German Exit Tax § 6 AStG: A Professional Guide for Shareholders

Many entrepreneurs and shareholders today plan to relocate their lives and businesses abroad. Destinations such as Switzerland, the USA, or Dubai offer attractive conditions. However, this new beginning often triggers a costly German mechanism: the Exit Tax (Wegzugsbesteuerung) under Section 6 of the Foreign Tax Act (§ 6 AStG). Without precise cross-border tax planning, you may face taxes on profits you have not yet received. In professional circles, we call this the taxation of “Dry Income”.

What Exactly Is the German Exit Tax?

The exit tax functions like a capital gains tax on the appreciation of your assets. When you give up your German tax residency, the law deems that you have sold your shares in corporations (e.g., GmbH, AG) at their current market value. Although you do not actually sell a single share, the tax office demands payment. Specifically, the authorities act as if you liquidated your entire company at market value on the day of your departure.

Target Group: Who must pay the tax?
The Method: How does the tax office calculate the value?
The Destination: Differences between EU/EEA and third countries.
Relief Options: How the installment plan works.
The Strategy: Options to avoid the tax before you move.

When Does the Exit Tax Apply?

The tax under § 6 AStG affects you as an individual if you meet three conditions simultaneously:

Your Tax History: You were subject to unlimited tax liability in Germany for at least seven years within the last twelve years.
Your Ownership: You own at least 1% of the shares in a corporation. Furthermore, it is sufficient if you reached this threshold at any point in the five years preceding your move.
Your Departure: You terminate your unlimited tax liability in Germany by giving up your residence or habitual abode.

Please note that donating or gifting shares to persons abroad can also trigger this tax.

The Calculation: When Book Values Become Real Burdens

The tax office calculates the gain based on the rules of the Income Tax Act (§ 17 EStG). Since there is usually no real sale price, the authority estimates the fair market value on the day of your relocation.

The Value: The tax office often uses the simplified capitalized earnings method, which frequently leads to very high valuations.
The Procedure: You tax the gain under the partial income procedure (Teileinkünfteverfahren). This means you must tax 60% of the value increase at your personal income tax rate.

A Practical Example: A founder owns 50% of a GmbH. According to market analysis, the company is worth 4 million euros. Since his original costs were only 25,000 euros, Germany now taxes 60% of the deemed profit of nearly 2 million euros.

Moving to Switzerland, Dubai, or the USA

Previously, moving within the EU offered significant advantages. However, since the 2022 reform, the legislature has tightened these rules.

Installment Payments: You can now pay the tax in seven equal annual installments upon request. Although no interest applies, the tax office usually requires collateral, such as a bank guarantee.
Moving to Dubai: Since no tax treaty currently exists between Germany and the UAE, additional problems arise. If you still have economic interests in Germany, the extended limited tax liability (§ 2 AStG) often applies.
Moving to Switzerland: Germany treats Switzerland as a third country for tax purposes. Therefore, you can only use the seven-year installment model here as well.

Strategies for Avoidance or Reduction

An unplanned move can ruin your finances. Consequently, international tax advice is vital before you leave. We can examine the following options:

The Blocker KG: If we transfer your shares into a domestic business asset (e.g., a commercial GmbH & Co. KG), we can often avoid the exit tax entirely. However, the structure must perform a genuine commercial activity.
The Return Rule: If your absence is only temporary (e.g., for a project or studies), the tax liability lapses retroactively. You must become subject to unlimited tax liability in Germany again within seven years (extendable to 12 years upon request).
Residency Management: Sometimes you can prevent the termination of tax liability by maintaining a residence in Germany under strict conditions.

Frequent Mistakes in Practice

De Facto Management: If you are the sole director and move abroad, the “place of management” often moves with you. This can trigger an additional exit tax at the level of the GmbH itself (§ 12 KStG).
Underestimated Deadlines: Many notification requirements to the tax office have short deadlines. Violations can lead to high fines or even criminal tax consequences.

When Should You Seek Advice?

Ideally, you should plan your departure 12 to 24 months in advance. Many restructurings take time and must respect legal holding periods.

Conclusion

The German exit tax under § 6 AStG is a high hurdle, but you can manage it with the right preparation. Professional advice for expats protects your entrepreneurial wealth from being consumed by the mere act of moving.

Are you planning to relocate and hold shares in companies? Have the consequences checked early to avoid expensive mistakes. We are happy to accompany you in your cross-border tax planning.

German Exit Tax (§ 6 AStG): How to Neutralize the Tax Trap Before Moving Abroad