Not everyone considering relocation does so out of conviction. Often there is a specific trigger: an upcoming business sale, a sizeable inheritance, or simply the realisation that the combination of income tax, the solidarity surcharge and trade tax leaves little structural room for manoeuvre. What is frequently overlooked is that such a move is far more than a change of address. Those who understand this early can benefit substantially. Those who take it lightly may end up paying more than before.
The basic principle: why tax residence is decisive
Germany, Austria and France tax their residents on worldwide income. Top rates of up to 45% are the norm in these countries for successful entrepreneurs. If you are registered there and your centre of life is there, you owe the tax authorities a substantial share of every euro you earn anywhere in the world.
The opposite principle applies just as strongly: if you move your residence to another country and genuinely become resident there, you will then fall under that country’s tax law. The key word is “genuinely”. Tax authorities have significantly stepped up scrutiny of foreign residences in recent years. Anyone who registers an address in Dubai or Lisbon but in reality continues to live in Munich or Vienna will not go unnoticed for long.
One more point that is often missed: under § 2 AStG, Germany can continue to tax you even after you leave. If you move to a low-tax country and meet certain conditions, you may remain subject to limited tax liability for certain German-source income for up to ten years. A tax-law analysis before the move is therefore not optional and should be professionally supported.
Portugal has, for good reason, established itself as a destination for internationally mobile entrepreneurs. The IFICI regime in force since 2024, often referred to as NHR 2.0, offers qualifying newcomers a flat 20% tax rate on certain domestic income and, in part, tax exemption on foreign income. The period is ten years. Anyone wishing to use the regime must not have been tax resident in Portugal in the five years prior to moving.
This is particularly relevant for entrepreneurs with dividends from foreign shareholdings or royalty income from international structures. Portugal combines these tax advantages with stable legal conditions, EU membership and comparatively high quality of life. Not for everyone, but for many a serious option.
Monaco is what it has always been: expensive to get started, but uncompromising when it comes to tax exemption. There is no personal income tax, with the well-known exception for French citizens. Investment income, private business profits and inheritances between direct relatives are also untaxed.
Anyone applying for residency typically needs a bank account with at least €500,000 in funds, proof of ownership or a tenancy, and an impeccable background. Naturally, that limits the pool of realistic candidates. Monaco is not a mass destination, but an option for those for whom the tax savings clearly outweigh the significant cost of living.
Relevant for entrepreneurs: companies operating predominantly in Monaco may be subject to local corporation tax. The tax exemption primarily applies at the private level.
For many entrepreneurs, the UAE is the first place that comes to mind when thinking about tax optimisation through relocation. No personal income tax, modern infrastructure, international connectivity. Since 2023, a 9% corporate tax applies at company level from profits of AED 375,000. Private income remains tax-free.
What often receives too little attention: for German nationals, particularly strict rules apply when moving to the UAE. The German-Emirati double taxation agreement was terminated by Germany in 2021 and has not been in force since 2022. Withholding tax on German investment income, the extended limited tax liability and the exit tax interact here in a way that can become expensive without careful preparation.
Both countries combine EU membership with attractive tax regimes for newcomers. Malta taxes foreign income only if it is actually remitted into the country. Anyone treated as a non-domiciled resident pays no Maltese income tax on foreign profits that are not remitted.
Cyprus, in turn, exempts non-domiciled residents for 17 years from the so-called Special Defence Contribution on dividend and interest income. The corporation tax rate is 12.5%, which also makes Cyprus attractive as a holding location. For entrepreneurs who want to combine European legal certainty with meaningful tax relief, Malta and Cyprus are often underestimated alternatives to the more prominent destinations.
Anyone who learns about § 6 AStG too late may find it costly. The rule says: if you leave Germany, were subject to unlimited tax liability for at least seven of the last twelve years, and hold shares in corporations of more than 1%, you must treat those shares for tax purposes at the moment of departure as if they had been sold at market value. The accrued hidden reserves become immediately taxable, even though no actual sale has taken place.
Since the 2022 AStG reform, this also applies when moving to EU and EEA states. Interest-free instalment payments, as previously possible, are no longer available in most cases. For third countries such as the UAE, the tax is due immediately anyway. Anyone close to an IPO or exit and planning to move at the same time can fall into a serious liquidity trap.
Forward-looking planning can reduce the burden. Contributing shares to a holding company before departure, using existing allowances, or a relocation of assets are approaches that can work in individual cases. However, they must be implemented with sufficient lead time and a clear legal basis. Arrangements that serve solely to avoid tax will be challenged by the tax authorities.
A classic case from practice: A founder wanted to emigrate to Dubai within four weeks, but overlooked his 15% stake in a German GmbH. Without prior restructuring, the mere stamp in his passport would have triggered a six-figure tax bill, without a single penny having been received. With a timely holding solution, we were able to neutralise the tax burden. Time is the most important factor here.
A residence abroad is not a given. Tax authorities in Germany, Austria and Switzerland increasingly examine whether the claimed foreign residence holds up in reality. They look at days of presence, rental or ownership agreements, where the family’s centre of life is, physical presence in professional activity, as well as bank connections and everyday infrastructure.
The 183-day rule is often seen as a magic threshold. That is misleading. It is an indicator, not a free pass. If you spend 200 days in Dubai but keep your wife, children, main home and managing director position in Germany, the German tax authorities will still regard you as subject to unlimited tax liability.
For families with school-age children or with partners who have limited mobility, this presents a structural challenge. In such constellations, seeking a binding ruling from the competent tax office may be sensible before the move is carried out.
Let’s be blunt: the days when you could get away with a letterbox in Panama and a holiday home on Sylt are over. Tax offices now use software that matches flight data and credit card spending. If you do not live the relocation consistently, you risk an allegation of tax evasion. We therefore strongly advise: either all in, or not at all.
A change of residence is in many cases accompanied by an adjustment of the corporate structure. Holding companies in the Netherlands, Luxembourg or Malta allow tax-efficient pooling of shareholdings and income. The prerequisite is genuine economic substance: your own staff, real business operations, and a coherent entrepreneurial purpose.
The OECD BEPS initiative and the EU directives ATAD I and II have significantly narrowed the scope for structures without substance. Anyone running a holding company merely as a tax pass-through will no longer do so unnoticed. Substance costs money and is unavoidable, but it pays off in the long term.
In addition, foundations and trusts can be useful for asset protection and succession planning. A Liechtenstein private foundation or a Jersey trust can be suitable instruments in certain constellations. The key is that they serve a legitimate purpose (whether asset management, family protection or succession structuring) and do not exist solely to minimise tax.
DTAs are intended to prevent double taxation. In practice, they are often a source of misunderstandings. Germany has concluded such agreements with more than 90 states, but the terms vary considerably. Central is the residence clause: a DTA only protects those who are genuinely tax resident in the destination country.
There are also subject-to-tax clauses, which make an exemption in the source country dependent on the income actually being taxed in the destination country. So if you move to a country that does not tax certain types of income at all, you may lose DTA protection and be taxed again in Germany. This requires careful review on a case-by-case basis.
In advisory work, we often see clients focus too much on headline tax rates. But beware: what is the benefit of tax exemption in the UAE if the family cannot cope in midsummer at 45 degrees? A location must fit not only from a tax perspective, but also in terms of everyday life. Those who move only for the rate often return disillusioned after two years and then face a tax-law mess.
Anyone contemplating a change of residence should start early. Ideally several years before the planned move. In that time, shareholding structures can be adjusted, assets relocated and family-law questions clarified. The shorter the lead time, the tighter the room to manoeuvre.
Equally important is assembling the right advisory team. In more complex cases, an international tax adviser, corporate lawyer, notary and, where appropriate, an immigration adviser specialising in the destination are the minimum. Anyone trying to cover this process with a single generalist underestimates the depth of the subject matter.
Gruendungskanzlei.eu supports entrepreneurs and high-net-worth individuals from the initial location analysis through tax structuring to full implementation. Get in touch with us today.
Yes. Re-registering alone is not enough. The tax authorities assess the overall picture: days of presence, family circumstances, property ownership and the actual centre of your life.
§ 6 AStG affects people who leave Germany, have been subject to unlimited tax liability for at least seven of the last twelve years, and hold corporate shareholdings of more than one per cent. On departure, these shares are treated as a deemed disposal and the hidden reserves are taxed immediately.
This complex question cannot be answered uniformly. It depends on income structure, citizenship, family situation and personal preferences. Portugal, Monaco, the UAE, as well as Malta and Cyprus are frequently chosen options, but they require different preconditions.
