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German exit tax (Wegzugsbesteuerung): what founders need to know before moving

See your German exit tax exposure before you move: § 6 AStG scope, the 2025 fund rule, the seven-year installment option, and a departure timeline.

10 min read

If you hold shares in a company and are planning to leave Germany, the exit tax (Wegzugsbesteuerung) is likely the single largest line item in your relocation maths. Paragraph 6 of the Foreign Tax Act (§ 6 AStG) treats your departure as a sale of your shares on the day you go — tax falls due on gains you have never cashed in. Since January 2025 the rule also reaches large investment-fund holdings, so it now concerns many people who have never founded anything.

This guide walks through who is caught, how the bill is calculated, the payment and return options, and how to sequence the twelve months before departure. German exit taxation is fact-sensitive and several points are currently before the courts, so treat this as a map for the conversation with your advisor.

Who the exit tax catches

Three conditions have to come together (§ 6 AStG, in conjunction with § 17 EStG):

  • A qualifying shareholding. You held at least 1% of a corporation — German or foreign, directly or indirectly — at any point during the five years before departure. A GmbH, UG, AG or a foreign Ltd. all count.
  • A qualifying person. You were subject to unlimited German tax liability for at least seven of the last twelve years.
  • A trigger event. The classic trigger is giving up your German residence and habitual abode. Gifting or bequeathing shares to a person outside German unlimited tax liability triggers the rule too, as does any other event that excludes or restricts Germany’s right to tax the gain.

The tax attaches to the shareholding itself. Whether you plan to sell, and whether the company pays you anything, is irrelevant to the assessment.

What gets taxed, and at what rate

On the day your unlimited tax liability ends, the law assumes a sale of your shares at fair market value. The difference between that value and your acquisition cost is taxed under § 17 EStG using the partial-income method (Teileinkünfteverfahren): 60% of the gain is taxable at your personal rate. At the 45% top rate plus the 5.5% solidarity surcharge, the effective burden is roughly 28.5% of the full gain.

Valuation is where founders are most often surprised. For unlisted companies the tax office applies standardised valuation methods, and a recent financing round is generally strong evidence of fair value — a loss-making startup can still carry a valuation in the tens of millions on paper. Get a defensible valuation estimate early and confirm the approach with your advisor.

AssetExit tax treatment on departure
Shareholdings of 1% or more in a corporationDeemed sale under § 6 AStG; roughly 28.5% effective at the top rate
Investment fund units (departures from 1 Jan 2025)Deemed sale where you hold 1% or more of the fund or your acquisition cost is €500,000 or more per fund; flat 25% plus surcharge, partial exemptions apply
Special investment fund unitsDeemed sale regardless of the size of the holding
Listed portfolio below both fund thresholds and below 1% per companyNo exit tax
German real estateNo exit tax; it stays taxable in Germany after you leave

The seven-year installment option

Since the 2022 reform, the tax is assessed at departure and, on application, payable in seven equal annual installments, interest-free (§ 6 Abs. 4 AStG). In practice the Finanzamt will normally ask for security — a bank guarantee or a pledge of the shares is common. The first installment is due within one month of the assessment notice; the remaining six are due each 31 July.

The installment plan can collapse into immediate full payment if certain events occur: you sell the shares, the company makes distributions exceeding one quarter of the share value, you miss an installment, you become insolvent, or you breach the annual notification duties. Put the 31 July deadlines and the yearly notification to the Finanzamt in a recurring calendar entry — a missed formality is an expensive way to lose the plan.

Returning to Germany can erase the tax

The law contains a genuine escape hatch. If you resume unlimited German tax liability within seven years, the assessment lapses retroactively — provided you still hold the shares, distributions stayed within the one-quarter limit, and Germany’s taxing right is restored. On request, and if you can show a continuing intention to return, the tax office can extend the window by up to five further years, twelve in total. Founders taking a genuinely temporary posting abroad should document that intention from day one.

EU/EEA moves and third-country moves

For departures since 1 January 2022 the statute treats every destination the same: assessment at departure, with the seven-installment option as the only relief. Before 2022, moves within the EU/EEA enjoyed an unlimited, interest-free deferral until an actual sale — that regime is gone for new cases.

Whether the uniform treatment holds up under EU law is an open question. In Wächtler (C-581/17, judgment of 26 February 2019) the CJEU held that immediate collection on a move to Switzerland breached the EU–Swiss free movement agreement, and German courts have since required deferral in old-law cases. A fresh referral is now pending: C-430/25 (Gena), a Polish case lodged 29 May 2025 concerning an exit-tax regime closely comparable to Germany’s, asks the CJEU whether installment-only regimes are compatible with the fundamental freedoms, with a decision expected around 2027. If you are moving within the EU/EEA or to Switzerland, it can be worth keeping your assessment procedurally open while this plays out — confirm the mechanics with your advisor.

The January 2025 extension to fund holdings

The Annual Tax Act 2024 extended deemed-sale treatment to investment fund units held as private assets, for departures after 31 December 2024 (§ 19 Abs. 3 InvStG). You are in scope if, for any single fund, you hold 1% or more of its units or your acquisition cost reaches €500,000. Units in special investment funds are caught regardless of size (§ 49 Abs. 5 InvStG).

Gains on fund units fall under the flat-rate regime — 25% plus solidarity surcharge, roughly 26.4% — reduced by the partial exemption (30% for equity funds) and by advance lump sums already taxed in earlier years. The personal scope mirrors the share rule (seven of the last twelve years), and the installment and return provisions apply correspondingly. The thresholds are tested per fund, so how a portfolio is spread across funds matters; review this well before booking flights.

If the company stays German-controlled: CFC rules

Moving yourself abroad while the business, or a new foreign holding above it, remains controlled from Germany brings the CFC regime (Hinzurechnungsbesteuerung, §§ 7–14 AStG) into play. Where German residents together control more than 50% of a foreign company, its passive income — think interest, royalties, certain trading income — is attributed to the German-resident shareholders and taxed in Germany whenever the foreign effective rate is below 15% (lowered from 25% as of the 2024 assessment period). Companies resident in the EU/EEA can escape by demonstrating genuine economic activity (the substance test in § 8 Abs. 2 AStG).

Two points matter for the departing founder:

  • CFC attribution applies to German residents. Once your German residence ends, the ongoing exposure sits with co-founders or family members who stay.
  • Your own German story may continue anyway. Under § 2 AStG, German nationals who were unlimitedly tax liable for at least five of the last ten years and move to a low-tax jurisdiction while keeping substantial economic interests in Germany (for example a stake above 25% in a German business, or German-source income above 30% of total income or €62,000) remain subject to an extended limited tax liability for up to ten years after the year of departure.

Restructuring — a holding company, share transfers within the family — can reduce exposure, and it can also trigger its own tax events. These moves need twelve months of lead time or more.

How tax treaties interact with the exit tax

The exit tax is assessed for the moment just before departure, while you are still a German resident, so double tax treaties generally leave the assessment itself untouched. The treaty governs what happens afterwards: future gains on the shares typically become taxable in your new residence state.

The real treaty issue is the step-up. Some destination countries compute a later capital gains bill from your original acquisition cost and give no credit for the German exit tax — the same gain gets taxed twice. Other countries step your cost basis up to the departure value. Which camp your destination falls into, and how the tie-breaker for the transition year (centre of vital interests) applies to you, are exactly the questions to settle with advisors on both sides before you commit to a date.

Sequencing: 12, 6 and 0 months before departure

12 months out

Commission a valuation estimate and model the exit tax on realistic numbers. Review the structure: holdings, family share transfers and fund-portfolio adjustments all need long lead times and can trigger tax of their own. Shortlist destinations with the step-up and treaty position in mind, and plan liquidity for either the first installment or the security the Finanzamt will want.

6 months out

Engage advisors in Germany and in the destination country. Open the conversation with the Finanzamt about security for the installment application. Pick a departure date deliberately — leaving early in the calendar year keeps your final German assessment small. Start building the paper trail of the move: lease, schools, health insurance, memberships.

At departure

File the deregistration (Abmeldung) and notify your Finanzamt. Record the facts of your departure day carefully; the deemed sale is valued on it. Calendar the annual notification duty and the 31 July installment dates. The exit tax itself is declared with your final German income tax return the following year.

A structured brief that runs these numbers for your specific shareholding, destination and family setup is exactly what TaxoTax produces. Start with the free instant check at /#instant-check to see your headline exposure, or browse a full sample report to see the depth an advisor-ready brief goes into.

Sources

FAQ

Does the exit tax apply even though I have no intention of selling my company? Yes. § 6 AStG assumes a sale at fair market value on the day your unlimited tax liability ends, whatever your plans. The seven-installment option and the return provision are the two statutory ways to soften the cash impact.

I only hold ETFs — does any of this concern me? Since 1 January 2025, possibly. If your acquisition cost in any single fund reaches €500,000, or you hold 1% or more of a fund’s units, departure triggers deemed-sale treatment on those units. Below both thresholds, fund units carry no exit tax.

Is moving within the EU treated more gently than moving to Dubai or Singapore? Under the current statute, no — since 2022 all destinations get the same regime of assessment plus optional installments. EU-law challenges are pending (CJEU case C-430/25), so the position may improve for EU/EEA moves; keeping your assessment open is worth discussing with your advisor.

What happens if I move back to Germany? If you return within seven years — extendable to twelve on request where an intention to return is shown — the exit tax assessment lapses, provided you kept the shares, distributions stayed under one quarter of the share value, and Germany’s taxing right is restored.

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