What Changes in Tax Terms When Leaving Germany?
Leaving Germany does not automatically sever all ties with the German tax authorities. Departing the country does not necessarily bring an immediate end to German tax obligations. What matters is what remains behind — and what does not.
Unlimited tax liability ends when the last German residence is given up. Anyone who retains a dwelling in Germany, maintains a property under circumstances suggesting continued use, or spends more than six months a year in Germany remains subject to unlimited liability — regardless of where the centre of life is located.
Giving Up the Residence
A clean tax deregistration requires the complete relinquishment of all domestic residences. In practical terms: terminating the lease or selling or permanently letting the owner-occupied property, surrendering the keys, and having no right of access or use at any time.
A property formally let to third parties but available for recall at any time — for example to family members at a nominal rent — may in the view of the tax authorities still constitute a residence. The standards applied are strict.
Limited Tax Liability After Departure
When unlimited tax liability ends, limited tax liability may begin. It covers all income continuing to arise from German sources. This includes in particular:
Rental income from German property — this remains subject to German income tax regardless of where the owner is resident.
Income from a German permanent establishment or partnership — anyone with an interest in a German partnership remains taxable in Germany on the attributable income.
Remuneration for work carried out in Germany — those who occasionally work in Germany after departure are subject to limited liability on that income.
Dividends and interest from German sources — these are subject to capital gains tax withholding, which generally has a final settlement effect.
Exit Taxation
A particular instrument that may become relevant on departure is the exit tax under Section 6 of the Foreign Tax Act (AStG). It applies to individuals who have been subject to unlimited tax liability in Germany for at least ten years and hold substantial interests in corporations — meaning interests of at least one percent.
On departure, the shares are treated as if they had been sold at fair market value. The resulting hidden reserves — the difference between acquisition cost and current value — are taxed as income, even though no actual sale has taken place.
For departures to an EU or EEA state, the tax may in certain circumstances be deferred interest-free until the shares are actually sold. For departures to third countries, the tax is generally due immediately.
Double Tax Treaties on Departure
The treaty with the destination country determines which state has primary taxing rights over remaining income after departure. For income that Germany may continue to tax as a source country — such as real estate income — the treaty typically provides for exemption in the destination country.
Important: not every country to which Germans emigrate has a treaty with Germany. In that case, the domestic rules of both states apply alongside each other, which can result in actual double taxation.
Practical Steps Before Departure
Structured tax preparation for departure should address the following: whether exit taxation under Section 6 AStG is triggered; which German income remains subject to limited liability after departure; the applicable treaty with the destination country; documentation of the relinquishment of residence for tax purposes; and coordination with the competent tax office regarding tax deregistration.
Frequently Asked Questions
When does my German tax liability end?Unlimited tax liability ends when the last German residence is actually given up. Limited tax liability for German-source income may continue beyond that point.
Do I still need to file a German tax return after leaving?Yes, if income subject to German tax continues to arise — for example from a German property or a German permanent establishment. Limited tax liability gives rise to its own filing obligation.
What is exit taxation?Exit taxation under Section 6 AStG captures hidden reserves in substantial interests in corporations on departure from Germany. It requires at least ten years of unlimited tax liability and an interest of at least one percent.
Can I keep a property in Germany without remaining tax-liable?No. Anyone who retains a dwelling in Germany that they can use at any time remains tax-resident in Germany and therefore subject to unlimited tax liability — regardless of actual presence.
Your tax situation is individual.
Leaving Germany is one of the most complex events in a taxpayer's life from a tax perspective. Early planning — ideally one to two years before the intended departure — can avoid significant tax consequences. We advise in German, English, Russian and Italian.
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