You sell nothing, you cash nothing in, and yet your home country sends you a tax bill the day you move abroad. Welcome to the world of the exit tax. Several countries tax the unrealized gains of departing residents, treating the change of tax residence as if you had sold all your assets. The rules vary widely from one jurisdiction to another, and what is a manageable deferral in one country can be a decisive bill in another. This guide compares the main exit tax regimes around the world, with practical implications for expats and entrepreneurs.

Disclaimer: This guide is for informational purposes only. International taxation is complex and evolves regularly. Always consult a tax professional in both your home and destination countries before making any decision.

What is an exit tax? A universal concept

An exit tax (sometimes called departure tax, expatriation tax, or deemed disposal) is a tax levied on individuals who cease to be tax residents of a country, calculated on the unrealized gains of their assets at the date of departure. The legal fiction is identical everywhere: the tax authority pretends you sold all your assets the day before leaving, and applies tax on the resulting capital gains.

The rationale is the same across jurisdictions: prevent residents from accumulating large unrealized gains while subject to a high-tax regime, then moving to a low-tax country to crystallize the sale tax-free. The OECD has documented these mechanisms as legitimate anti-avoidance measures, and they have spread to most developed economies over the past two decades.

What changes from country to country:

  • Trigger thresholds: net worth, value of holdings, percentage of ownership
  • Asset scope: shares only, all securities, sometimes pensions and crypto
  • Deferral mechanisms: automatic, on request with collateral, or none
  • Relief conditions: time-based, return-based, or none

Let us look at how the main expat-source countries handle exit taxation.

United States: Section 877A expatriation tax

The US is the most aggressive jurisdiction on exit taxation, simply because it is one of only two countries (with Eritrea) that taxes its citizens on worldwide income regardless of where they live. To stop being a US taxpayer, a citizen must renounce US citizenship or, for long-term green card holders, formally abandon their status.

When that happens, IRC Section 877A imposes a mark-to-market exit tax on “covered expatriates”.

Who is a covered expatriate? You are a covered expatriate if you meet any one of these tests:

  • Net worth of USD 2 million or more on the date of expatriation
  • Average annual net income tax of more than approximately USD 201,000 (indexed annually, 2024 figure) over the 5 preceding years
  • Failure to certify on Form 8854 that you complied with US tax obligations for the past 5 years

How the tax is calculated: All worldwide assets are deemed sold the day before expatriation at fair market value. Gains above an exclusion (around USD 866,000 in 2024, also indexed) are taxed at standard capital gains rates (typically 20% federal, plus 3.8% NIIT).

Special rules apply to:

  • Deferred compensation (401(k), IRAs): generally subject to a 30% withholding when distributed
  • Specified tax-deferred accounts: deemed distributed
  • Interests in non-grantor trusts: 30% withholding on distributions

No automatic deferral: payment is due with the final tax return, although an irrevocable election to defer is possible if you post adequate security and waive treaty benefits, with interest accruing.

For a US citizen with significant unrealized gains, the exit tax often makes renunciation a costly decision worth careful planning, sometimes years in advance.

United Kingdom: temporary non-residence and deemed disposal

The UK does not have a general exit tax on individuals, but it has powerful anti-avoidance rules designed to catch expats who leave to crystallize gains and return.

Temporary non-residence rule (TNR): If you leave the UK and return within 5 years, gains realized while abroad on assets you owned before leaving become taxable in the UK in the year of return. This effectively neutralizes any benefit of moving abroad to sell. Details are published by HMRC in the Statutory Residence Test guidance and the Capital Gains Tax manual.

Specific exit charges: The UK does have targeted exit charges for:

  • Trustees of certain settlements
  • Companies ceasing to be UK tax resident
  • Certain employment-related securities

ATED-related and pension exit charges also apply in narrow scenarios.

For most individuals, the practical rule is simple: if you genuinely move abroad permanently and stay non-resident for at least 5 complete tax years, gains realized abroad are not taxable in the UK. If you return earlier, expect a bill.

Canada: departure tax (deemed disposition)

Canada applies one of the cleanest exit tax regimes: when you cease to be a Canadian tax resident, you are deemed to have disposed of most of your assets at fair market value, and gains are taxed in your final Canadian return.

The mechanism is described by the Canada Revenue Agency (CRA) emigrant guide.

What is included:

  • Shares of public and private companies
  • Most investments (mutual funds, ETFs)
  • Cryptocurrency and digital assets
  • Interests in partnerships and trusts

What is excluded:

  • Canadian real property
  • Canadian business property
  • RRSPs, RRIFs, TFSAs and other registered accounts
  • Pensions (taxed under treaty rules when withdrawn)

Thresholds and reporting:

  • Form T1243 (Deemed Disposition of Property by an Emigrant) is mandatory
  • Form T1161 lists worldwide property worth more than CAD 25,000 at departure (excluding cash and personal items)
  • Capital gains are taxed at standard rates (50% inclusion, then marginal rate)

Deferral: Canada allows you to elect to defer payment of departure tax by posting acceptable security with the CRA, with no interest as long as the security holds. You file Form T1244 for this election. The deferral lasts until you actually sell the asset.

For Canadian entrepreneurs holding shares in their own private corporation, the departure tax can be substantial, but the deferral with security often turns it into a manageable cash-flow item.

Australia: deemed disposal under CGT event I1

Australia treats ceasing tax residence as a Capital Gains Tax (CGT) event under CGT event I1, documented by the Australian Taxation Office.

The mechanism: When you stop being an Australian resident, you are deemed to have sold all assets that are not “taxable Australian property” at market value.

Taxable Australian property (NOT subject to deemed disposal, taxed only when actually sold):

  • Australian real estate
  • Indirect interests in Australian real estate
  • Mining rights
  • Business assets used in an Australian permanent establishment

Other assets (shares in foreign companies, foreign real estate, most portfolios) are subject to the deemed sale.

Election to defer: You can elect to disregard the deemed disposal for non-Australian property. The trade-off is that those assets are then treated as taxable Australian property going forward, meaning Australia retains the right to tax them when actually sold, even after you become a non-resident. This election is irrevocable and must be carefully evaluated.

No threshold: the rule applies to all assets regardless of value, although in practice small holdings rarely create material liability after the 50% CGT discount for assets held over 12 months.

Germany: Wegzugsteuer

Germany levies the Wegzugsteuer (“departure tax”) on substantial shareholdings when an individual ceases to be a German tax resident. The rules were significantly tightened in 2022.

Who is affected:

  • Individuals who have been subject to unlimited German taxation for at least 7 of the last 12 years
  • Holding at least 1% of the shares of a corporation (German or foreign)

How it works: The shares are deemed sold at fair market value at departure. Gains are taxed under the German partial income procedure (Teileinkünfteverfahren) at roughly 26.4% effective on 60% of the gain for shares held privately, or full income tax rates in other cases.

Deferral: Since 2022, deferral is no longer automatic for moves within the EU/EEA. Instead, taxpayers can request a payment in 7 annual installments, generally requiring collateral. Specific reliefs apply if you return to Germany within 7 years (extendable to 12).

The Wegzugsteuer is one of the toughest exit tax regimes in Europe and a major planning topic for German entrepreneurs considering relocation to Switzerland, Austria, or further afield.

Spain: IRNR and the “exit tax” for shareholders

Spain introduced an exit tax in 2015, codified in Article 95 bis of the IRPF Law.

Conditions:

  • Tax resident in Spain for 10 of the last 15 years
  • Holding shares with a market value above EUR 4 million, OR
  • Holding more than 25% of a company whose shares exceed EUR 1 million

Calculation: Unrealized gains on shares are deemed realized at the change of residence and taxed under the savings income scale (19% to 28% in 2024).

Deferrals:

  • Move within the EU/EEA: payment can be deferred until effective sale, return to Spain, or 10 years (whichever comes first), without collateral
  • Move outside EU/EEA: deferral possible only if moving for work to a country with a tax treaty containing exchange of information, generally with collateral
  • Move to a tax haven: no deferral

France: exit tax under Article 167 bis CGI

France has had an exit tax since 1999, restructured in 2011 after EU litigation. It is codified in Article 167 bis of the French General Tax Code.

Who is affected:

  • French tax resident for at least 6 of the last 10 years
  • Holding securities worth more than EUR 800,000 total, OR representing more than 50% of a single company

Calculation: Unrealized capital gain = market value at departure minus acquisition cost. Taxed at the flat tax rate (30% in 2026, including social levies).

Deferral:

  • Move to EU/EEA + cooperative state: automatic deferral, no collateral
  • Move outside EU/EEA: deferral on request, with collateral and a French tax representative

Relief:

  • After 5 years without selling (EU/EEA destinations) or 2 years (other destinations)
  • Upon return to France
  • If actual sale price is lower than the value at departure (recalculation)

Filing is via Form 2074-ETD at departure and annual follow-up declarations until relief or sale.

Comparison table at a glance

CountryThresholdDeferralRelief after
United StatesUSD 2M net worth or USD ~201k average taxOn request, with securityNone (one-time mark-to-market)
United KingdomNone for individuals (TNR rule)N/A5 years non-resident
CanadaNone (all assets)On request, with securityAt sale (no time-based relief)
AustraliaNone (all non-TAP assets)Election to defer (asset becomes TAP)At sale
Germany1% shareholding + 7/12 years residence7 annual installmentsReturn within 7-12 years
SpainEUR 4M or 25% with EUR 1MAutomatic in EU/EEA, on request elsewhereReturn, sale, or 10 years
FranceEUR 800k or 50% + 6/10 years residenceAutomatic in EU/EEA2-5 years without sale, or return

Practical strategies that work across jurisdictions

1. Plan years ahead, not weeks. Most exit tax regimes look at residency over the prior 5 to 12 years. Decisions like crystallizing gains, restructuring holdings, or making lifetime gifts often need to happen well before you announce your departure.

2. Choose the destination with deferral in mind. Moving from France to Portugal triggers automatic deferral. Moving from France to Dubai requires collateral. Moving from Germany under the new Wegzugsteuer is hard regardless of destination.

3. Crystallize gains under a favorable regime. If your home country taxes capital gains modestly and your destination heavily, selling before departure can be cheaper than deferring. Example: a UK resident selling shares while still UK-resident benefits from the CGT annual exemption and 20% top rate, often better than later regimes.

4. Use lifetime gifts to children or trusts (carefully). Gifting securities before departure can reduce the unrealized gain attributable to you. Gift tax allowances differ widely (USD 18k/year US annual exclusion, EUR 100k/15 years per child in France, etc.), and anti-abuse rules apply.

5. Consider the type of asset. Most regimes carve out real estate (taxed at sale anyway, in the country where it sits) and registered retirement accounts. Holding wealth in those vehicles often softens the exit tax bite.

6. Get dual professional advice. A specialist in your departure country and one in the destination country are both needed. A treaty optimization that makes sense in Country A may trigger a controlled foreign corporation issue in Country B.

Country-specific resources

Destinations and exit tax: planning your move

Whatever your country of origin, your destination matters. Some popular expat destinations are friendlier than others to people leaving high-tax jurisdictions:

For a comprehensive overview of taxation by destination, see our expat taxes hub.

In summary

Exit taxes are no longer a French peculiarity. The United States, Canada, Australia, Germany, Spain and France all impose some form of departure tax, and the United Kingdom catches “tax tourists” through its temporary non-residence rule. Thresholds, mechanics, deferral rules and reliefs differ, but the underlying principle is the same: governments do not want you to leave with untaxed gains.

The good news is that all these systems include planning levers, deferrals, allowances, reliefs, treaty optimization. The expats who handle exit taxes best are those who treat them as a multi-year planning project, not a last-minute formality. Start early, get qualified advice in both jurisdictions, and document everything.