Exit taxation under section 6 of the German Foreign Tax Act (AStG) is, at its core, the taxation of deemed capital gains from shares in corporations when an individual with a relevant shareholding moves their residence abroad.
Exit tax (Wegzugssteuer), also known as exit tax, in Germany is based on section 6 of the Foreign Tax Act (AStG) and captures the hidden reserves in shares in corporations (e.g. GmbH, AG, comparable foreign legal forms) as soon as these are removed from Germany’s taxing rights. In practice, this means: when you move abroad, it is assumed you have sold your shares even though no actual sale takes place; the deemed capital gain is then subject to income tax.
Important: this is not a separate type of tax, but ordinary income tax on a deemed disposal gain under the partial-income method rules (Teileinkünfteverfahren). The topic is particularly relevant for emigrants, remote entrepreneurs, start-up founders, investors and influencers with GmbH/AG shares or interests in German corporations who want to relocate their centre of life abroad.
Exit taxation applies exclusively to individuals who move their residence or habitual abode from Germany to abroad. It is not about pure corporate taxes, but about private shareholders. Affected are people who, in their private assets, hold directly or indirectly at least 1% in a domestic or foreign corporation.
Key requirements under section 6 AStG under current law include, in particular:
You are an individual holding share(s) in corporation(s) as private assets.
Your direct or indirect shareholding was at least 1% at some point during the last five years before departure.
You give up your residence or habitual abode in Germany (emigration, permanent remote lifestyle, extended stay abroad without a German residence).
You were subject to unlimited tax liability in Germany for at least seven years within the last twelve years before departure.
If you do not reach the 1% threshold or do not meet the time requirements, you generally do not fall within the scope of exit taxation, even if you move abroad.
What is taxed are the hidden reserves in the corporate shares, i.e. the difference between acquisition costs and the current fair market value of the holding at the time of departure. The legislator assumes a deemed disposal on this effective date. The resulting deemed gain is subject to income tax, even though no cash has flowed to you.
Typical real-world examples include:
Start-up shares held by founders or business angels that have risen sharply in value.
GmbH shares held by a freelancer or online entrepreneur who relocates their activity abroad.
Holdings in a holding GmbH in which operating companies or trade marks are bundled.
It is important to distinguish this from business assets, because section 6 AStG targets corporate shares held as private assets. Different rules and mechanisms may apply for share structures held as business assets or involving partnerships (e.g. GmbH & Co. KG) (deemed withdrawal, different deferral and instalment logics).
The calculation of exit taxation follows a clear sequence of steps:
Determine the fair market value: determine the market value of your corporate shares at the time of departure (e.g. based on a business valuation, transaction prices, comparable methods).
Deduct acquisition costs: subtract the historical acquisition costs or contributed book values from that market value.
Calculate the deemed disposal gain: the difference is the taxable deemed gain.
Apply the partial-income method: for holdings in private assets, in principle only 60% of the gain is subject to income tax; 40% remains tax-free.
Apply your personal tax rate: your individual income tax rate (up to about 45% plus solidarity surcharge and, where applicable, church tax) is applied to the taxable 60%.
Acquisition costs for the GmbH shares €100,000, market value on departure €600,000 → deemed disposal gain €500,000
Of this, 60% (€300,000) is taxable; assuming a top rate of around 45%, this results in income tax of about €135,000 plus surcharges
The problem: no money is received, yet a large tax burden arises. This creates a significant liquidity risk.
Historically, exit taxation was heavily shaped by CJEU case law on freedom of establishment. Germany had to take free movement into account and provide payment relief where moving within the EU/EEA. The former interest-free, unlimited deferral within the EU/EEA was, however, abolished by the ATAD Implementation Act and replaced with a uniform instalment model.
Current basic logic:
Exit tax is assessed at the time of departure, but does not necessarily become due immediately in full.
Upon application, the tax can generally be paid in up to seven annual instalments, regardless of whether you move to an EU/EEA country or a third country.
The instalment plan is generally interest-free, but usually requires the provision of security. In addition, certain events (e.g. an actual sale of the shares, loss of security, renewed structural changes) can trigger early due payment of the remaining balance.
The precise design is dynamic, because in particular Federal Fiscal Court (BFH) decisions on the compatibility of the instalment rules with EU law can create further pressure to adjust them.
Section 6 AStG contains a return rule providing that, under certain conditions, exit taxation ceases retroactively if the taxpayer becomes subject to unlimited tax liability in Germany again after leaving. The idea: if a person moves abroad only temporarily and returns within a legally defined period, the previously assumed “final” removal of Germany’s taxing rights is reversed.
Under the current legal situation, the exit tax can lapse if the taxpayer or their legal successor returns to Germany within seven years of departure. This period can be extended to up to twelve years in certain cases. In practice, applying these return rules is complex.
Disclaimer: This article provides general information and is not individual tax or legal advice. Specific arrangements should always be coordinated with a tax adviser or a specialist lawyer for international tax law.
Typical planning approaches to reduce the exit-tax burden include:
Structure via a holding or foundation holding: if a legal entity (e.g. a holding GmbH, family foundation) holds the operating investments, exit taxation primarily attaches to the individual as shareholder of the holding. Depending on the structure, this can manage or shift the exit-tax exposure.
Conversion into a partnership (e.g. GmbH & Co. KG), whereby the shares are transferred into domestic business assets (“escape into business assets”). Different provisions than section 6 AStG apply here, which can be used in planning.
Timing the emigration: planning the move only after relevant shareholding or tax-liability periods have elapsed (e.g. reaching or falling below the 1% threshold, holding periods), where economically and legally sensible.
Early valuation and, if appropriate, (partial) realisation of gains: partial sales or distributions before departure can help realise hidden reserves in a more predictable way and limit later exit taxation.
Exit taxation is no longer an obscure niche topic; it increasingly affects founders, investors, online entrepreneurs and influencers with German corporations.
Typical tax traps:
Founders and start-up investors: high value increases in a short time, holdings above 1% and international exit plans can lead to massive exit tax if you move unexpectedly before an exit.
Online entrepreneurs and digital nomads: a common case is that the operational activity is run from Portugal, Dubai or Bali while holdings in a German GmbH remain in place.
Influencers and self-employed people: many influencers form a GmbH to limit liability and later relocate their centre of life abroad. Then section 6 AStG may apply even though they want to keep the GmbH.
With this checklist you can assess whether you might be affected by exit tax and what you should pay attention to:
Review your holding structure: which corporate shares do you hold, in what amount, as private or business assets?
Document your tax history: record your residence and tax-liability history for the last twelve years, including move-in and move-out facts.
Roughly calculate hidden reserves: determine market values of the holdings (e.g. via a business valuation) and estimate potential deemed disposal gains.
Discuss options with experts: plan holding structures, conversion, sale or partial disposal, instalment payments and/or security early on with your tax adviser/specialist law firm.
Align the timeline for leaving: do not leave spontaneously; execute the move in a tax-planned way (cut-off dates, deadlines, return options).
For shareholders in corporations with at least a 1% interest, exit taxation on moving abroad is a key issue because it can lead to a high tax charge on deemed gains without any liquid funds coming in. With early planning, suitable structures (e.g. holding company, partnership, foundation) and smart timing, risks can be reduced and planning leeway used.
Recommendation: consult your tax adviser in advance to review suitable arrangements.
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Yes, exit tax is generally a one-off. It applies exactly on the effective date when you move your residence and taxes the hidden reserves in the shares (deemed disposal gain) at that point in time. After that, the rule no longer applies, unless later events such as an actual sale of the shares trigger subsequent taxation (e.g. under an instalment arrangement). There is no recurring taxation. It is not an ongoing levy.
Deregistering your residence primarily triggers exit tax (if the requirements are met), but it also carries further disadvantages:
Financial: exit tax on hidden reserves (high liquidity burden without any cash inflow), loss of social benefits such as child benefit or housing benefit.
Practical: no longer possible to register a vehicle, more difficult to open new bank accounts, complicated contracts (e.g. electricity, insurance).
Bureaucratic: voting rights only via postal vote (advance application required), continued possibility of extended limited tax liability (section 2 AStG) for 10 years.
Tax-related: you must prove that you have actually given up your residence (handing over keys, etc.), otherwise unlimited liability continues to apply.
Exit tax does not apply “forever”; it is assessed once. However, payment can be spread: upon application, in up to 7 annual instalments (interest-free against security). It lapses retroactively if you return within 7 years (extendable to 12 years upon application), provided you become subject to unlimited tax liability again and keep the shares. After the return period has expired or after full payment, it is settled. Section 2 AStG may govern a separate subsequent taxation of gains (extended limited tax liability for up to 10 years).
