Wegzug aus Deutschland?: Was Auswanderer steuerlich beachten müssen

Moving out of Germany? Expats must consider tax implications

Leaving Germany for love, better job opportunities or a milder climate? Beware, the tax authorities may still levy hefty fines before or even years after departure. Here are the key tax concerns for expatriates. What must you inform the tax authority? Anyone emigrating should notify the tax office of their new address and sort out any outstanding tax obligations.

Self-employed individuals must additionally cancel their business registration. "The tax office will then usually ask," explains tax lawyer Esther Seibt-Pfitzner. Typical questions include whether there are plans to return and if any business premises or branch offices remain in Germany. These determine the tax consequences of the departure.

Do I still have to file tax returns? Anyone obligated to file a tax return must do so for the years up to departure within the German filing deadlines. "This is often forgotten, but it risks tax estimations and in the worst case a tax criminal prosecution," warns Seibt-Pfitzner. What do I pay taxes on later? Certain earnings remain taxable in Germany even after departure.

For example, earnings from real estate. Almost everywhere, the worldwide income principle applies: In general, the taxpayer's home state taxes the entire worldwide income. To avoid double taxation, Germany has concluded double taxation agreements with over 100 countries. These agreements regulate ways to offset paid taxes or exempt from taxation.

However, higher tax burdens can still occur. "These agreements do not always fully resolve practical problems," says Seibt-Pfitzner. Are inheritances tax-free after departure? No. Gifts and inheritances after departure may still be taxable in Germany if they exceed the individual tax-free allowance. In the first years without German residency, this applies to all worldwide gifts and inheritances, but for five years it only covers real estate, business assets and certain shares in capital companies.

Once German assets are included in the estate, careful consideration is needed to determine if they are subject to German tax, advises Seibt-Pfitzner. What is the departure tax? It applies to shares in capital companies, provided two conditions are met. First, the expatriate was tax resident in Germany for at least seven years without any restrictions.

Second, their shareholding in the capital company amounted to at least one percent at any time in the five years prior to departure. Then the tax office treats the departure as if the expatriate sold their shares at the current market value. The difference between market value and acquisition cost is considered a fictitious capital gain.

60 percent of this is subject to income tax. "With high gains, together with church tax and solidarity surcharge, up to 48 percent of taxes can be levied - even though nothing was sold and no euro of income received," says tax lawyer Eugen Mehlhaf in Berlin. Country-specific exceptions? None. Installments possible, but often only against securities such as a mortgage.

Refund upon return? Only within the first seven years if the shares still belong to the returner. Does the departure tax apply to my ETF portfolio? It may, since since 2025 the departure tax also applies to ETFs and classic funds. This is for expatriates who held at least one percent of fund shares in the five years prior to departure.

It also applies to expatriates who at the time of departure have fund shares with acquisition costs of at least 500,000 euros. The value threshold applies individually to each fund. "For example, if one invested 400,000 euros in ETF A and 450,000 euros in ETF B, they would remain under the threshold," says Mehlhaf. In both cases, the expatriate must also pay the fictitious increase in value between acquisition cost and market value.

What should self-employed and freelancers consider? While the departure tax also applies to owners of capital companies, it affects freelancers and sole traders through detachment tax. When transferring business assets abroad, the tax office assesses the difference between book value and market value of the company, creating a fictitious gain without actual income.

This can be costly, especially for intangible economic assets such as copyrights or a customer base. "Intangible economic assets without a book value are fully taxed at market value," says Mehlhaf. Do I need a tax advisor? For simple financial situations, the departure tax is manageable. However, when capital shares or a business are involved, and even for large inheritances and income from Germany after departure, professional tax advice is beneficial. Consulting early can utilize some planning levers and reduce the tax burden.