You have decided to move your business to a lower-tax jurisdiction. You close the company in Country A, open a new one in Country B, and plan to operate from there going forward. Clean break, fresh start.
That is how it looks from your side. The tax authority in Country A may see something entirely different.
When a company ceases to exist in one country and an equivalent business begins in another, tax authorities do not simply wave it through. Most high-tax jurisdictions treat this type of restructuring as a taxable event before the company ever stops trading.
The reason is straightforward. The company built up value while it was subject to tax in Country A: customer relationships, contracts, intellectual property, goodwill, sometimes licences or brand. When that value moves out of the jurisdiction, the tax authority wants its share of what was accumulated there. The exit triggers a deemed disposal, meaning the company is treated as if it sold its assets at market value on the day it left even though nothing was actually sold.
This is not a legal grey area. It is established practice in Germany, the Netherlands, France, Austria, and most other EU member states, as well as the UK.
The exact scope depends on the jurisdiction, but the following categories are consistently in scope:
Unrealised capital gains. Any appreciation in the value of company assets (real estate, shareholdings, patents, software) is assessed as if realised on the exit date. If the company bought an asset at €200,000 and it is now worth €500,000, that €300,000 gain is taxable at the point of exit.
Goodwill and intangible assets. Many business owners underestimate how the tax office values goodwill. Client lists, long-standing supplier relationships, established revenue streams, and brand recognition can all be assigned a market value. In practice, this is often where the largest assessments arise.
Transfer pricing adjustments. If the new company in Country B will be dealing with related parties in Country A, buying services, licensing IP, subcontracting, the tax authority will scrutinise whether those transactions are at arm's length. Artificially low pricing can attract a correction.
Outstanding tax on retained profits. If the company held undistributed profits during its time in Country A, those may be subject to exit withholding depending on the applicable double tax treaty and domestic rules.
A common misconception is that liquidating the original company sidesteps the exit charge. It generally does not, most jurisdictions apply exit taxation at the point the company ceases to be resident or transfers its effective place of management which may happen before the formal liquidation is complete. The sequence of steps matters enormously, and the timing of decisions, board resolutions, and registered addresses can all affect what is assessed and when.
In some structures, the liquidation itself triggers a deemed distribution to the shareholder, which may be taxable at the personal level in addition to the corporate exit charge.
Even if you register a new company in Country B from day one, the tax authority in Country A may argue that the place of effective management remains there. This is particularly relevant when the founder or controlling director continues to live in Country A, when strategic decisions continue to be made there, or when the operational substance of the business has not genuinely shifted.
Under most double tax treaties, a company is resident where it is effectively managed. If Country A can demonstrate that management remained there, it can maintain its taxing rights regardless of where the new entity was incorporated.
This is one of the most frequently overlooked risks in international restructuring. Incorporation is not the same as fiscal residence.
Closing in one country and opening in another can absolutely be done in a way that is legally sound and tax-efficient. The difference between a costly surprise and a clean transition comes down to preparation.
Key elements of a well-structured approach include:
Valuing assets before the move, ideally with a formal appraisal, so the exit charge is based on defensible numbers rather than a unilateral estimate by the tax authority
Documenting the transfer of management clearly and contemporaneously. Board minutes, contracts, and operational records that show where decisions are actually being made
Reviewing applicable double tax treaties to understand whether deferral of the exit charge is available, and under what conditions
Ensuring the new company has genuine substance in Country B: local directors or management, real operational activity, and banking arrangements that reflect actual business conducted there
Coordinating the personal tax position of the owner alongside the corporate restructuring, since the two are rarely independent
Tax authorities across Europe have significantly improved their ability to detect and challenge structures that appear to shift value without a corresponding tax event. The automatic exchange of information under CRS means that the opening of a new company account in Country B is visible to Country A. Cross-border mergers, liquidations, and deregistrations are increasingly flagged for review.
The most expensive mistakes in international corporate restructuring happen when a business owner executes the move first and seeks advice second. By the time the new company is registered and the old one is being wound down, the options for managing the exit tax position have often narrowed significantly.
Planning the sequence correctly, which is understanding what the exit charge will be, whether it can be deferred, how the new structure needs to be set up to be defensible, and what documentation needs to exist.
If you are planning to close a company in one country and reopen in another, book a free initial consultation with our team. We advise on exit taxation, international corporate restructuring, and cross-border structures and we work through the detail before it becomes a problem.
