In short: German exit tax under Section 6 of the Foreign Tax Act (AStG) affects entrepreneurs who hold GmbH shares of 1% or more and were subject to unlimited tax liability in Germany for at least 7 of the last 12 years. It becomes due on the notional capital gain at the time of emigration — even without an actual sale. Options to avoid or reduce it include, among others, gifting shares while retaining a usufruct, setting up a foundation, converting into a partnership, or transferring the shares into business assets. Which route fits depends always on the individual case.
Contents
- Who is affected by German exit tax?
- Calculating exit taxation
- 5 ways to avoid it
- Frequently asked questions
For many entrepreneurs who hold shares in corporations and plan to move their residence and centre of life abroad, exit taxation is a sensitive topic. As soon as residence is relocated, substantial tax claims can arise that in many cases exceed available liquidity — because what is taxed is a gain that has not even been realised yet. This article shows what entrepreneurs should watch out for when emigrating and what planning options exist. Anyone additionally looking to set up a company in the UAE can find further information in our article on company formation in Dubai.
Who is affected by German exit tax?
In principle, all entrepreneurs are affected by exit tax who hold shares in corporations and were subject to unlimited tax liability in Germany for more than 7 of the last 12 years, as soon as they relocate their residence.
As soon as an entrepreneur gives up their residence and their unlimited tax liability in Germany ends, Germany generally loses the right to tax future increases in value. For this reason, the increase in value of the shares accrued up to the point of emigration is taxed at the time of emigration — governed by Section 6 AStG.
Calculating exit taxation
Exit tax becomes due even if the shares are not sold. The basis is the current market value of the shares at the time of emigration, less acquisition costs. The tax office frequently relies on the simplified capitalised earnings method for the valuation:1 the average annual profit is multiplied by a factor of 13.75.
Worked example: For a GmbH with an annual profit of €100,000, the simplified capitalised earnings method results in a company value of €1,375,000. Due to the partial income procedure, “only” 60% of this notional gain has to be taxed, with 40% remaining tax-free. Even so, this example results in a tax burden of over €350,000 — without a single share having been sold.
Selling the shares significantly below value to a family member or business partner does not work: the tax authorities examine the sale price for arm’s-length terms and reasonableness. Anyone who decides to pay the exit tax should have the actual value determined by an independent appraiser.
5 ways to avoid exit tax
1. Retain tax residency
The simplest but, in the long run, least tax-efficient option is to keep your residence in Germany. In this case, unlimited tax liability continues, meaning profit distributions remain taxable in Germany.
2. Gifting shares
Another option is to gift the company shares to a person resident in Germany before emigrating. This eliminates exit taxation, although gift tax may apply. To minimise this, a gift with a reserved usufruct can be considered: only the legal ownership is gifted, while the donor retains the right to profit distributions and sale proceeds — which reduces the taxable value of the gift. In addition, the allowances under Section 16 of the German Inheritance and Gift Tax Act (ErbStG) can be used, which range from €20,000 to €500,000 depending on the degree of kinship.
For Austrian entrepreneurs, gifting — with or without a reserved usufruct — can be a particularly simple option, since Austria has had no gift tax since 1 August 2008.
3. Setting up a foundation
A frequently overlooked but very effective method is setting up a foundation — in Germany or abroad. Under certain conditions, a German family foundation can receive up to €400,000 without triggering gift tax, provided the next beneficiary is a child of the founder (tax class I under Section 15(2) ErbStG). If the foundation does not carry out any commercial activity, it pays only 15% corporate tax in Germany; the substitute inheritance tax also becomes due every 30 years.
For foreign foundations, the ongoing tax burden is often lower, but transferring assets from Germany to a foreign foundation also triggers gift tax; for a transfer from Austria, the Austrian foundation entry tax applies. In addition, the attribution taxation under Section 15 AStG (with an escape clause under Section 15(6) AStG for EU/EEA foundations) as well as ongoing reporting and substance obligations must be taken into account. A detailed look at the Liechtenstein option can be found in our article on setting up a foundation in Liechtenstein.
4. Converting into a partnership
Converting a GmbH into a GmbH & Co. KG means that the former GmbH shareholder becomes a partner in a partnership and is therefore no longer subject to exit taxation. Important: the company’s operations must remain in Germany in order to avoid a taxable relocation of functions. The conversion itself is generally tax-neutral — however, existing retained earnings can result in a significant tax burden.
5. Transferring shares into business assets
Another interesting option is transferring the shares into the business assets of a (newly formed) GmbH & Co. KG. Here too, the operations must remain in Germany. This model only works if the KG carries out its own commercial activity domestically — an obvious example would be providing management and administration as a service to the operating GmbH.
| Option | Exit tax avoided? | Main side effect |
|---|---|---|
| Retain tax residency | Yes, but residence stays in Germany | Ongoing unlimited tax liability |
| Gifting shares (with usufruct) | Yes | Possible gift tax |
| Foundation (Germany or abroad) | Yes | Attribution taxation under Section 15 AStG, reporting obligations |
| Conversion into GmbH & Co. KG | Yes | Operations must remain in Germany |
| Transfer into business assets | Yes | Requires genuine commercial activity of the KG |
Frequently asked questions about German exit tax
From when does exit tax apply? It applies if you hold at least 1% of the shares in a corporation and were subject to unlimited tax liability in Germany for at least 7 of the last 12 years.
Do I have to pay exit tax even if I don’t sell the shares? Yes. What is taxed is a notional capital gain based on the market value on the day of emigration, regardless of whether an actual sale takes place.
Can I avoid exit tax by gifting shares to family members? A gift to a person resident in Germany before emigrating can avoid exit tax, but may trigger gift tax under certain circumstances. A sale below value is examined by the tax authorities for arm’s-length terms and is not a solution.
Is a foundation always the best solution? Not necessarily. Foundation solutions avoid exit tax but come with their own obligations — such as attribution taxation under Section 15 AStG for foreign foundations. Which option fits depends on the asset structure, succession planning, and target country.
We are here for you
If you hold shares in corporations and are considering — or have already decided — to relocate your residence abroad, you should address exit taxation and the ways to avoid it early on. Which option best suits you always depends on the individual case. In a free initial consultation, AK Venture Path and PSK Steuerberatung will analyse your current situation and outline the best possible ways to implement it.
Legal status as of: 08/2026. This article does not replace individual tax advice.
Paul Simon Kasper, Tax Advisor and Foundation Consultant, Owner of PSK Steuerberatung
Paul Simon Kasper structures the emigration process from Germany for entrepreneurs — from exit taxation under Section 6 AStG to share gifts and foundation solutions. Learn more about him on LinkedIn and at steuerberatung-psk.com/uber-uns.
1 Simplified capitalised earnings method under Sections 199–203 of the German Valuation Act (BewG).
