In Brief

1. Canada's capital gains inclusion rate remains at 50% following the cancellation of the proposed increase to 66.67% by Prime Minister Carney on 21 March 2025; the Canada Revenue Agency confirmed the reversion to the enacted rate. Top effective capital gains tax rates are approximately 26.7% in Ontario and 26.8% in British Columbia.
2. Section 128.1 of the Income Tax Act imposes a deemed disposition on all property at fair market value on the date a Canadian resident ceases to be a resident — the departure tax — with limited exceptions including Canadian real property and pension assets.
3. The Canada-UAE Double Taxation Agreement (in force June 2004) provides treaty relief on income and gains, but effective UAE tax residency — supported by physical presence, a genuine home in the UAE, and UAE economic connections — is required before the treaty can be relied upon to reduce Canadian withholding and source-based tax obligations. The proposed increase to Canada's capital gains inclusion rate — one of the most widely discussed tax developments of 2024 — did not become law. Budget 2024 announced an increase from 50% to 66.67% effective 25 June 2024, but the legislation was never passed before Parliament was prorogued on 6 January
4. On 21 March 2025, Prime Minister Mark Carney confirmed that the government would not proceed with the increase. The Canada Revenue Agency subsequently confirmed it is administering the currently enacted inclusion rate of one-half. The 50% inclusion rate applies to all capital gains realised by Canadian residents in the 2025 and 2026 tax years.

That clarity — while welcome — does not diminish the underlying planning question for high-net-worth Canadians with significant unrealised gains. At the current 50% inclusion rate, the top effective capital gains tax rate in Ontario is approximately 26.7% and in British Columbia approximately 26.8%. For individuals holding large equity portfolios, private company shares, or commercial real estate, the departure tax and treaty planning available through a UAE relocation remain genuinely significant. The 50% inclusion rate and effective tax rates in context Under the current Canadian tax regime, 50% of a capital gain is included in taxable income and taxed at the applicable marginal rate. For the 2025 tax year, the federal top marginal income tax rate is 33%, applied above approximately CAD $246,752. Combined with provincial rates, the top combined marginal rates are approximately 53.53% in Ontario and 53.5% in British Columbia on ordinary income. Province Top marginal income tax rate Effective CGT rate (50% inclusion) Lifetime Capital Gains Exemption (QSBC) Ontario approx. 53.53% approx. 26.76% CAD $1,250,000 (2025)

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Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Readers should seek professional advice tailored to their specific circumstances. Information reflects the position as of the publication date and may be subject to change. This article addresses UAE, Australian, UK, and Canadian law where specified; different rules apply in other jurisdictions. © 2026 Alldren. All rights reserved. This article addresses Canadian and UAE tax law. Readers should seek advice from a qualified Canadian tax adviser and a UAE-registered practitioner before making any decisions about relocation, departure tax, or cross-border structuring.