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Emigrating and Tax Declaration: Avoid Costly Mistakes!
Emigration is a significant step that requires careful planning. The tax declaration, in particular, can become a challenge. We will show you what you need to be aware of in order to avoid pitfalls and fulfil your tax obligations correctly. Do you need individual support? Contact us for personal advice.
The topic short and concise
Emigration is a significant step that requires careful planning. The tax declaration, in particular, can become a challenge. We will show you what you need to be aware of in order to avoid pitfalls and fulfil your tax obligations correctly. Do you need individual support? Contact us for personal advice.
Emigration is a significant step that requires careful planning. The tax declaration, in particular, can become a challenge. We will show you what you need to be aware of in order to avoid pitfalls and fulfil your tax obligations correctly. Do you need individual support? Contact us for personal advice.
Emigration is a significant step that requires careful planning. The tax declaration, in particular, can become a challenge. We will show you what you need to be aware of in order to avoid pitfalls and fulfil your tax obligations correctly. Do you need individual support? Contact us for personal advice.
Planning your emigration? Learn all about exit taxation, deadlines, and how to correctly prepare your tax return to minimise financial risks. Get informed now!
Planning to leave Germany and start anew abroad? The tax aspects of emigration are complex and should not be underestimated. A correct tax declaration when emigrating is crucial to avoid financial risks. At GoMovin, we understand that this process raises many questions. That's why we offer comprehensive advice and support to make your move as smooth as possible. Our goal is to help you with all steps, from planning to implementation, so you can focus on your new life.
Basic Principles of Tax Liability in Germany
The tax liability in Germany is based on two basic principles: unlimited and limited tax liability. It is important to understand these differences in order to accurately assess your tax obligations.
Unlimited and Limited Tax Liability
Unlimited tax liability applies to individuals who have their residence or habitual abode in Germany. This means that your entire worldwide income is subject to tax in Germany. In contrast, limited tax liability affects individuals who neither have a residence nor habitual abode in Germany but earn income from German sources. This income is then subject to tax in Germany. More information about limited tax liability can be found on Rosepartner.de.
The Timing of Departure and Its Tax Implications
The timing of your departure significantly impacts your tax obligations. It is important to know the tax implications in the year of departure and to take the necessary steps.
Tax Declaration in the Year of Departure
Even in the year of your departure, you are obliged to submit a tax declaration in Germany. This tax declaration includes all income you earned up until the day of your departure. It is advisable to prepare this tax declaration early to meet deadlines and avoid possible late payment penalties. GoMovin is pleased to assist you in preparing your tax declaration and ensures that all relevant aspects are considered.
Importance of Deregistration in Germany
Deregistering with the German authorities is an important step in emigration. It documents your departure and is relevant for determining your tax liability. A correct deregistration is therefore essential to avoid later issues with the tax office. At GoMovin, we provide comprehensive advice on all necessary steps for deregistration and support you in communicating with the authorities. More information on deregistering with the tax office can be found in our article Emigrating: Deregistering from the tax office.
Understanding exit tax: How to avoid high additional payments
The exit tax, often also called Exit Tax, is a central aspect when considering the tax implications of emigration. It primarily affects individuals who hold shares in corporations. It is important to address this topic early to avoid unexpectedly high back payments.
What is the exit tax?
The exit tax is a levy on unrealised capital gains of corporate shares when a person relocates their residence abroad. It is intended to ensure that Germany can tax the capital gains that arose during the period of unlimited tax liability.
Definition and application scope
The exit tax applies when you, as a natural person, hold shares in a corporation (e.g., GmbH, AG) and move your residence or habitual abode abroad. It does not matter whether you actually sell the shares or not. The tax applies to the difference between the fair market value of the shares at the time of departure and the original acquisition cost. WirtschaftsWoche provides further insights into the topic.
Affected individuals and assets
Those primarily affected by the exit tax are entrepreneurs and wealthy private individuals who hold shares in corporations. The amount of tax depends on the increase in value of the shares. It is important to note that the exit tax is also incurred if the shares are not sold. GoMovin offers you individual advice to determine whether you are affected by the exit tax and what structuring options are available.
Taxation of corporate shares
The taxation of corporate shares upon emigration is a complex topic. It is important to understand the relevant regulations and valuation methods to determine the tax burden correctly.
Shares in GmbH, AG, and KGaA
The exit tax primarily affects shares in GmbHs, AGs, and KGaAs. It makes no difference whether it is a German or foreign corporation. Taxation is based on the fair market value of the shares at the time of emigration. It is advisable to have a professional valuation of the shares conducted to ensure an accurate tax return.
Valuation of shares and determination of taxable gain
The valuation of the shares is generally carried out by an expert opinion. The fair market value of the shares is determined at the time of departure. The taxable gain is the difference between the fair market value and the acquisition cost. This gain is then taxed at your personal income tax rate. GoMovin supports you in selecting a suitable expert and provides comprehensive advice on determining the taxable gain.
Annual Tax Act 2024 and changes from 2025
The Annual Tax Act 2024 brings some changes in the area of exit tax, which will come into force from 2025. It is important to be aware of these changes to adjust your tax planning accordingly.
Impact on investment funds
A significant change concerns the taxation of investment funds. The Annual Tax Act 2024 aims to prevent the circumvention of the exit tax through the contribution of shares to investment funds. In the future, value increases of shares in investment funds will also be taxed upon emigration. This mainly affects investors who have invested large sums in investment funds.
Closing tax loopholes
The Annual Tax Act 2024 aims to close tax loopholes in the area of exit tax. By extending taxation to investment funds and other assets, it is intended to ensure that all value increases that arise during the period of unlimited tax liability are taxed in Germany. It is advisable to inform yourself early about the impact of the Annual Tax Act 2024 and adjust your tax planning accordingly.
Avoiding Extended Limited Tax Liability: Here's How
The extended limited tax liability is another important aspect to consider when emigrating. It could result in you remaining subject to tax in Germany even after moving abroad. However, there are ways to avoid this.
Conditions for the extended limited tax liability
The extended limited tax liability applies when certain conditions are met. It is important to be aware of these conditions to determine if you are affected.
Residency in a low-tax country
A key condition for extended limited tax liability is relocating your residence to a low-tax country. Low-tax countries are those where the tax burden is significantly lower than in Germany. The specific criteria for a low-tax country are defined in German tax law.
Significant economic interests in Germany
Another condition is that you continue to have significant economic interests in Germany. This means, for example, that you have income from German sources or own assets in Germany. The specific criteria for significant economic interests are defined in German tax law. Rose & Partner provide detailed information on this.
Avoiding the extended limited tax liability
There are various ways to avoid extended limited tax liability. It is advisable to examine these options early and take the necessary steps.
Renunciation of German citizenship
One option is the renunciation of German citizenship. If you no longer hold German citizenship, you are generally no longer subject to the extended limited tax liability. However, this step should be well considered as it comes with some consequences.
Reduction of economic interests
Another option is the reduction of your economic interests in Germany. This means, for example, reducing your income from German sources or transferring your assets abroad. It is important to know the exact criteria for significant economic interests to take the necessary steps.
Transfer of securities abroad
Transferring securities abroad can also help to avoid the extended limited tax liability. If you transfer your securities to a foreign account, the income from these securities can no longer be taxed in Germany. However, it is important to consider the tax consequences of transferring securities abroad.
Types of Income in Focus: Tax Consequences After Relocation
Even after moving away, certain types of income may remain taxable in Germany. It is important to understand the tax implications of different types of income to adjust your tax planning accordingly.
Income from Business Operations and Self-Employment
If you receive income from a business operation or self-employment in Germany, this may remain taxable in Germany even after your move.
Taxation of Profits after Relocation
The taxation of profits from business operations or self-employment after relocation depends on various factors. An important aspect is the Double Taxation Agreement (DTA) between Germany and your new country of residence. The DTA determines which country is allowed to tax the income. It is advisable to inform yourself early on about the provisions of the DTA.
Importance of Double Taxation Agreements (DTA)
Double Taxation Agreements (DTA) are treaties between two countries designed to prevent a person or company from being taxed on the same income in both countries. The DTA regulates which country is allowed to tax the income and how double taxation is avoided. It is crucial to understand the provisions of the DTA between Germany and your new country of residence to adapt your tax planning accordingly.
Income from Renting and Leasing
If you earn income from renting and leasing property in Germany, this income remains taxable in Germany even after moving away.
Taxation of Rental Income from German Property
The taxation of rental income from German property is carried out in Germany. You must declare and tax this income in your German tax return. However, it is possible that the rental income may also be taxable in your new country of residence. In this case, the DTA between Germany and your new country of residence may allow for an offset of German taxes against foreign taxes.
Interest Income and Other Capital Gains
Even interest income and other capital gains may remain taxable in Germany after you move.
Taxation of Interest and Dividends
The taxation of interest and dividends depends on where the account or deposit generating them is located. If the account or deposit is in Germany, the interest and dividends are taxable in Germany. However, it is possible that interest and dividends may also be taxable in your new country of residence. In this case, the DTA between Germany and your new country of residence may allow for an offset of German taxes against foreign taxes.
Pensions and Annuities
The taxation of pensions and annuities is a complex topic that depends on various factors.
Taxation of Pensions from Germany
The taxation of pensions from Germany depends on whether it is a statutory pension, a private pension, or occupational pension provision. Taxation can occur both in Germany and in your new country of residence. It is advisable to inform yourself early about the tax implications of your pension and, if necessary, seek individual advice.
Utilise exit taxation: Secure tax advantages for entrepreneurs
For sole traders and partnerships, exit taxation can become relevant. It concerns the taxation of hidden reserves when relocating and offers opportunities for tax optimisation.
Taxation of Hidden Reserves on Relocation
Exit taxation involves taxing the hidden reserves present in your business. Hidden reserves are increases in the value of assets that have not yet been realised.
Principle of Exit Taxation
The principle of exit taxation states that hidden reserves are taxed upon relocation as if the assets had actually been sold. This is to ensure that Germany can tax the value increases that arose during the period of full tax liability. The Website wohnsitzausland.com provides further information on this.
Exceptions and Planning Opportunities
However, there are also exceptions and planning opportunities to avoid or reduce exit taxation. One option is the conversion of the business into a corporation before relocating. Another option is leasing the business to a foreign company. GoMovin is happy to advise you on the various planning opportunities and supports you in their implementation.
Conversion and Leasing as Alternatives
The conversion and leasing of the business are two alternative strategies to avoid or reduce exit taxation.
Tax Optimisation through Restructuring
Through a skilful restructuring of your business, you can significantly reduce the tax burden upon relocation. One possibility is the conversion of the business into a corporation before relocating. Another possibility is leasing the business to a foreign company. It is advisable to find out early about the various restructuring options and to seek individual advice.
Avoid double taxation: Make the most of DTA benefits
Double Taxation Agreements (DBA) play an important role in avoiding double taxation. They determine which country has the right to tax income and how double taxation can be prevented. It is essential to understand the regulations of the DBA between Germany and your new country of residence to adjust your tax planning accordingly.
The Importance of DBAs
DBAs are agreements between two countries designed to prevent an individual or a company from being taxed in both countries on the same income.
Avoiding Double Taxation
DBAs serve to avoid double taxation. They specify which country has the right to tax income and how double taxation can be avoided. Typically, DBAs provide for the offsetting of foreign taxes against German taxes. This means that although you must pay taxes abroad, these taxes are credited against your German tax.
Regulations on Offsetting Foreign Taxes
The regulations on offsetting foreign taxes are outlined in the DBAs. They determine how foreign taxes paid are credited against German taxes. There are various offsetting methods applied in the DBAs. It is important to be aware of the DBA regulations between Germany and your new country of residence to adjust your tax planning accordingly.
Offsetting Methods and Their Application
There are various offsetting methods applied in the DBAs. The two most common methods are direct and indirect offsetting.
Direct and Indirect Offsetting
With direct offsetting, the tax paid abroad is directly credited against the German taxes. With indirect offsetting, the tax paid abroad is added to the taxable income, and the German tax is calculated on the entire income. Subsequently, the tax paid abroad is deducted from the German tax. Which method is applied is specified in the DBA between Germany and your new country of residence.
Minimising Inheritance Tax: Strategies for Expats
The inheritance tax can also play a role when emigrating. It is important to understand the inheritance tax implications within five (or ten) years after emigration and explore strategies to minimise inheritance tax.
Inheritance tax implications within five (or ten) years after emigration
If you pass away within five (or ten) years after your emigration, inheritance tax in Germany may become relevant.
Extended limited inheritance tax liability
In this case, the extended limited inheritance tax liability may apply. This means that your estate is subject to taxation in Germany if at the time of your death you either held German citizenship or had stayed in Germany for more than five years in the last five years before your death. If you emigrated to a low-tax country, this period extends to ten years. The Website wohnsitzausland.com offers further information on this.
Strategies to minimise inheritance tax
However, there are strategies to minimise inheritance tax. One option is the early transfer of assets.
Early transfer of assets
By transferring assets early to your heirs, you can reduce the inheritance tax burden. It is important to consider the exemption limits for gift tax. GoMovin is happy to advise you on the various strategies and support you in their implementation.
Reduce tax burden: Use smart strategies before emigrating
There are various tax optimisation strategies you can use before emigrating. These strategies aim to reduce your tax burden and protect your assets.
Formation of a Foreign Holding Company
The formation of a foreign holding company can offer tax benefits for dividends and capital gains.
Tax Benefits for Dividends and Capital Gains
By establishing a foreign holding company, you can receive dividends and capital gains in a tax-optimised manner. The holding company can be based in a country with low taxation on dividends and capital gains. However, it's important to consider the tax implications of forming a foreign holding company and to seek individual advice.
Cross-Border Mergers
Cross-border mergers can enable a tax-efficient continuation of the company abroad.
Tax-Efficient Continuation of the Company Abroad
Through a cross-border merger, you can continue your business tax-efficiently abroad. This involves merging your German company with a foreign company. It can offer tax advantages, especially if the foreign company is based in a country with low tax rates. However, it's crucial to consider the tax implications of a cross-border merger and seek individual advice.
Transfer of Assets
Transferring assets abroad can also help reduce your tax liability.
Transfer of Securities and Other Assets
By transferring securities and other assets to a foreign account or custody, you can reduce your tax burden. The income from these assets will then no longer be subject to tax in Germany. However, it's important to consider the tax implications of transferring assets abroad and to seek individual advice. Further information on emigrating and taking money with you can be found in our article.
Planning emigration: Secure tax benefits now!
The tax aspects of emigrating are complex and should not be underestimated. Careful planning and personalised advice are crucial to avoid financial risks and optimise your tax burden.
Summary of the Key Tax Aspects
The key tax aspects of emigration include exit tax, extended limited tax liability, taxation of various types of income, and inheritance tax. It is important to address these issues early on and take the necessary steps to optimise your tax burden.
Personalised Advice and Planning
Personalised advice and planning are essential to optimally manage the tax aspects of your emigration. GoMovin offers comprehensive advice and support to make your move as smooth as possible. We analyse your individual situation and develop a tailor-made tax strategy that meets your needs.
The Importance of Early Planning
Early planning is crucial to fully leverage the tax advantages of your emigration. The sooner you start planning, the more options you have for structuring. GoMovin supports you in planning your emigration and ensures that all relevant aspects are considered.
Are you planning your emigration and want to ensure that all tax aspects are covered? GoMovin is here to assist you with our expertise. We simplify the relocation process and make international relocations stress-free, efficient, and customised. With our all-in-one solution for international moves, personal advice, legal support, property service, and cultural integration, we are your ideal partner.
Choosing to emigrate is a big step. We help make this step as smooth as possible by supporting you with all tax-related questions. This allows you to focus on your new life and enjoy the anticipation.
Now is the perfect time to plan your emigration and secure tax advantages. Contact us today to start your personalised consultation and optimise your tax planning. Schedule an appointment now for a non-binding consultation!
Further useful links
The Federal Ministry of Finance (BMF) provides information on double taxation agreements that are relevant to emigrants.
The Federal Statistical Office (Destatis) provides statistics on emigration from Germany.
FAQ
Which tax return must I submit when emigrating?
You must submit a tax return for the year of emigration in Germany. This includes all income you have earned up until the day of your departure. GoMovin is happy to assist you with this.
What is the exit tax and who is affected?
The exit tax applies to individuals who hold shares in corporations (e.g. GmbH, AG) and move their residence abroad. It is levied on unrealized capital gains.
How can I avoid or reduce the exit tax?
Options for reducing the exit tax include, among others, the restructuring of the company prior to emigration or the transfer of assets. Individual advice is recommended.
What is the extended limited tax liability and how can I avoid it?
The extended limited tax liability may apply if you move to a low-tax country and continue to have significant economic interests in Germany. It can be avoided by relinquishing German citizenship or reducing economic interests.
What income is taxable in Germany after emigration?
Even after emigration, income from business operations, self-employment, rental and leasing can be taxable in Germany. The specific regulations depend on the double taxation agreement (DTA).
What is the exit taxation and how does it affect entrepreneurs?
The exit taxation affects sole proprietors and partnerships and relates to the taxation of hidden reserves upon emigration. Conversion or leasing may be alternatives.
How can I avoid double taxation?
Double taxation agreements (DTA) determine which country has the right to tax income. It is important to be familiar with the DTA between Germany and your new country of residence and to use the credit methods.
What do I need to consider regarding inheritance tax?
Within five (or ten) years after emigration, the extended limited inheritance tax liability may apply. An early transfer of assets can reduce the tax burden.
