Exit Tax: Everything You Need to Know in 2025

Are you thinking of leaving your home country to explore the world as a digital nomad or perhaps to settle in a new country? While embarking on this exciting journey, there’s one important factor you need to be aware of—exit tax.

When you officially give up your tax residency in your home country, some countries may impose an exit tax. This tax is something you should plan for before you leave, as it applies to unrealized capital gains on assets you hold when departing. Let’s dive into what exit tax is, when it applies, and how to handle it.

What Is Exit Tax?

In simple terms, an exit tax is a tax imposed on unrealized capital gains when you leave your home country. It’s as though you sold all your assets before departing, and you must report any gains made from those assets. This typically applies to investments like real estate, stocks, or business interests that have appreciated in value.

When Does Exit Tax Apply?

Exit taxes usually kick in when you officially relinquish your tax residency or citizenship, especially when moving to a country with a lower tax rate. The tax is meant to ensure that any unrealized gains you’ve accrued while living in the country are taxed before you leave. It’s triggered by significant changes in your tax status, such as expatriating or relocating assets abroad.

Are Any Incomes Exempt From Exit Taxes?

While exit taxes mainly focus on unrealized capital gains and high-value assets, regular income such as salary is generally not subject to these taxes. Some countries may also exempt specific assets or income, such as retirement accounts or assets below a certain value, depending on local tax regulations.

What Happens If You Don’t Pay Exit Taxes?

Failing to pay exit taxes can result in severe consequences, such as fines, penalties, or even criminal charges, depending on the country and the amount owed. Non-payment could also complicate your ability to settle in your new country or return to your home country. Additionally, ignoring exit tax obligations can harm your credit and financial standing, making it crucial to address these issues before leaving.

Countries That Impose Exit Taxes

Many countries impose exit taxes, and this may come as a surprise to those leaving their home countries without considering the tax implications. Here’s a list of some countries where exit taxes apply:

• Australia
• Canada
• Denmark
• France
• Germany
• Spain
• South Africa

Detailed Look at Exit Tax in Specific Countries

• Canada: Canada imposes an exit tax on unrealized capital gains when you leave the country. However, certain assets like personal items or retirement accounts may be exempt from this tax. The tax is based on the “deemed disposition” of your property, meaning you’re taxed as if you sold it when you left.
• Spain: Spain applies an exit tax to high-net-worth individuals who own significant shares (over €4 million or €1 million in a 25% stake of a business). This tax applies to individuals who have been residents of Spain for at least 10 out of the last 15 years. Deferred payments are available under certain conditions.
• Denmark: Denmark’s exit tax applies to unrealized gains on assets such as shares when residents move abroad. If you’ve lived in Denmark for at least seven years, you’ll be subject to this tax. Payment can be deferred but will accrue interest.
• France: France doesn’t have a standard exit tax but does impose a departure tax on unrealized gains for individuals with substantial holdings who have been French residents for at least six years before leaving.
• Germany: Germany applies an exit tax on individuals who relinquish their tax residency and own significant shares in a company. The tax is calculated based on unrealized gains of these shares at market value, especially for those moving to countries outside the EU or EEA.
• Australia: In Australia, the exit tax applies to residents moving abroad permanently. It’s based on the deemed disposal of assets, meaning you’re taxed as if you sold everything when leaving. Certain personal assets and retirement accounts might be exempt.
• South Africa: South Africa’s exit tax is part of its capital gains tax regime, applied to residents who cease to be tax residents. This tax covers the deemed disposal of worldwide assets, but it doesn’t apply to immovable property in South Africa.

The United States and Exit Tax

The U.S. has a unique situation. It’s one of the only two countries that tax citizens even after they’ve officially renounced their citizenship. The exit tax applies to U.S. citizens or green card holders who have been permanent residents for at least eight of the last fifteen years.

Exit tax for U.S. citizens or long-term residents is calculated on the capital gain of their assets as if they sold everything before leaving. The tax rate for these gains can go as high as 23.8%.

How Much Is the Exit Tax?

Exit taxes are calculated based on the capital gains you would have earned if you sold all your assets before leaving your country. This includes real estate, stocks, and other investments. For example, if you purchased a property for $100,000 and it appreciated to $200,000 before you left, you would be taxed on the $100,000 gain, even if you didn’t sell the property. The tax rate can be as high as 23.8% depending on the country and the type of asset.

Example: Canada Exit Tax

Let’s say you bought a condo in Toronto for $100,000 CAD, and by the time you decide to move to Italy, the property is worth $200,000 CAD. If you officially give up your Canadian residency, you will be deemed to have sold the condo and will need to report a capital gain of $100,000 CAD. The exit tax on this gain could be as high as $25,000, depending on the tax rates in your province.

How to Officially Give Up Residency

Before leaving your home country, it’s essential to understand your exit tax obligations. Start by researching your home country’s exit tax regulations and calculating the value of your assets. You may want to consult with a tax professional to ensure you comply with all the necessary requirements.

Additionally, make sure to notify the tax authorities and your bank about your move, and keep a record of your assets and their market values. If you have a business, reviewing your corporate structure and minimizing tax liabilities can save you from future complications.

Conclusion

Exit taxes can be an unexpected hurdle when moving abroad, but with proper planning and awareness, they don’t have to be a roadblock. By understanding the tax implications of relinquishing your residency and calculating the potential taxes you may owe, you can make informed decisions and avoid any surprises down the road. Start by researching your home country’s rules and reach out to a professional to help you navigate the process.