Germany's exit tax: the latest developments

Key points at a glance

• Germany's exit tax under § 6 AStG (Außensteuergesetz, Germany's Foreign Tax Act) captures unrealised gains in shares of corporations (a GmbH, for example) from a 1 % stake upwards, if you have been subject to unlimited German tax liability for at least seven of the past twelve years.

• Investment funds and ETFs now fall under their own exit tax as well (§ 19 InvStG, Investmentsteuergesetz, Investment Tax Act), once your acquisition costs in a single fund reach 500,000 euros or you hold 1 % of the units. No threshold applies to specialised investment funds (Spezial-Investmentfonds).

• For moves within the EU and the EEA, Malta included, there has been no permanent interest-free deferral since 2022. Instead, you pay in instalments over up to seven years. Large distributions can bring part of that liability forward (a de facto ban on distributions).

• The Bundesfinanzhof/BFH (Federal Fiscal Court) "Wächtler" ruling (2023) secures a permanent, interest-free deferral until sale for moves to Switzerland. Two BMF (Federal Ministry of Finance) letters from 2025 clarified how the authorities handle legacy cases.

• A move to Malta stays plannable if deferral, genuine substance and a possible return are thought through together, and early.

Germany's exit tax under § 6 AStG has grown sharper over the past few years, driven by several legislative changes and a landmark ruling from the Federal Fiscal Court. A second front has now opened up: investment holdings and ETFs are caught too. For anyone planning to leave Germany, that makes the picture more layered. This article sets out where things stand and what a move to Malta actually involves.

What is the exit tax?

The exit tax under § 6 of the Außensteuergesetz (AStG) taxes the increase in value of shares in corporations when you leave Germany, even though you never actually sell them. The law assumes a deemed disposal at market value and taxes the unrealised gains, meaning the difference between the original acquisition costs and today's value.

This affects individuals who have been subject to unlimited tax liability in Germany for at least seven of the past twelve years and who hold, directly or indirectly, at least 1 % of a German or foreign corporation. The previous ten-year window was shortened to seven years, which has widened the circle of people affected considerably.

The 2022 changes and what they mean

A revised version of § 6 AStG took effect on 1 January 2022. The most significant change was the end of the permanent, interest-free deferral of exit tax for moves within the EU and the EEA. In its place came a time-limited concession: you can settle the tax bill in up to seven annual instalments. For anyone not expecting an immediate cash inflow from a sale, that is a real financial burden.

The "de facto ban on distributions"

Just before the turn of 2023/2024, lawmakers brought in further tightening that also catches earlier moves. The tax office can revoke the instalment arrangement in part if, after your move, distributions of profit or a return of capital contributions add up to more than a quarter (25 %) of the share value at the time of departure. The tax then falls due to the extent that this limit is exceeded. In practice it works like a "de facto ban on distributions": take a substantial distribution out of your own company and you risk the exit tax becoming payable straight away, to that extent.

Exit tax now applies to investment funds and ETFs

For a long time the exit tax was confined to entrepreneurial holdings. The Jahressteuergesetz 2024 (Annual Tax Act 2024), approved by the Bundesrat on 22 November 2024, extended it to investment holdings for the first time. The rules in § 19 InvStG and § 49(5) InvStG apply to cases from 2025 and closely mirror § 6 AStG.

Who is affected

The rules catch private investors who hold investment units at the point of a move or a gratuitous transfer (through inheritance, or a gift to someone not subject to unlimited German tax liability, for example). Tax is triggered once one of these thresholds is met:

• you hold, directly or indirectly, at least 1 % of the units in an investment fund, or
• your acquisition costs in a single investment reach at least 500,000 euros.

No threshold applies to specialised investment funds (Spezial-Investmentfonds): they are caught in every case, regardless of size. There is also a five-year look-back. If your holding hit at least 1 % at any point in that period, it still counts.

In practice this means even a sizeable ETF portfolio can trigger the exit tax, once acquisition costs in a single fund reach 500,000 euros. Unlike a classic shareholding under § 6 AStG, no entrepreneurial stake is needed. If your wealth is spread widely across funds, it is worth having the structure reviewed before you move.

The "Wächtler" case: an important signal on deferral

In a closely watched decision, the First Senate of the Bundesfinanzhof ruled on the "Wächtler" case on 6 September 2023. The BFH held that for a move to Switzerland, taking account of the Freizügigkeitsabkommen (Agreement on the Free Movement of Persons) between the EU and Switzerland, a permanent, interest-free deferral of the exit tax until the actual sale is required. The taxpayer can be asked to provide security in return.

The case began when Mr Wächtler moved to Switzerland in 2011 and was assessed for exit tax by the tax office. After a long dispute, which included a preliminary ruling from the European Court of Justice, the BFH set out the conditions.

What this means for those affected

For anyone who has moved to Switzerland or is planning to, the ruling opens up the option of applying for a permanent, interest-free deferral until sale. That is a clear break from previous practice and can bring significant financial relief. Exactly how much security is required, and in what form, remains a question for the individual case and still causes uncertainty in practice.

Administrative practice: the 2025 BMF letters

The tax authorities responded to the case law and spelled out their approach in two letters issued in 2025:

• In a letter dated 22 April 2025, the Bundesfinanzministerium set out how the exit tax under § 6 AStG is to be applied in the version in force on 30 June 2021 (legacy cases).
• A letter dated 2 June 2025 followed, with guidance on the return rule and the treatment of legacy cases, particularly in connection with the Freizügigkeitsabkommen with Switzerland.

Both letters deal mainly with the conditions under which the tax claim lapses or stays deferred, and how the 25 % limit applies to substantial distributions. If you are relying on a deferral or want to challenge an assessment, it pays to know the current administrative view and to document it.

Moving to Malta: getting deferral, substance and return right

Malta is an EU member state, so a move there falls under the EU/EEA rules: no permanent interest-free deferral as in the Swiss Wächtler case, but instalments over up to seven years. That does not let you avoid the exit tax, but it does spread out when it falls due. The key is to look at the following three points together.

First, the distribution question. While the instalments are running, an excessive distribution from your company can trigger the de facto ban on distributions and make the tax payable at once, to that extent. So distribution policy belongs in the plan before you move.

Second, genuine substance. A Malta structure only holds up for tax purposes if it has real economic substance, meaning its own premises, staff and actual decisions taken on the ground. We describe how to build that substance when relocating a company in Building substance in Malta by relocating your company. Malta's tax refund system, with its 6/7 refund, is tied to precisely this kind of substance.

Third, the return option. If you can credibly show that the move is only temporary, you may, under certain conditions, benefit from the return rule, so that the exit tax lapses retroactively. The deadlines and evidence here are strict, which is why clean documentation from the outset matters.

Whether a move to Malta makes sense in your particular case depends on your shareholding structure, your wealth and your plans. Legitimate tax planning within the EU framework calls for an individual review. For how a Malta structure is set up in the first place, see our guide Setting up a company in Malta with a Malta Limited. For the personal side, our international tax advisory is here to help.

Practical steps for those affected

• Check early whether you fall under § 6 AStG (corporate shares) and/or the new § 19 InvStG rules (investment funds, ETFs).
• Review your distribution policy so you do not trigger the de facto ban on distributions.
• For a planned move to Switzerland, look into the permanent deferral under the Wächtler ruling; for moves within the EU/EEA, the instalment route.
• Gather all your records on acquisition costs, valuations and the move itself with care.
• Against any assessment you consider unlawful, file an objection within the deadline and rely on the current case law and the 2025 BMF letters.

Frequently asked questions

Who is affected by the exit tax?

Individuals who have been subject to unlimited German tax liability for at least seven of the past twelve years and who hold at least 1 % of a corporation. Holders of larger investment fund and ETF portfolios now join them.

Does the exit tax apply to ETFs as well?

Yes. Under § 19 InvStG, investment holdings are caught too, once acquisition costs in a single fund reach 500,000 euros or you hold 1 % of the units. No threshold applies to specialised investment funds. The rule applies to moves from 2025.

Can I avoid the exit tax by moving to Malta?

As a rule, no, because Malta is in the EU and no permanent interest-free deferral applies. You can, however, spread the tax over up to seven annual instalments and make use of the return rule if the move is temporary.

What is the "de facto ban on distributions"?

It is the rule that lets the tax office revoke the instalment arrangement in part if distributions or a return of capital contributions come to more than 25 % of the share value at the time of departure. The exit tax then falls due to the extent that this limit is exceeded.

What did the "Wächtler" ruling change?

In 2023 the BFH held that a move to Switzerland warrants a permanent, interest-free deferral until the shares are sold. For moves within the EU/EEA, the time-limited instalment route still applies.

What role do the 2025 BMF letters play?

They flesh out administrative practice on legacy cases, the return rule and the application of the 25 % limit. If you are relying on a deferral or challenging an assessment, you should know them.

Free initial consultation

Planning a move out of Germany and want to know how the exit tax would play out in your case? Arrange a free initial consultation with our tax experts.

Sources: § 6 AStG and § 19 InvStG (statutory texts); Jahressteuergesetz 2024 (Bundesrat approval 22 November 2024); BFH ruling I R 35/20 of 6 September 2023 ("Wächtler"); BMF letters of 22 April 2025 and 2 June 2025 on the exit tax.

This article is based on independent research by DW&P Dr. Werner & Partners and does not constitute legal or tax advice.