their Occupation.
Work with Sebastian
If you live in Canada with assets abroad, or live abroad with property, a trust or retirement savings in Canada, and want the Budget 2026 proposals mapped onto your own situation before the dates arrive, that is the kind of cross-border planning Sebastian works on with internationally mobile clients. Book a consultation.
