Leaving Germany: the exit tax on shareholdings and everything else to settle before you go

Who is caught

The exit tax applies to individuals who

• were subject to unlimited German tax liability for at least seven of the last twelve years, and

• held, at any time in the last five years, at least 1 % of a corporation – a German GmbH or AG or a foreign company – as private assets (§ 17 EStG), and

• end their unlimited liability by giving up their German residence, shift their centre of vital interests abroad under a tax treaty, or transfer the shares by gift or inheritance to a person resident abroad.

Since 1 January 2025 the rule also covers investment funds and ETFs: holdings of at least 1 % of a fund’s units or with acquisition costs of at least 500,000 € per fund are treated like shareholdings on departure (§ 19 Abs. 3 InvStG); special investment funds are covered without any threshold. An internationally mobile professional with a large fund portfolio is now in the same position as a company owner.

Not covered: shares held in a business, real estate, portfolios below the thresholds, and interests in partnerships – which follow separate rules.

What is taxed

The deemed gain is the fair market value of the shares on the day of departure less your acquisition costs. For unlisted companies the value is usually determined by the simplified capitalised earnings method (§§ 199 ff. BewG): average earnings of the last three years multiplied by 13.75. The gain is taxed under the partial-income rule – 60 % at your progressive rate – which at the top rate amounts to roughly 28.5 % of the entire increase in value. A founder who set up a GmbH with 25,000 € and whose company now earns 400,000 € a year faces a deemed value of 5.5 million € and a tax bill in the region of 1.5 million € on the day the residence ends.

Instalments over seven years

Since the 2022 reform there is no longer an indefinite interest-free deferral for moves within the EU. Instead, on application, the tax is payable in seven equal annual instalments, without interest, generally against security (§ 6 Abs. 4 AStG). The instalment plan is revoked – and the balance falls due – if the shares are sold or contributed to a company, if dividends or capital repayments within the seven years exceed 25 % of the shares’ value at departure, or if instalments or annual notifications are missed. Owners who leave and then take large dividends out of their company lose the plan.

The returnee rule

If the move is temporary, the tax can be undone. A person who returns to Germany and resumes unlimited tax liability within seven years – extendable on application by up to five years to twelve – has the exit tax cancelled retroactively, and instalments already paid are refunded (§ 6 Abs. 3 AStG). Conditions: the shares were not sold in the meantime and distributions stayed below the 25 % threshold. Anyone who considers coming back should apply for instalments and document the intention to return from the outset.

Planning before departure

Every option needs lead time – often years. The realistic ones:

• Contribute the shares to a trading partnership with a German permanent establishment. Shares held in business assets are not subject to § 6 AStG; Germany keeps its taxing right on a future sale. The contribution must be tax-neutral and the establishment genuine.

• Distribute before leaving. Retained earnings inflate the company’s value. Paying them out beforehand lowers the deemed gain – at the price of withholding tax on the dividend. Whether that is cheaper depends on the numbers.

• Gift to family staying in Germany. Transferring the shares to children resident in Germany avoids the exit tax, triggers gift tax (mitigated by allowances and business-asset relief) and leaves the built-in gain with the next generation.

• Keep German residence. Retaining a home in Germany and remaining unlimitedly liable avoids the trigger – as long as the centre of vital interests under the treaty does not move too. This is the most fragile route and needs careful documentation.

• Holding structure with lead time. Inserting a holding does not avoid the exit tax on the holding’s shares, but it positions a later sale and dividend flow; the seven-year lock-up after contribution (§ 22 UmwStG) is why it must be set up early.

Which route fits depends on the destination country and its treaty with Germany – Switzerland, the US, Dubai, Portugal and Spain each present different constellations –, on whether the move is permanent and on the structure of the holding. Steuerberater Florian Enders has written about the country-specific issues at florian-enders.de.

Everything else to settle when leaving

• Deregistration at the residents’ office; the tax office is informed automatically, but tell them your new address anyway.

• Final German return for the year of departure, covering the period of residence and – under limited liability – any German-source income afterwards, such as rental income.

• Progressionsvorbehalt in reverse: income earned abroad after departure raises the rate on your German income of the same year.

• Pensions: German statutory pension contributions may be refundable after 24 months for citizens of some non-treaty countries; for most, entitlements remain and are paid abroad later. Company pensions and Riester contracts have their own rules on leaving.

• Property kept in Germany: rental income remains taxable in Germany; the ten-year capital gains clock keeps running; the owner-occupier exception on a later sale requires attention to timing.

• Inheritance and gift tax: German citizens remain fully liable for five years after leaving; residents of any nationality only until departure – but German-situs assets remain taxable indefinitely.

• Annual notifications during the instalment period: current address and confirmation of continued ownership, by 31 July each year (§ 6 Abs. 5 AStG).

How tes tax handles departures

Steuerberater Florian Enders and the tes tax team start with the valuation – what would leaving cost today? – and derive the options: instalments, returnee rule, restructuring, timing. We coordinate with advisors in the destination country, prepare applications and security arrangements, file the departure-year return and handle the notification duties in the years that follow. In English, remote, with a written fee quote before engagement.

Note: This page provides general information on German tax law. A binding assessment of your situation is only possible after engagement and review of your documents. We quote our fees in the initial consultation, before you commit.