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Emigrate and never pay taxes again? The truth behind the dream!
The dream of a tax-free life abroad is tempting. But beware! Even after emigrating, tax obligations can still remain in Germany. Find out now how to avoid these traps and plan your move optimally. Do you need individual advice? Get in contact with us!
The topic short and concise
The dream of a tax-free life abroad is tempting. But beware! Even after emigrating, tax obligations can still remain in Germany. Find out now how to avoid these traps and plan your move optimally. Do you need individual advice? Get in contact with us!
The dream of a tax-free life abroad is tempting. But beware! Even after emigrating, tax obligations can still remain in Germany. Find out now how to avoid these traps and plan your move optimally. Do you need individual advice? Get in contact with us!
The dream of a tax-free life abroad is tempting. But beware! Even after emigrating, tax obligations can still remain in Germany. Find out now how to avoid these traps and plan your move optimally. Do you need individual advice? Get in contact with us!
Discover which tax obligations may remain even after emigrating and how you can legally circumvent them. Avoid costly mistakes and secure your tax-free new start!
The dream of emigrating and never having to pay taxes again is widespread. However, reality often looks different. Many emigrants underestimate the complexity of the German tax system and the potential pitfalls that can remain even after leaving the country. At GoMovin, we understand that an international move raises many questions, especially concerning your tax situation. Therefore, we want to provide you with a comprehensive overview so that your fresh start abroad is not marred by unexpected tax demands.
A common misconception is that deregistering your residence in Germany automatically eliminates your tax obligations. However, this is not the case. German tax law recognises various forms of tax obligations that may still be relevant after emigration. These include limited tax liability and extended limited tax liability. It is crucial, therefore, to address the tax implications early and plan your emigration on an individual basis. The high tax burden in Germany often leads to distrust towards emigrants, which can result in potentially prohibitive taxation.
We support you in understanding these complexities and making the right decisions to ensure your move is as smooth as possible. Our expertise in Expat Services helps you consider all aspects of your international relocation, from legal support to cultural integration. This way, you can focus calmly on your new life abroad.
Exit tax: Expensively taxing shares in corporations
The exit tax, often referred to as the Exit Tax, is an important aspect to consider when planning to emigrate. It primarily affects individuals who hold shares in corporations. Specifically, this means that unrealised capital gains on shares of more than 1% in corporations are taxed when you move your residence abroad. This regulation aims to prevent taxpayers from shifting profits abroad without tax implications. The exit taxation can trigger significant tax burdens, especially for larger shareholdings.
The basis for calculating the exit tax is the notional capital gain. This is determined by calculating the sale price of the shares minus the acquisition costs. This notional gain is then subject to the individual tax rate. 60% of the notional gain is taxed. Since 2022, there has been a stricter exit tax, affecting even more individuals. This not only affects GmbH shareholders but also property owners and freelancers. For example, if you hold at least a 1% stake in a GmbH, the exit tax may become relevant. There are also similar regulations for sole proprietors and partners in the form of entanglement taxation.
It is therefore advisable to inform yourself early on about the potential impact of the exit tax and, if necessary, to examine structuring possibilities. We at GoMovin can help you analyse your individual situation and develop optimal strategies for tax optimisation. Early planning can save you a lot of money and help avoid unexpected tax demands.
Exit Tax: Optimising Business Assets for Tax Purposes When Emigrating
Alongside exit taxation, self-employed individuals and entrepreneurs should also keep an eye on the stranding tax. This tax applies when self-employed individuals, sole proprietors, or freelancers transfer business assets abroad. Essentially, it taxes the hidden reserves, which is the difference between the fair market value and the book value of the assets. The stranding tax concerns the taxation of the difference between the market value and the book value.
However, there are various ways to avoid or reduce the stranding tax. One option is the transformation of the business into a partnership. Leasing the business can also provide tax relief. Another possibility is to allocate assets to a domestic business operation. If you move to an EU/EEA country, there may be the possibility of a five-year tax deferral. This deferral can help you better distribute the tax burden and preserve your liquidity.
We at GoMovin support you in finding the best strategy for your individual situation. Our experts provide comprehensive advice on all aspects of the stranding tax and assist you in exploiting the optimal structuring options. This way, you can ensure that your move does not become an unnecessary financial burden.
Avoiding tax liability: Using residency relocation and double taxation agreements
To avoid or at least reduce tax liability in Germany after emigrating, various strategies exist. An important measure is the surrender of residence and habitual abode in Germany. This means not only deregistering your residence but also ensuring that you do not stay in Germany for more than 183 days a year. The 183-day rule is crucial to avoid unlimited tax liability. It's important to note that this rule is based on a rolling year, not just the calendar year.
Another way to optimise taxes is the use of Double Taxation Agreements (DTAs). These agreements are designed to prevent you from having to pay tax on the same income in two countries. DTAs are especially relevant for digital nomads with foreign employers. If your employer is not based in Germany and you do not perform your work in Germany, a DTA can prevent you from having to pay taxes in Germany. However, it's important to check the specific conditions of the respective DTA, as these can vary from country to country.
At GoMovin, we help you understand the complex regulations of double taxation agreements and make use of the benefits relevant to you. Our experts support you in planning your move and optimising your tax situation. This way, you can ensure that you don't pay unnecessary taxes abroad.
Extended Limited Tax Liability: German Citizens in Low-Tax Countries in Focus
A particular pitfall is the extended limited tax liability. This regulation primarily affects German citizens who move to a low-tax country. The extended limited tax liability applies if you have been subject to unlimited taxation in Germany for at least five of the last ten years, move to a low-tax country, and still have significant economic interests in Germany. In this case, certain types of income that do not qualify as foreign income may continue to be taxable in Germany. The extended limited tax liability aims to prevent tax avoidance.
The gift and inheritance tax can also be relevant if you are living abroad as a German citizen. If you receive a gift or an inheritance within five years of your relocation, this gift or inheritance may be subject to tax in Germany. Domestic assets also remain taxable. Another aspect is the progression proviso. This can cause the tax rate on your domestic income to increase if you also have foreign income, even if it is tax-free abroad.
At GoMovin, we offer comprehensive advice on all aspects of extended limited tax liability and gift and inheritance tax. Our experts assist you in analysing your individual situation and developing optimal tax optimisation strategies. This way, you can ensure that you do not pay unnecessary taxes abroad.
Tax Optimisation: Choosing the Right Country of Residence for Expats
An important factor in emigration planning is the choice of the right country of residence. Some countries offer attractive tax advantages or even full tax exemptions. There are so-called tax-free countries of residence, such as the Bahamas, Monaco, or Dubai. In these countries, you generally pay no income or wealth taxes. Other countries offer temporary tax exemptions, such as Chile, Indonesia, Israel, South Africa, or the United Kingdom. These exemptions are often subject to certain conditions, such as obtaining a specific visa or meeting certain investment criteria. The strategic relocation of residence for tax optimisation requires consideration of specific types of income.
There are also special tax programmes, such as Portugal's NHR (Non-Habitual Resident) Programme or Spain's Beckham Law. These programmes are aimed at foreign professionals and offer attractive tax benefits for a certain period. When choosing the right country of residence, you should also consider the taxation of capital gains. Some countries offer favourable taxation on interest, dividends, or capital gains. It is therefore advisable to carefully examine the tax regulations of different countries and make the optimal choice for your individual situation.
We at GoMovin support you in choosing the right country of residence and provide comprehensive advice on the tax advantages and disadvantages of various options. Our experts help you analyse your individual situation and develop the optimal strategy for tax optimisation. This way, you can ensure that you do not pay unnecessary taxes abroad.
Emigration Planning: Personalized Advice and Careful Documentation Ensure Success
Successful emigration planning requires personalised advice from a tax advisor. Every case is unique, and the tax implications depend on your personal circumstances. A tax advisor can analyse your individual situation and show you the optimal strategies for tax optimisation. It is advisable to seek advice well before moving to consider all aspects of tax liability and avoid unexpected tax demands.
Another important aspect is the careful documentation of all relevant circumstances. Keep all documents related to your residence, habitual abode, income, and assets. This documentation can help prove your tax liability and avoid potential disputes with the tax authorities. Also, pay attention to meeting deadlines. Submit your tax return on time in the year of emigration and inform the tax authorities of your move. Timely deregistration with the tax office is an important step to clarify your tax obligations.
We at GoMovin support you in all aspects of your emigration planning. Our experts help you make the right decisions and take all necessary steps to make your move as smooth as possible, allowing you to relax and focus on your new life abroad.
Tax Aspects: Comprehensive Planning Essential for Successful Emigration
The tax aspects are an important part of any emigration planning. It is crucial not to underestimate the tax consequences and to address the relevant regulations early on. Comprehensive planning can save you a lot of money and prevent unexpected tax demands. Rather than relying on tax repression, Germany should create incentives to retain skilled workers. This could help increase Germany's attractiveness as a location and reduce the emigration of qualified professionals.
It's also important to monitor developments in international tax law. Tax regulations change constantly, and it's advisable to regularly keep informed about the latest developments. At GoMovin, we keep you updated and inform you about all relevant changes in tax law. Our experts are always available to answer your questions and assist you in optimising your tax situation.
We at GoMovin understand that planning an international move can be challenging. That's why we offer comprehensive support in all areas of your relocation. From legal advice to cultural integration – we're here for you. Contact us today to learn more about our services and make your move stress-free. Find out about our relocation assistance now and start your new life with peace of mind! Plan your move now with our professional support. Schedule a non-binding consultation today to discuss your individual situation and develop the optimal strategies for your move. Contact us today!
Further useful links
Bundesfinanzministerium provides official information on German tax legislation.
Statista provides migration data that might be relevant in the context of emigration.
IWW publishes economically relevant reports and analyses, which could also relate to taxes.
FAQ
What happens to my taxes when I emigrate?
Deregistering your residence in Germany does not automatically end your tax obligation. There are limited and extended limited tax obligations which may still be relevant. The exit tax may also be applicable if you hold shares in corporations.
What is the exit tax and who is affected by it?
The exit tax affects individuals who hold more than 1% of shares in corporations and relocate their residence abroad. It taxes the unrealized capital gains on these shares.
How can I avoid or reduce the exit tax?
There are various strategies to avoid or reduce the exit tax, such as the conversion of the business into a partnership or leasing the business. It is advisable to seek early advice.
What is the disengagement tax and when does it apply?
The disengagement tax affects self-employed individuals, sole proprietors, and freelancers who transfer business assets abroad. This taxes the hidden reserves (difference between market value and book value).
What is the extended limited tax obligation and who is affected?
The extended limited tax obligation mainly affects German citizens who move to a low-tax country while maintaining significant economic interests in Germany. It applies for 10 years after relocation if certain conditions are met.
How does the 183-day rule affect my tax obligation?
The 183-day rule states that you must not stay in Germany for more than 183 days in a year to avoid unlimited tax liability. This rule is based on a rolling year.
What role do double taxation agreements (DTAs) play in emigration?
Double taxation agreements (DTAs) are intended to prevent you from paying taxes on the same income in two countries. They are particularly relevant for digital nomads with foreign employers.
Which countries are particularly tax attractive for emigrants?
Some countries offer attractive tax advantages or even complete tax exemption, such as the Bahamas, Monaco, or Dubai. Other countries offer temporary tax exemptions or special tax programs.
