For many Germans, the dream of living abroad becomes a reality. Whether it’s studying in another country, relocating for work, or seeking a sunnier retirement, moving abroad offers many advantages. However, caution is advised: if you hold shares in a corporation, you must consider the so-called Exit Tax Germany. In this article, we explain what this means, the latest regulations, and how to minimize your tax burden.
What Is the Exit Tax?
The exit tax applies when a person who is subject to taxation in Germany and holds at least 1% of a corporation moves their residence abroad. The tax office treats this as a deemed sale of shares and imposes a tax—typically around 30% of the assumed capital gain. This is crucial to understand regarding the Germany exit tax.
Deferral Options and Their Pitfalls
Previously, taxpayers moving to an EU or EEA country could benefit from “perpetual deferral.” This meant that the tax was deferred indefinitely, interest-free, and without fixed installment payments. However, since the implementation of the ATAD law in 2022, new rules apply:
- The tax can now only be deferred for a maximum of seven years in installments, complicating the deferral of the Germany exit tax.
- The deferral is revoked if an installment is not paid on time, the taxpayer fails to meet reporting obligations, or declares bankruptcy.
- Selling shares, distributing profits, or repaying capital contributions can also lead to a revocation if the total value exceeds 25% of the overall shareholding.
Special Risks for Previous Expats
Those who moved abroad before the law change and benefited from perpetual deferral should be cautious. Even past relocations may now be subject to exit taxation in Germany. Retroactive taxation can result in unexpected financial consequences for many expats.
Professional Advice Is Essential for Exit Tax Germany
Leaving Germany does not necessarily mean the end of tax obligations. Especially when it comes to meeting the deferral requirements regarding the exit tax in Germany, regular monitoring is crucial to avoid unpleasant surprises.
Are you planning to move abroad and have questions about Exit Tax Germany? If so, it´s best to seek professional advice early to minimize tax risks and explore possible tax planning strategies.
Contact us today for individual advice and optimize your tax strategy when moving abroad! https://www.stb-thalmeir.de/faq-en/
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