Fast facts

Those affected

Those affected

Those with significant holdings shares in corporations/investment funds

Triggers

Triggers

Moving residence abroad/gifting across the border

Taxation

Tax icon

Notional gains on disposal are taxed even though no actual sale is transacted

Planning

Planning

Getting tax advice early is essential

What is exit tax?

Exit taxation, often also called exit tax (Wegzugsbesteuerung or Wegzugsteuer), is a central topic in German tax law and is becoming increasingly important in the context of international mobility.

It applies when a taxpayer moves their residence or habitual abode abroad and holds at least 1 per cent shares in corporations or investments that are subject to the Investment Tax Act (Investmentsteuer-gesetz – InvStG) on which there is a profit (calculated according to the Investment Tax Act) and if the following conditions are met: 

  • the investor holds a total of ≥ 1 percent of the subscribed/issued investment shares/units (within the last five years) or
  • investments with a cost of EUR 500,000 (each investment fund is considered separately) as well as
  • shares in special investment funds. 

The purpose of this rule is to tax the increase in value of these shares that came about in Germany but has not yet been realised before they are able to escape the reach of German taxes by the move abroad.

Triggers

  • Terminating resident taxation in Germany, e.g. by ending residence or habitual abode in Germany
  • Transfers to a German tax resident at no cost
  • Restriction of German right to tax gains on disposal of holdings or business assets

With increasing globalisation and changes to ways of working and lifestyles, exit taxation is becoming an important way to secure German tax revenues. At the same time, exit tax raises important questions about its compatibility with EU law, how to deal with it practically and the financial impact on affected taxpayers. Our experts will take pleasure in advising you on this important topic.

Find out now

Articles on exit tax

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German Federal Fiscal Court judgment on extended non-resident tax liability when moving abroad
An important update for those moving abroad German Federal Fiscal Court judgment on extended non-resident tax liability when moving abroad
Moving abroad may have tax consequences that are often underestimated. When moving to a tax haven or low-tax country, “extended non-resident tax liability” for income tax as well as inheritance and gift tax often goes unrecognised. This is why particular attention should be paid to a recent decision by the German Federal Fiscal Court (BFH). In this article, we shed light on what those moving abroad need to know about the German extended limited tax liability.
Christian Kempges
Christian Kempges
| 4 min read | 07 Apr 2025
Exit taxation on shares in investment funds introduced
Extinction of Exit taxation introduced Exit taxation on shares in investment funds introduced
The German Bundestag has introduced exit taxation on investments at record speed. The Bundesrat, the upper house, didn’t ratify yet but is expected to assent to the new rules so that they might enter into force starting on 1 January 2025.
Alexander Fleischer
Christian Kempges
Kristina Laubeck
Bernadette Louis
| 3 min read | 18 Nov 2024
News on exit tax
Private clients News on exit tax
In this article, you can read about the challenges that arise when preparing a purchase price allocation.
Kristina Laubeck
Kristina Laubeck
| 5 min read | 01 Feb 2024
    View more
    Exit tax safeguards the German right of taxation when taxpayers move abroad, but it also requires careful planning so as to avoid financial burdens and legal pitfalls.
    Alexander Fleischer Partner, Grant Thornton AG

    Legal basis of exit taxation

    • What is affected – shares in corporations in which there was an (in)direct holding of at least 1 per cent within the last five years
    • Who is affected – those with resident tax liability in Germany for seven of the last 12 years
    • End of resident tax liability due to ending residence or habitual abode
    • Transferring shares at no cost to a non-tax resident
    • German right to tax gains on disposal is excluded or restricted in other ways
    • Shares held are deemed to have been sold (dry income)
    • Determined by – value of the shares  
    • Tax rate – approx. 28.5% (plus any church tax), personal income tax rate, but partial income procedure applies (60%)
    • Return intended – deferral possible
      • 7 years (+5 years)
      • Interest accrues if no return
    • Otherwise payments on account possible:
      • 7 annual amounts
      • No interest charged
      • Annual duties to disclose
      • Other conditions incl. block on selling  
      • Security usually required 

    Deferrals for exits to EU/EEA countries after 31/12/2021 have been abolished. EU/EEA and third countries are treated the same. The “everlasting deferral” has been replaced with prorated payment on application, spread over seven years.  Prorated payment is only granted if security is provided. 

    Notional gains on disposal – the taxable amount is the difference between the carrying amount of the shares and their fair market value on the date of the exit.

    Tax rate – the profit is taxed at the individual income tax rate.

    Returning to the country within seven years (with a one-time option to extend by a further five years) may reverse the tax duty.

    The exit taxation rules are again and again a focus of checks for conformity with EU law – including with freedom of movement because the EU protects the right of citizens to move freely. The exit taxation rules must be proportionate. The German exit tax rules regularly come in for scrutiny, so application continues to include many contentious issues.

    Exit taxation was last thoroughly reformed on 1 January 2022 in the ATAD Implementation Act [ATAD-Umsetzungsgesetz].

    It comes down to your strategy – plan and implement exit taxation wisely

    Exit taxation requires careful planning to minimise the financial burden and avoid legal pitfalls. With the right strategy, you can exploit tax advantages and effectively manage risks.  Our experts will support you in taking into account all the relevant factors and developing an individually customised solution. Trust in our experience and know-how – together we’ll find the best way for your exit.

    Our experts on exit taxation

    Kristina Laubeck
    Kristina Laubeck
    Partner
    Duesseldorf
    View full profile
    Alexander Fleischer
    Alexander Fleischer
    Partner
    Duesseldorf
    View full profile
    Christian Kempges
    Christian Kempges
    Senior Manager
    Berlin
    View full profile
    Bernadette Louis
    Bernadette Louis
    Senior Manager
    Duesseldorf
    View full profile

      Trust Grant Thornton and our experts with exit taxation

      Moving abroad brings challenges for tax – particularly in exit taxation. Our experts at Grant Thornton will support you with understanding the tax requirements, minimising risks and developing tailor-made solutions. With profound specialist knowledge, a global network and personal advisory, we are the partner you can trust with complex tax issues.

      All-round expertise

      Our experienced tax advisers and specialist lawyers combine profound knowledge with practical experience to offer you precise and effective solutions.

      International network

      As part of a global association, Grant Thornton has access to experts in over 130 countries – ideal for mastering international tax issues and challenges between countries.

      Personal advisory

      We attach importance to individual advisory and tailor-made solutions that are precisely customised to your personal and business needs.

      Frequently asked questions on exit tax

      Exit tax or exit taxation (Wegzugsbesteuerung) is a rule in German tax law. It applies when a taxpayer moves his or her residence or habitual abode abroad and holds at least 1 per cent shares in corporations. Gains on disposal are notionally calculated that are then subject to income tax in Germany. Additionally, since 01.01.2025 the new exit tax on shares in investment funds applies.

      Exit taxation affects private persons who hold at least a 1 per cent share in a corporation in their personal assets and who move their residence or habitual abode abroad. The new rules include investments that are subject to the Investment Tax Act (Investmentsteuer-gesetz – InvStG) on which there is a profit (calculated according to the Investment Tax Act) and if the following conditions are met: 

      • the investor holds a total of ≥ 1 percent of the subscribed/issued investment shares/units (within the last five years) or 
      •  investments with a cost of EUR 500,000 (each investment fund is considered separately) as well as
      • shares in special investment funds. 

      Companies are affected by similar rules like taxable disjunction (Entstrickungsbesteuerung) if assets or functions are moved abroad. Starting from 01/01/2025, shares in investments are also subject to exit tax.  

      Besides moving residence, the following also trigger exit tax: 

      • Transfers at no cost to a person who is not a German tax resident
      • Restriction of German right to tax gains on disposal of holdings or business assets  

      The tax burden depends on the personal income tax rate which can be up to 45 per cent (plus solidarity surcharge). The taxable amount is the notional gains on disposal, that is, the difference between the fair market value of the shares on the date of exit and the acquisition costs. The partial income procedure (Teileinkünfteverfahren) applies. The tax on the fictional sale of investments funds is 25% flat plus solidarity surcharge (Abgeltungsteuer).

      Notional gains on disposal arise because exit taxation assumes that the shares are sold as of the date of exit. This profit is calculated as the difference between the fair market value of the shares and the original acquisition costs. This means that tax is due even though no profit is actually made. 

      Companies are not subject to exit tax in the form of Wegzugsteuer, but Entstrickungsbesteuerung. Hidden reserves are disclosed when assets are moved abroad. The difference is subject to corporate income tax (15 per cent) as well as solidarity surcharge (5.5 percent on the corporate income tax) as well as trade tax.

      Exit taxation is triggered the moment a taxpayer moves their residence or habitual abode abroad and holds at least a 1 per cent share in a corporation or investmentfund.

      Shares in corporations (domestic and foreign) are affected of which the taxpayer holds at least one per cent directly or indirectly, as are shares in investment funds (starting from 01/01/2025). 

      Exit taxation is laid down in section 6 of the Foreign Tax Act [Außensteuergesetz – AStG]. It describes the conditions, assessment bases and exemptions in detail. Additionally, section 19 abs. 3 Investment Tax Act (InvStG) applies for the funds.

      If you return to Germany within seven years (with a one-time option to extend by a further five years) and continue to hold the shares, the exit tax may be annulled under certain conditions.  

      No, exit tax comes about in the last “legal second” before crossing the border so only German law applies.

      However, it is also always necessary to check the DTA Double Tax Treaty (DTT) with the destination country to find out in advance how the new country of residence deals with the shares. 

      We’ll be glad to advise you on it.