Exit tax when leaving Germany in 2026: who pays and how to spread it over 7 years

Germany taxes the growth in value of company shares and large fund holdings when you move abroad. Who it applies to, how the amount is calculated, how to pay in 7 interest-free instalments and how a return within 7 years cancels the tax.

In detail

What the exit tax is

When you give up your home or habitual residence in Germany, your unlimited German tax liability ends. On that day the tax office treats your company shares as sold at market value, even though you keep them. The difference between that value and what you paid for the shares is a gain on paper, and it is taxed as if you had sold them.

Section 6 of the Foreign Tax Act covers company shares, and since 1 January 2022 it works the same way for a move within the European Union and for a move to any other country. For large fund holdings, section 19(3) of the Investment Tax Act applies, which refers to section 6.

Who pays the exit tax

3 conditions apply together:

• A stake of 1% or more in a corporation, such as a limited liability company or a stock corporation, at any time in the last 5 years;
• 7 years of German tax residence within the 12 years before the move;
• A trigger: you move your home or habitual residence abroad, you give or leave the shares to a person who is not tax-resident in Germany, or Germany loses or has restricted the right to tax a sale of the shares.

Fund units held privately, including exchange-traded funds, follow a similar rule when you held at least 1% of one fund's units in the last 5 years or hold units of one fund that cost at least $560,000 (€500,000). The threshold applies to each fund separately, not to the whole portfolio.

How the amount is calculated

The base is the market value of the shares on moving day minus their acquisition cost. Under the partial income method 60% of this gain is added to your income and taxed at your personal income tax rate; 40% stays tax-free. For funds the gain on paper is taxed at the flat 25% tax on investment income, plus the solidarity surcharge and, for church members, church tax, after the fund's partial exemption: 30% for equity funds and 15% for mixed funds.

For a private company the market value is set by a valuation, so the numbers for a move are worth working out in advance: the value of the company, the year of the move and the destination country.

Paying in 7 instalments

On application the tax is paid in 7 equal annual instalments, without interest. The tax office usually grants them against security. The first instalment is due within a month of the tax assessment, and the others on 31 July of each following year.

The schedule runs while you keep the shares, pay on time and report once a year: by 31 July you send the tax office your current address and confirm that you still hold the shares. A sale or gift of the shares, insolvency, payouts above a quarter of the value, a missed instalment or a missing annual report make the rest due within a month.

Returning within 7 years

If the move is temporary and you become a German tax resident again within 7 years, the tax lapses under 3 conditions: the shares were not sold, transferred or put into a business; payouts and returns of capital stayed at no more than a quarter of the value; and Germany's right to tax the shares is restored at least to its previous extent. An inheritance by an individual does not stand in the way. On application the tax office can extend this period by up to 5 years while you still plan to return, up to 12 years in total. On application, the tax office defers the tax for this period without annual instalments; if the tax does not lapse in the end because you do not return, interest is charged for the whole period.

So a move for a contract abroad or a few years in another country can pass with no exit tax at all, when the return is planned from the start.

Planning the move

The exit tax is one of the steps of leaving Germany, alongside deregistration, health cover and pension; the full list is in our checklist for leaving Germany. The choice of country matters too: compare tax regimes in our overview of taxes by country and residence options in the residence catalogue.

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