Germany sits 212th out of 217 in our world ranking, with a FiScore of 3.2 out of 10. Income tax reaches 47.5% with the solidarity surcharge, corporate tax lands near 29.7% once trade tax is counted, and VAT is 19%.
None of that is the reason people plan their departure years in advance. The reason is the exit tax, and in 2025 it grew a new set of teeth.
The rule, in one paragraph
Under section 6 of the Foreign Tax Act (§ 6 AStG), if you hold 1% or more of a corporation and you have been fully liable to German tax for at least seven of the twelve years before you leave, then giving up German tax residency is treated as a sale of those shares at market value.
You sell nothing. You receive nothing. The tax office issues an assessment anyway.
For a founder holding a GmbH that has grown, this is the single largest number in the entire relocation.
What changed on 1 January 2025, and why it matters to people who own no company
Here is the part almost nobody has caught up with.
The exit tax now also reaches units in investment funds, ordinary ETFs included, held as private assets.
It bites when either of these is true:
- the acquisition cost of the units reaches 500,000 euros, or
- you held 1% or more of the fund's units at any point in the previous five years.
The rate is 25% on the unrealised gain, after a partial exemption of 30% for an equity fund, 15% for a mixed fund and 0% for a bond or money market fund.
Read that again if you have been building an ETF portfolio for fifteen years. Half a million euros of purchase cost is not an exotic number for a German engineer in their fifties who has been paying into a world index fund every month. There is no company, no shareholding, no structure, and the exit tax applies.
The deferral that no longer exists
This is where old advice is actively dangerous.
Until 2021, moving within the EU or the EEA gave you an indefinite, interest-free deferral. The tax sat there and was only collected if you actually sold. A great deal of published guidance still says so.
It was abolished for departures after 31 December 2021.
What replaced it is narrower:
| Before 2022 | Now | |
|---|---|---|
| EU/EEA move | indefinite deferral | seven annual instalments |
| Interest | none | none |
| Security | not required | required in practice |
| Conditions | few | annual reporting, restrictions on selling |
Seven interest-free instalments is not nothing. It is also not the same thing as never paying, and the security requirement is what surprises people: the tax office generally wants it up front, which is a liquidity problem precisely when you are financing a move.
The returnee rule
If you come back to Germany within seven years, the exit tax assessment is reversed. That window can be extended once by a further five years, giving a maximum of twelve.
This is genuinely useful for a fixed-term posting abroad, and it is worth documenting your intention to return from the beginning rather than arguing it later.
Germany against the UK, the US and Canada
Four departures, four different logics, and generalising from one to another is how people get hurt.
Germany taxes unrealised gains on shareholdings, and since 2025 on large fund holdings, with instalments and a returnee rule.
Canada deems a disposition of nearly all worldwide capital property, with a deferral election and a 60-month exemption for recent arrivals.
The United Kingdom taxes nothing on departure, but reaches back if you return within five years.
The United States never lets go at all, because it taxes citizenship rather than residence.
The order of operations
- Count the years. Fewer than seven of the last twelve as a German resident, and § 6 AStG does not apply to you.
- Add up your fund acquisition costs, not their current value. The 500,000 euro test is on what you paid.
- Value the shareholding properly before you move, not after. A defensible valuation is your only protection against the tax office's.
- Apply for the instalment plan and work out what security you can post.
- Decide honestly whether you are coming back, because the returnee rule is worth planning around and impossible to invent afterwards.
Sources
Rules verified in August 2026 against § 6 AStG, the 2025 amendments to §§ 19 and 49 of the Investment Tax Act, and German advisory firms publishing on the post-ATAD instalment regime. An error reported to us gets fixed.
This page informs, it does not advise. German exit tax is the clearest case on this site where general information is not enough: take German advice before you give up residency, as our terms of use set out.