Exit Tax: What Every Retiree Must Understand Before Leaving Their Home Country
Your home country's tax office wants a final settle-up before you sail off into the sunset. Here's what exit tax means for Canadians, Australians, Americans, and Brits — and why the timing matters more than the amount.
Your home country's tax office wants one last conversation before you leave.
Most retirees don't know this. They plan the move, buy the plane tickets, tell the family, and then — sometimes years later — get a nasty letter from a faceless tax official back home.
Exit tax is the mechanism your home country uses to make sure it gets its share of your unrealised investment gains before you slip out of its net. It's not always a huge tax bill. But it's almost always a real one, and it needs to be planned around, not stumbled into.
Here's the version for four of the most common home countries our clients leave from - if you’re from a country not on this list, please send an email to hello@ftr.finance and if we can help we’ll send you back a country-specific guide.
Canada 🇨🇦
Canada's exit tax is called a "deemed disposition." Under section 128.1 of the Income Tax Act, the day you become a non-resident, most of your capital assets are treated as if you sold them at fair market value. The gains are taxable on your final Canadian tax return.
What's included: non-registered investment accounts, private-company shares, foreign property, cryptocurrency.
What's excluded: RRSPs, RRIFs, TFSAs, Canadian real property, and Canadian resource property.
The bill can be big. If you've held a stock portfolio for 20 years and it's grown significantly, you're paying capital gains tax on all of it in one hit.
The upside: Canada lets you defer the actual payment (interest-free) by posting security. You can also elect the timing of your departure date, which matters if your income varies year to year.
Australia 🇦🇺
Australia has a similar mechanism to Canada, called CGT Event I1. When you stop being an Australian tax resident, most of your capital assets are treated as sold at market value.
What's included: shares (Australian and foreign), managed funds, cryptocurrency, foreign property.
What's excluded: "taxable Australian property" — mainly Australian real estate and business assets tied to a permanent establishment. These stay in the Australian tax net whether you're resident or not.
The interesting option: you can elect NOT to trigger CGT Event I1 on non-Australian property. Instead, the asset stays subject to Australian CGT when you eventually sell it. This is often the better answer for retirees moving to a country with no CGT-treaty relief.
Superannuation is treated differently again and needs its own conversation.
United States 🇺🇸
Here's where US citizens have a much bigger problem than everyone else. The US taxes its citizens on worldwide income regardless of where they live. Moving abroad doesn't cut the tax cord.
Exit tax only kicks in if you formally renounce US citizenship (or give up long-held green card status). And when it does — under Section 877A of the Internal Revenue Code — it's serious: a deemed sale of essentially your entire net worth on the day of expatriation, plus special rules on retirement accounts and trusts.
For most retirees keeping their US citizenship, the day-to-day answer is different. You'll continue filing US returns forever, claiming the Foreign Earned Income Exclusion or Foreign Tax Credit where relevant, and dealing with FBAR and Form 8938 reporting on your foreign accounts. So, rather than a clean exit, what Americans need is smart multi-jurisdiction planning, proper off-shore structuring, and ongoing maintenance.
United Kingdom 🇬🇧
The UK doesn't have a traditional exit tax. You can generally leave without a deemed-disposition event.
But there are still real issues. UK CGT can apply to gains realised within five years of leaving on assets held at departure if you return within that period ("temporary non-residence" rules). UK-situs assets — mainly real estate — remain subject to UK CGT after you leave. UK state pension entitlements freeze at the rate applicable to the country you move to, which for some countries, including Colombia specifically, is a major issue (Colombia is a "frozen rate" country for UK pensions, amongst others).
The UK exit process is less dramatic than Canada's or Australia's, but the ongoing UK-connection issues are often more complex and require proper configuration and planning to ensure you don’t get an unpleasant surprise in the form of a large unplanned tax bill.
What all four have in common
Timing matters more than the amount. The date you become a non-resident sets your tax bill in stone. Getting the date wrong by a few months can shift things dramatically, both up and down.
Getting professional advice in the year before you move is almost always cheaper than getting it in the year after.
Exit tax and destination-country tax don't stack neatly, they need proper planning. Your Panama structure or your Colombian residency won't automatically reduce a Canadian deemed disposition; that's a home-country event, settled before you leave, however it can be strategically planned to minimise financial impact.
Next Steps
If you're within 24 months of moving abroad, exit tax planning should already be on your radar. Book a scoping call via the ‘Book a Consultation’ button above, or email our service team at hello@ftr.finance today, and we'll help you to model your specific exposure across the countries relevant to your situation.
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Important note: This article is general information for readers considering cross-border retirement or asset structuring. It is not personal tax, legal, or financial advice. Tax laws, visa rules, and treaty positions change regularly, and how they apply to you depends on your specific facts, citizenship, source of income, and prior tax history. Speak to a qualified adviser at FTR or elsewhere before acting on anything in this article.
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