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 leave. Here's what exit tax means for Canadians, Australians, Americans, and Brits — and why the timing matters more than the amount.
The day you become a non-resident, Canada treats you as if you sold your entire investment portfolio — at market value, in cash, that afternoon. You didn't sell anything. You still owe the tax. Three other countries our clients leave from each handle this differently, and none of them are as simple as "just move."
Exit tax is the mechanism a home country uses to collect its share of your unrealised gains before you're out of its reach. It isn't always a huge bill. It's almost always a real one, and it needs planning, not a surprise letter two years after you've settled into your new life. Here's the version for the four countries we see most.
Canada 🇨🇦
Canada's version 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 sold at fair market value. The gain lands 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.
Say your non-registered portfolio has grown from CAD 150,000 invested over twenty years to CAD 400,000 today — CAD 250,000 of accrued gain. Under the standard capital-gains rules, roughly half of that becomes taxable income on your departure return: about CAD 125,000. At a combined federal-provincial marginal rate in the 30–40% range, that's somewhere around CAD 37,500 to CAD 50,000 owed, before you've sold a single share.
The upside: Canada lets you defer 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, CGT Event I1. Stop being an Australian tax resident, and 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. Those 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. The asset then stays subject to Australian CGT when you eventually sell it, deferring the bill rather than crystallising it on departure. That's often the better answer if you're moving to a country with no CGT-treaty relief.
Superannuation is treated differently again and needs its own conversation.
United States 🇺🇸
US citizens have a bigger structural problem than everyone else on this list. The US taxes citizens on worldwide income regardless of where they live. Moving abroad doesn't cut the tax cord.
Exit tax only triggers if you formally renounce citizenship, or give up long-held green card status. 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 for retirement accounts and trusts.
For most retirees keeping citizenship, the ongoing answer is simpler and less dramatic: you keep filing US returns indefinitely, claim the Foreign Earned Income Exclusion or Foreign Tax Credit where relevant, and stay current on FBAR and Form 8938 reporting for your foreign accounts.
United Kingdom 🇬🇧
The UK doesn't run a traditional exit tax. You can generally leave without a deemed-disposition event.
There are still real issues, though. UK capital gains tax can apply to gains realised within five years of leaving, on assets held at departure, if you return within that period — the "temporary non-residence" rules. UK-situs assets, mainly real estate, stay subject to UK CGT after you leave. And UK State Pension entitlements freeze at the rate applicable to your destination country — which for Colombia specifically matters, since Colombia is a "frozen rate" country for UK pensions.
The UK's exit process is less dramatic than Canada's or Australia's. The ongoing UK-connection issues that follow it are often more complex.
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 — get it wrong by a few months and the number can move significantly in either direction.
Getting advice the year before you move is almost always cheaper than getting it the year after.
Exit tax and destination-country tax don't stack neatly. Your Panama structure or your Colombian residency won't reduce a Canadian deemed disposition. That's a home-country event, settled before you ever leave.
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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