Anyone leaving Germany often expects to make a clean break for tax purposes as well. No home there, no habitual residence, no ongoing tax liability – or so the common assumption goes. In many cases that is true. But particularly with investments, the reality turns out to be far more complex.
German shares in particular can mean that, even after emigrating, you may still remain liable to tax in Germany. This often happens unnoticed, and only years later does it become clear that the tax link was never fully severed.
The article below explains why German shares can be problematic when you move abroad, which mechanisms are involved, and why simply deregistering your residence is often not enough.
When preparing to relocate abroad, completely different topics usually take centre stage: immigration status, health insurance, the children’s schooling, or new sources of income. Existing securities accounts often just "carry on in the background".
That is precisely the problem. From a tax perspective, the question is not how actively an account is used, but what economic connection it creates. While international ETFs or foreign shares are unproblematic in many cases, German holdings can have a particular impact.
This distinction is not intuitive for many investors, but it plays a key role in German tax law.
Giving up your residence generally ends unlimited tax liability. From that point on, you are only taxed in Germany on certain types of income – i.e. (extended) limited tax liability.
Many people conclude from this that investment income is no longer affected at all. That is exactly the misconception. German tax law includes scenarios in which taxation remains possible even without a residence.
A key term in this context is extended limited tax liability.
Extended limited tax liability is aimed primarily at German nationals who move abroad but retain significant economic interests in Germany. It can apply for several years after departure.
What matters is not only where someone moves to, but also how strong their economic connection to Germany remains. This is not solely about property or business shareholdings. Investments can also play a part.
In addition, certain destination countries are viewed from the German perspective as tax-sensitive. Anyone moving to a country without comprehensive information exchange or with very low taxation is more likely to come under scrutiny.
Many investors draw a strict mental line between entrepreneurial interests and a private share portfolio. For tax purposes, however, that clear distinction does not always exist.
German shares are regarded as domestic investments regardless of their size. Unlike other rules, it makes no difference whether a particular ownership threshold is exceeded. Even small positions can be relevant if they form part of an overall significant Germany connection.
In practice, investors often only realise this link once the tax office starts asking questions.
Another widespread misconception concerns where the account is held. A foreign broker is often seen as a "safe distance" from the German tax system.
In fact, the decisive point for tax classification is not where the account is, but which assets it contains. Shares in German companies retain their domestic connection regardless of whether they are held via a German bank or an international provider.
This means that, even after fully emigrating, tax-relevant income can still arise.
Whether German shares actually lead to continuing tax liability depends on the overall picture. The decisive factors are certain threshold values, assessed either in absolute terms or relative terms.
It is sufficient for just one of these values to be exceeded. It is not necessary for multiple criteria to be met at the same time. That is precisely what makes the rule so tricky in practice.
What is particularly critical is that these thresholds can change over time. Price increases, dividends or additional investments can mean that tax relevance only arises years after the move, without anything in your life situation having changed.
One point that is often overlooked in practice: it is rarely just "that one German share". Often it is several small building blocks that, in total, create the Germany connection. A portfolio of German dividend shares, a stake in a German GmbH, perhaps a rented-out flat as well – and suddenly the move is assessed for tax purposes differently than planned. That is exactly why the overall structure matters more than individual positions.
Even a seemingly harmless decision can be relevant: anyone who, after moving abroad, "just quickly" buys another German blue chip or regularly saves into German assets changes their profile. It may not have an immediate impact, but later, in an audit, it can be the very point at which the tax office argues that economic interests continue to exist.
An investor moves abroad, gives up their residence entirely, and keeps only their existing portfolio. Alongside international holdings, it also contains German shares.
At the time of departure, the value of these positions is below the relevant limits. However, market movements and reinvestments cause the portfolio value to rise steadily. At the same time, dividends are received regularly.
Only during a later review does it become clear that the economic connection to Germany was never fully removed. The income becomes tax-relevant retroactively.
These situations are not the exception; they occur regularly in practice.
Many problems arise not from deliberate planning, but from false assumptions. This includes the idea that deregistration means everything is sorted. Equally common is the belief that small amounts are irrelevant for tax purposes.
German tax law, however, always considers the overall picture. Several seemingly uncritical positions can, taken together, very much have a tax impact.
If you plan to move abroad, you should not look at your assets in isolation. What matters is which components have a connection to Germany and how they relate to your total wealth.
The destination country is just as important. Not every country offers the same level of tax protection, and not every scenario is cushioned by double tax treaties.
As a practical step, it helps to take a very sober look before leaving: which income streams or assets are still "tied" to Germany? Alongside shares, this includes dividends from German sources, German bank connections, domestic property, shareholdings, but also ongoing contracts or activities that are economically relevant. And yes: the question of how often you are in Germany and whether a flat remains available for use at any time can also resurface later.
Another point is often underestimated: measures taken after departure are usually far more limited than arrangements made in advance. What may still be flexible beforehand can later become tax-expensive – or no longer feasible at all.
German shares can lead to continuing tax liability even after emigrating. The lack of a residence alone is not enough to reliably end the tax connection.
Anyone who wants to avoid risks should review their investments early and integrate them into a well-thought-out overall strategy. Especially with long-term portfolios, timely adjustments can be decisive.
We help to identify tax risks and to structure your departure from Germany in a legally compliant way.
