Deemed Acquisition and the Canadian Cost-Base Reset
What happens, tax-wise, to the unit trust you’ve held for eleven years, or the small share portfolio you built up slowly, the day you stop being a South African tax resident?
The thing people hope for on the Canadian side has a name — a deemed acquisition, which would reset the cost base of everything you own to its arrival-day value. The honest answer, though, starts on the South African side, because that half is well documented and worth understanding properly before you touch the Canadian side at all.
The SARS exit tax, plainly
Section 9H of South Africa’s Income Tax Act creates what’s called a deemed disposal: on the day before your tax residency ceases, SARS treats you as if you sold your entire worldwide asset base at fair market value — even though nothing actually changed hands. It’s a notional sale, not a real one, which is exactly why it catches people out. There’s no buyer, no cash proceeds, just a tax bill calculated as if there were. South African immovable property is excluded and stays in SARS’s net regardless of where you live. For everything else, the mechanics work through the ordinary capital gains rules: a 40% inclusion rate against your marginal tax rate, up to a maximum effective rate of around 18%, with an annual exclusion (R40,000 as at 2025 — confirm the current figure before relying on it).
Residency doesn’t end just because you booked a flight. SARS looks at whether you meet the ordinarily-resident test (intention plus supporting facts — visa type, where your family lives, how often you come back), the physical presence test (330 full days continuously outside South Africa), or a double-taxation-agreement tie-breaker. You declare the cessation date on the RAV01 form via eFiling, and SARS can decline the declaration if your documentation doesn’t support it.
The Canadian mirror — and where this piece has to stop
The question behind this post is really about the mirror image of the SARS exit tax: does Canada do the reverse when you arrive, treating your assets as freshly acquired at their arrival-day value, so that only the gain from that point forward is ever taxed in Canada?
It’s a reasonable thing to expect a modern tax treaty partner to do, and cross-border advisers describe Canada as operating broadly this way for new residents. But this piece is built strictly on the South African-side research behind it, and that research doesn’t include a verified account of the Canada Revenue Agency’s own rule, its exact mechanics, or which asset classes it does and doesn’t cover. Stating that as settled fact here would be a guess dressed up as an answer, and guessing about a tax basis is exactly where a wrong assumption costs real money years later when you eventually sell. Confirm this directly with a cross-border tax advisor or accountant, or against the CRA’s own guidance, before you plan around it.
What to do regardless of how the mechanics land
One thing doesn’t depend on resolving that uncertainty: get formal, dated valuations of what you own — share portfolios, unit trusts, any foreign property — as close as possible to your departure date, and keep every record. Whichever authority eventually asks, and both very well might, you’ll want a paper trail showing what things were worth on the day everything reset, rather than a reconstruction from memory five years later.
If the exit-tax mechanics themselves feel like more than you can plan alone — and for most people with any real asset base, they are — Cape2Canada’s free guide on proof of funds and moving money covers the South African side of the process; the tax calculation itself belongs with a registered SARS tax practitioner and, once you’ve landed, a Canadian accountant who works with newcomers.