Case · Leaving Germany

Germany's Exit Tax (Wegzugsteuer): How Founders Plan Around It

Q: Who does the German exit tax apply to?

Individuals who were subject to unlimited German tax liability for at least 7 of the last 12 years and hold, or held within the last five years, at least 1% of a corporation (GmbH, AG or foreign equivalents). On departure, section 6 AStG deems those shares sold at fair market value and taxes the unrealized gain, even though no money changed hands.

Q: Are ETFs and investment funds now caught by the exit tax?

Since 1 January 2025, yes, in defined cases: exit taxation extends to investment fund units where the taxpayer held at least 1% of the fund's units or the acquisition cost of the units totals at least 500,000 euros. This closed the old loophole of shifting wealth into funds before leaving. Ordinary retail portfolios below those thresholds remain outside the exit tax.

Q: Can the exit tax be deferred or paid in installments?

Since the 2022 reform there is no indefinite interest-free deferral for moves within the EU anymore. The tax can be paid in seven annual installments upon application, generally against security. A returner provision cancels the tax if you re-establish German unlimited tax liability within 7 years (extendable to 12), provided shares were not sold and distributions stayed within limits.

Q: What planning actually works before leaving Germany?

The realistic levers: leaving before crossing the 7-of-12-years threshold, selling or gifting stakes before departure while valuations are defensible, restructuring into vehicles that are not caught (each with its own tradeoffs and anti-abuse rules), using the installment regime, or planning a genuine return within the returner window. All of them require time; none of them work the week before the flight.

Zero Tax · Updated July 2026 · 9 min read

A SaaS founder in Berlin got a Dubai offer she could not refuse. Her GmbH shares, bought for 25,000 euros, were worth roughly 4 million on the last funding round. Her advisor's welcome gift: leaving Germany would trigger tax on nearly 4 million euros of gains she had never received in cash. She stayed a year longer than planned, restructured, and left on her terms. The difference was not luck; it was lead time.

What the Wegzugsteuer actually is

Section 6 of the Foreign Tax Act (Außensteuergesetz, AStG) contains one of Europe's harshest exit taxes. When you end your unlimited German tax liability (typically by moving your residence abroad), Germany treats your qualifying shareholdings as sold at fair market value on the day you leave. The unrealized gain is taxed under the partial income method, which lands at an effective rate of roughly 27 to 28.5% on the gain, without a single euro of sale proceeds arriving in your account.

You are in scope if both are true:

You were subject to unlimited German tax liability for at least 7 of the last 12 years; and
You hold (or held at any point in the last five years) at least 1% of a corporation: a GmbH, an AG, or a foreign equivalent such as a US Inc. or a UAE FZCO.

The rule catches founders, business angels, employees with meaningful equity, and anyone whose startup shares quietly crossed the 1% line. It does not require you to sell anything, ever: the departure itself is the taxable event.

The 2025 extension: funds and ETFs joined the party

Until the end of 2024, private investors could sidestep the exit tax by holding wealth through investment funds rather than direct company stakes. The Annual Tax Act 2024 closed that door. For departures on or after 1 January 2025, exit taxation also applies to investment fund units where:

you held (directly or indirectly) at least 1% of the fund's issued units within the last five years, or
your acquisition cost for the units totals at least 500,000 euros.

A long-term ETF portfolio built with more than half a million euros of contributions is now potentially a deemed disposal on departure. Ordinary retail portfolios below both thresholds stay out of scope, but wealthy savers who assumed "funds are safe" need to re-run the numbers before booking movers.

The detail nobody weighs: the exit tax is calculated on paper valuations, and startup valuations are the most punishing kind. A founder taxed on a 4 million euro round valuation may see the company fold two years later; German law offers only limited correction mechanisms after the fact. The asymmetry (tax now on hypothetical value, limited relief if reality disappoints) is the single strongest argument for planning the exit before the next funding round, not after it.

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Payment: the 2022 reform removed the soft landing

Regime	Before 2022	Since 2022 (still true in 2026)
Move within EU/EEA	Indefinite, interest-free deferral until actual sale	No special EU deferral: same rules as any destination
Payment option	Installments in hardship cases	Seven annual installments upon application, generally against security
Return provision	5 years, extendable	Tax cancelled if you return within 7 years (extendable to 12), if shares were kept and distributions stayed within limits

The returner provision (Rückkehrerregelung) matters for genuine temporary moves: leave for a defined assignment, keep the shares, keep distributions moderate, come back within the window, and the assessment is cancelled. But it is a tightrope: sell the shares abroad, or take excessive distributions, and the tax crystallizes retroactively.

Planning that actually works (and what does not)

Works, with lead time

Leave before you are caught. If you have not yet hit 7 of the last 12 years of unlimited tax liability, the clock is your friend. Common for expats who came to Germany mid-career.
Sell or gift before departure. A sale before leaving is taxed anyway, but at real proceeds, not paper values. Gifts to family members remaining in Germany keep the gain within German jurisdiction and can use inheritance tax allowances; gifts to persons abroad can themselves trigger the exit tax.
Restructure the holding. Certain structures (for example, interposing entities or converting the nature of the stake) can change the analysis. Every variant has anti-abuse rules and its own costs; this is bespoke work, not a template.
Use the installments and price them in. Seven years of installments against security is financeable for many founders, especially with an exit on the horizon that will produce real liquidity.
Plan a real return. For assignments and experiments abroad, structuring around the 7-to-12-year returner window can make the tax a suspended item rather than a bill.

Does not work

Leaving quietly and hoping nobody notices: the deregistration, the tax office questionnaire and CRS data close that gap quickly.
Last-minute transfers to spouses abroad or to fresh foreign entities: covered by the same rules or by anti-abuse provisions.
Assuming a tax treaty saves you: treaties do not prevent the deemed disposal on departure.

Frequently asked questions

Who does the German exit tax apply to?

Anyone with unlimited German tax liability for 7 of the last 12 years holding at least 1% of a corporation (now or within the last five years). Departure triggers a deemed sale at market value under section 6 AStG.

Are ETFs and investment funds now caught by the exit tax?

Since 1 January 2025, fund units are caught where you held at least 1% of the fund or your acquisition costs reached 500,000 euros. Smaller retail portfolios remain outside the rules.

Can the exit tax be deferred or paid in installments?

Seven annual installments are available upon application, generally against security. The old indefinite EU deferral is gone. A returner provision cancels the tax for genuine returns within 7 years, extendable to 12.

What planning actually works before leaving Germany?

Timing the departure before the 7-of-12 threshold, pre-departure sales or gifts, restructuring with professional design, installments, or a planned return. All require lead time measured in months or years, not weeks.

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This content is informational and educational. It does not constitute legal or tax advice. Verify current legislation and consult a specialist about your case before making decisions.