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Expat Tip 18: Departure Tax & Capital Gains When You Leave

When you permanently leave a country, many tax systems treat it as though you sold all your capital assets — even if you haven’t. This is called departure tax or deemed disposition. It’s one of the costliest surprises for expats.

 

📈 How Departure Tax (Deemed Disposition) Works

  • Essentially, the tax authority says:

    “We assume you sold all your stocks, property, and investments at fair market value on the date you depart.”

  • Gains above your adjusted cost base are taxed as capital gains.

  • Not all assets are covered — some jurisdictions exempt principal residences, pensions, or life insurance.

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🌐 Who Does It & When

  • Many tax systems (e.g. Canada, some European countries) impose departure tax when you cut tax residency.

  • The trigger date is typically your leaving date or official non-residency date.

  • Some countries offer deferral provisions so you don’t pay immediately, but interest or security may be required.

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⚠️ Challenges & Pitfalls for Expats

  • Valuation disputes over asset values on departure date

  • Foreign assets not recognized under your country’s regime

  • Double taxation if both home & host country treat you resident

  • Currency gains — exchange rate swings can amplify gains

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✅ What Expats Should Do

  1. Estimate the capital gains impact before leaving.

  2. Consider selling or gifting assets strategically before your tax departure date.

  3. If your country allows, defer tax by providing guarantees or paying in installments.

  4. Document fair market values (appraisals, valuations) as of departure date.

  5. Ask your CPA / tax adviser for scenario simulations before emigrating.

  6.  

🦊 Felix’s Quick Tips

  • Double-check whether your principal residence is exempt (some jurisdictions exclude it).

  • For foreign properties, ensure your home country considers foreign capital gains.

  • Where treaties allow, use step-up in basis or rollover provisions to limit gains.

  • Keep all your documentation: valuations, invoices, proof of departure date, and asset records.

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🦊 Information on specific countries

  • Australia (ATO): If you stop being a tax resident, you may trigger capital gains on assets (other than taxable Australian property). You can choose to pay CGT immediately or defer until you actually sell. ATO – Capital Gains Tax & Residency
  • Canada (CRA): When you emigrate, you may be deemed to have disposed of most property at fair market value (the so-called “departure tax”). Certain assets are excluded (like Canadian real estate). CRA – Leaving Canada (Emigrants & Departure Tax)
  • U.S. (IRS): Certain U.S. citizens and long-term residents who expatriate may face an “exit tax” on worldwide assets if net worth or tax liability thresholds are met. IRS – Expatriation Tax (Exit Tax)

 

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