Exit Taxes Explained: What You Owe When You Leave for Lower-Tax Jurisdictions

The headline appeal of moving to a low-tax jurisdiction is obvious: lower ongoing tax on income, capital gains, and dividends. The less-discussed cost is the exit tax some countries charge on departure — a one-time tax on unrealised gains, calculated as if the resident had sold everything on their last day of residency. For someone with material appreciated assets, the exit tax can be the single largest tax cost of the entire move.

This guide covers how exit taxes work in the high-tax jurisdictions most likely to be the source country for a 2026 relocation: Canada, Australia, Germany, France, the Netherlands, Norway, and the US (for citizenship renouncers). It is research, not tax advice; consult a qualified specialist in the departure jurisdiction before acting.

The basic mechanism: deemed disposal at fair market value

Most exit-tax regimes work through a "deemed disposal" rule. On the day the individual ceases to be a tax resident, the departure country treats them as having sold all (or specified categories of) their assets at fair market value. The resulting unrealised gains are taxed as if they had been realised — even though no actual sale occurred.

Two important details:

• Timing: exit tax is typically assessed in the final residency tax return, due in the year following departure. The actual cash payment may be deferrable or payable in installments.
• Scope: not all assets are caught. Most regimes target capital-appreciation assets — shares, business interests, sometimes real estate. Personal-use assets, retirement accounts, and certain holdings are usually carved out.

Canada: deemed disposition under section 128.1

Canada's exit tax (Income Tax Act section 128.1(4)) applies when a Canadian tax resident emigrates. The departure date triggers a deemed disposition at fair market value of:

• Shares in Canadian-controlled and foreign corporations
• Most non-Canadian real estate
• Business and partnership interests
• Most personal-use property valued above CAD 10,000 individually

Exempted assets include Canadian real estate, Canadian-domiciled pension and registered accounts (RRSP, TFSA, RPP), Canadian business property if a permanent establishment continues, and life-insurance policies.

The Lifetime Capital Gains Exemption (raised to CAD 1.25M for qualified small-business and farming/fishing property in 2025) can be claimed against the deemed gain. The proposed capital-gains inclusion-rate hike to 66.67% was cancelled in March 2025 — the 50% inclusion rate applies. Election under section 220(4.5) can defer payment with security pledged to CRA.

Practical implication: a Canadian founder selling a Canadian-controlled private corporation should usually trigger the actual sale before emigration to access the standard 50% inclusion rate plus LCGE — not after, where the deemed gain still triggers but the structure may be less efficient.

Australia: CGT events I1 and I2

Australia's exit tax (Income Tax Assessment Act 1997, CGT events I1 and I2) operates similarly. On ceasing to be an Australian tax resident, all CGT assets are deemed disposed of at market value, with the gain included in the final-year tax return.

Important option: an Australian tax resident can elect to "stop the clock" and have an asset treated as "taxable Australian property," keeping it within the Australian CGT net but deferring the deemed-disposal event until actual sale. This is useful for assets the person plans to hold long-term — particularly Australian real estate (which Australia retains taxing rights over regardless of residency anyway).

Australian real estate generally is taxable Australian property and is not caught by exit tax (it stays in the CGT net post-departure). The 50% CGT discount for assets held >12 months applies to the deemed gain.

Germany: Section 6 AStG exit tax

Germany has the longest history of exit taxation among major European jurisdictions. Section 6 of the German Foreign Tax Act (Außensteuergesetz, AStG) applies an exit tax to individuals with substantial shareholdings (≥1% in any corporation, including foreign) on emigration.

The 2022 reform tightened the rules significantly:

• Applies to taxpayers who have been German tax residents for at least 7 of the past 12 years
• Deemed disposal of substantial-shareholding assets at fair market value on departure
• Payment is due in 7 equal annual installments (was previously deferrable indefinitely for EU/EEA moves under the prior version)
• EU/EEA movers no longer get the indefinite deferral that existed before 2022

Practical implication: founders with German operations and material German-resident time should model exit tax as part of any relocation decision. Pre-2022 German emigrant founders structured around the indefinite EU/EEA deferral; that's gone.

France: exit tax (Article 167 bis)

France applies an exit tax to taxpayers transferring tax residency outside France, on substantial shareholdings (≥50% of profits in any one company, or holdings valued ≥€800,000). The exit tax was reformed in 2019 to reduce the holding period during which it remains due:

• Tax due on deemed gains at standard French rates (flat 30% PFU or progressive up to 45%)
• Holding period before relief: 2 years for the standard rate, 5 years for the highest brackets
• Deferral available with security for non-EU destinations; automatic for EU destinations
• If the relevant shareholding is sold within the holding period after departure, the deferred exit tax becomes payable
• Once the holding period expires without sale, the exit tax is forgiven

The 2019 reform was generally favorable to emigrants — shorter holding periods than the pre-reform 15-year rule. For HNWIs leaving France for Italy's €300k flat-tax regime or the UAE, the exit tax is generally manageable if shareholdings can be held through the relevant 2-5-year window post-departure.

Netherlands: substantial-interest exit tax

The Dutch exit tax targets shareholders with a substantial interest (5% or more in any one company). The deemed gain at departure is taxed at the Box 2 rate (24.5% / 33% for 2026), with deferral available against security for 10 years.

If the shareholding is sold during the deferral window, the deferred amount becomes payable. If the shareholding is held for 10 years post-departure, the deferred exit tax is canceled. This is a meaningful softening for founders who plan to hold long-term.

Norway: 2022 onward exit-tax expansion

Norway materially expanded its exit-tax scope in 2022 to cover unrealised gains on most shares, fund units, and similar assets — not just substantial-interest holdings. The tax is calculated at the standard 22% (for 2026) on the deemed gain. Deferral with security is available; the exit tax is reduced as the asset is held over time, with full relief after 12 years.

For Norwegian residents considering relocation, the post-2022 regime materially raises the cost of emigration relative to most other European peers.

United States: covered-expatriate exit tax

The US exit tax is unique because it applies only to citizenship renouncers and long-term lawful permanent residents (LPRs giving up green-card status after holding for ≥8 of the past 15 years), not to citizens who move abroad without renouncing.

A "covered expatriate" is an individual who meets any of three thresholds at expatriation:

• Net worth: ≥USD 2 million (not indexed)
• Average annual federal income tax liability: above an indexed threshold (~USD 206,000 for 2026)
• Tax compliance: failure to certify five prior years of tax compliance on Form 8854

If covered, the exit tax is a deemed sale of all assets at fair market value on the day before expatriation. The first ~USD 866,000 of gain (for 2026) is exempt. Certain assets — deferred compensation, specified tax-deferred accounts, beneficial interests in non-grantor trusts — are subject to specialised rules rather than the mark-to-market treatment.

Practical reality: very few US citizens renounce purely for tax reasons. Exit tax, $2,350 administrative fee, lifetime visa implications, and loss of Social Security entitlement based on future earnings combine to make the bar high. For most US citizens, optimising within the system (FEIE + FTC + smart jurisdiction choice) beats renunciation — see the US-citizen guide.

What about countries with no exit tax?

Many jurisdictions in the TaxAtlas dataset have no exit tax at all:

• UK: no exit tax on departure (separate from the residence-based IHT 10-year tail introduced April 2025)
• Italy: no general exit tax; corporate-level exit tax exists for businesses moving abroad
• Spain: limited exit tax on ≥€4M shareholdings, narrowly applied
• UAE, Singapore, Hong Kong, Cyprus, Malta: no exit tax (these are typically destination jurisdictions, not departure jurisdictions)
• Most LATAM and Caribbean jurisdictions: no exit tax

This asymmetry shapes the geography of moves. A Canadian moving to UAE pays the Canadian exit tax (one direction); the UAE doesn't impose exit tax when the person later moves on. A German moving to Italy pays the German Section 6 AStG; Italy has no exit tax to follow.

The pre-departure planning playbook

For high-net-worth individuals leaving high-tax jurisdictions, the standard pre-departure considerations are:

1. Trigger sales of appreciated assets before departure where the regular CGT rate is more favorable than the exit-tax rate, or where the LCGE / capital-gains exemption can be claimed.
2. Time the departure relative to the tax year. Some jurisdictions assess exit tax based on the last day of residency; others use the last day of the tax year. The optimal departure date can shift tax exposure by months.
3. Restructure shareholdings to avoid the substantial-interest threshold where the exit tax is gated on a percentage of ownership (Germany, Netherlands, France). Selling down below the threshold pre-departure can avoid exit-tax application entirely.
4. Use deferral mechanisms where they exist. The German 7-year installment plan, French automatic deferral for EU destinations, and Dutch 10-year deferral are all standard tools.
5. Coordinate destination treaty position. The treaty between the source and destination countries can affect post-emigration source-country taxation. See the treaty matrix for status by jurisdiction.
6. Plan for residence-based IHT tails. The UK's April 2025 reform extended UK IHT to former residents for 10 years post-departure. Other jurisdictions may have similar long tails.

Practical takeaways

Exit taxes are the most under-discussed cost of international relocation. They can dwarf the ongoing tax savings of the destination jurisdiction for the first few years, particularly for founders with material appreciated equity. Specialist pre-departure planning is not optional — running the numbers before departure date often produces structural changes (asset realisations, restructurings, departure timing) that materially reduce the total cost of the move.

For source-country-specific planning, see the country pages: Canada, Australia, Germany, France, Netherlands, United States, United Kingdom.