Practical recommendations to avoid exit taxation

Residence and domicile: Maintaining unlimited tax liability in Germany, e.g., through habitual residence or domicile, avoids exit taxation.

Share transfer: No exit taxation occurs upon departure through liquidation or transfer of shares to another person.

Involvement in Germany: Further involvement of shares in a German business asset can also avoid exit taxation. The shares must be placed into a business asset for this purpose. Some additional specifics must be considered.

 Practical tips for reducing exit taxation

Reduction of equity capital: Since the substance value corresponds to the minimum value of the company, e.g., by uncovering hidden reserves, selling assets, and profit distributions, the minimum value of the company can be reduced.

Fictitious entrepreneur salary: For certain corporate forms, the earnings value in the simplified earnings value can be reduced by a fictitious "market-rate" entrepreneur salary.

 When does exit tax arise?

The tax becomes due with the assessment of the income tax notice for the year in which you give up your residence in Germany. The good news: You can spread the tax burden over seven years, which is particularly helpful in case of liquidity bottlenecks. However, security deposits usually have to be provided for this.

 Impact of value changes after departure

Value increases of your shares after departure do not lead to a higher exit tax in Germany. However, these value increases become relevant upon sale in the new residence country.

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