Navigating your pre-departure checklist: Exit tax and more

This is part 2 of our cross-border tax planning series.  Pre-departure planning: tax residency, exit tax and asset planning.

• Part 1: Cross-border tax planning – a timeline for moving countries
• Part 3: After a move – income, reporting, and cross-border compliance

Why planning early matters

Start tax planning at least a year before departure to:

• Identify actions that must be completed before leaving
• Identify what can wait until after arrival
• Prioritise time-sensitive steps

Exit tax

Some countries impose an exit tax when you cease tax residency. South Africa is a clear example.

From a South African tax perspective, when you tax emigrate, you are generally treated as having disposed of your worldwide assets at market value. This deemed disposal can trigger Capital Gains Tax, even though you have not actually sold anything.

This raises a critical question: If assets are deemed sold on exit, does it still make sense to hold them in their current form, or should they be restructured beforehand?

Understanding exit tax rules early allows you to make informed decisions about whether to retain, dispose of, or restructure assets before leaving.

How the new country will tax your assets

Pre-departure planning is incomplete without understanding how your future country of residence will tax your assets. Capital gains rules vary significantly between jurisdictions.

Some countries only tax gains from the date you become tax resident. Others look at the full ownership period, even if part of that period was before you arrived.

For example:

• Australia generally treats you as having acquired your assets at market value when you become tax resident. This resets the base cost, making the transition relatively straightforward.
• The UK, by contrast, may tax capital gains based on the full period of ownership. This means assets you owned long before moving to the UK could still be taxed on gains that arose outside the UK tax system. Without careful planning, this can lead to higher, and often avoidable, tax liabilities and even double taxation. South Africa treats your departure as a deemed disposal, and the tax paid at that point may not be available as a credit against future UK capital gains tax.

These differences are a key reason why asset planning must happen before residency changes.

Estate planning across borders

Changing tax residency often creates an opportunity to reassess how your estate is structured.

Inheritance and estate taxes vary widely between countries. For example:

• UK inheritance tax can reach 40%, depending on the circumstances.
• Without planning, a significant portion of your estate could end up with HMRC rather than your heirs.

Different jurisdictions also treat offshore structures differently. Some are acceptable and commonly used. Others are heavily scrutinised or discouraged. This makes it essential to consider not only where you are moving now, but where you may live in the future.

Pre-departure planning is the time to assess whether assets should:

• Remain in your personal name
• Be placed into a trust
• Be held through another structure better suited to the new tax regime

Income and reporting considerations before leaving

Income streams also require careful planning before departure.

Key questions include:

• What income is reportable before you leave?
• What will be reportable after you arrive?
• How do the two tax systems interact?

Rental income, investment income, or even salary from your home country may remain taxable after you move. In many cases, filing the tax return in your old country first is essential so that foreign tax credits can be correctly applied in the new jurisdiction.

Common mistakes at this stage

The most frequent issues arise when planning starts too late, including:

• Reviewing asset and estate structures only after residency has changed
• Ignoring retirement planning and when funds should be accessed
• Missing potential planning windows between tax residencies

In some cases, there may be a period where you are no longer tax resident in your old country but not yet resident in the new one. When identified early, this window can allow for strategic restructuring that would not be possible later.

Benefits of working with cross-border experts

Pre-departure planning is most effective when advisers in both your current and future countries understand how their systems interact. Working with a firm that offers coordinated, cross-border expertise ensures that decisions in one jurisdiction do not create unintended consequences in another.

Secure your future today. Email us at [email protected] or call +27 (0) 21 657 1517 for expert guidance and gain maximum control over your tax position, assets, and long-term planning.