Exit taxation under § 6 AStG

From Wächtler to the ATAD Implementation Act

The exit tax of § 6 AStG is the most important single obstacle to the relocation of German entrepreneurs. Where the taxpayer holds at least 1 per cent of a corporation within the meaning of § 17 EStG, it treats the end of unlimited tax liability as a deemed disposal of the shares. The difference between the fair market value and the acquisition cost is taxed as if the shares had been sold. For an entrepreneur whose company has grown in value over decades, the result can be a tax liability in the millions without any cash proceeds from which it could be paid.

Until the end of 2021, § 6 paragraph 5 AStG in its old version granted an interest-free deferral without security to taxpayers moving to another member state of the European Union or of the European Economic Area. Emigrants to Switzerland were excluded from this privilege and had to pay the tax immediately or apply for a deferral in instalments that the tax office could grant in cases of considerable hardship. This distinction was brought before the Court of Justice in the case of Martin Wächtler, a German national who had moved to Switzerland. By judgment of 26 February 2019 in case C-581/17, the Court held that the immediate taxation of the unrealised gains on the relocation to Switzerland was incompatible with the free movement agreement between the European Union and Switzerland.¹ The Federal Fiscal Court drew the consequences in a judgment of 6 September 2023, I R 35/20, holding that an interest-free deferral was required to make the old version of § 6 AStG compatible with European law in cases of relocation to Switzerland. The Federal Ministry of Finance then issued a letter of 2 June 2025 granting such taxpayers an unlimited and interest-free deferral under the conditions it specified, replacing an earlier letter of 13 November 2019.²

These developments came too late to shape the current law. The German legislature had already rewritten § 6 AStG by the ATAD Implementation Act of 2021, with effect for departures after 31 December 2021. The new version abolished the permanent deferral for moves within the European Union and the European Economic Area and replaced it with a uniform system that applies to all destinations, Switzerland included.³ The favourable treatment secured by Wächtler therefore benefits only those who left Germany before 2022, a group whose cases are still being administered by the German tax offices. Whether the new law is compatible with the free movement agreement in its turn is a question that the reasoning of the Wächtler judgment makes legitimate to ask, although it has not yet been decided by the courts.

The current law

Under the current § 6 AStG, the deemed disposal is triggered by the end of unlimited tax liability through the abandonment of the domicile or habitual abode. The gratuitous transfer of shares to a person not subject to unlimited German tax liability has the same effect, as does any other exclusion or restriction of the German taxing right over the gain. The taxpayer must have been subject to unlimited tax liability for at least seven years in total within the last twelve years before the triggering event. If the shares were acquired gratuitously, the periods of the predecessor are included.⁴

Two mechanisms soften the result. The first is the return rule of § 6 paragraph 3 AStG. If the taxpayer becomes subject to unlimited tax liability again within seven years after the end of his unlimited liability, the tax claim lapses, provided that the shares have not been sold in the meantime and that distributions have remained within limits. The tax office may extend the period by up to five years on application if the taxpayer demonstrates that his intention to return persists. The second mechanism is the payment of the tax in seven equal annual instalments under § 6 paragraph 4 AStG, which the tax office grants on application and normally only against security. The remaining instalments become due immediately if the shares are sold, if distributions exceed a quarter of the value of the shares or if other defined events occur. Paragraph 5 imposes reporting obligations: the taxpayer must notify the tax office electronically of relevant events within one month and confirm annually his current address and the continued ownership of the shares.⁵

The requirement of security is the practical difficulty. An entrepreneur whose only substantial asset is his company must pledge the shares or provide a bank guarantee. The German tax offices have discretion in accepting the security offered, and negotiations over the form and amount of the security are a regular part of relocation work. The combination of instalments and security converts the exit tax into a debt that the taxpayer must service from dividends or other resources over seven years, which in turn affects the distribution policy of the company.

Investment funds since 2025

The Annual Tax Act 2024 extended exit taxation to units in investment funds held as private assets. Since 1 January 2025, § 19 paragraph 3 of the Investment Tax Act (InvStG) has applied the mechanics of § 6 AStG to units in ordinary investment funds. The rule applies if the investor held at least 1 per cent of the fund at any time during the preceding five years or if the acquisition cost of the units in the same fund amounts to at least 500,000 euros. For special investment funds under § 49 paragraph 5 InvStG no threshold applies.⁶ The extension closes a gap that wealthy families had used by holding liquid assets through investment funds. It must now be considered in every relocation of a German investor who holds substantial fund positions through a German custodian.

Relevance for moves to Zurich

For a German entrepreneur moving to Zurich, the exit tax means that the value accrued in his shares during his German residence remains taxable in Germany, whatever the treaty says about later disposals. Only the value created after the move escapes German tax, and even then only after the expiry of the five-year period of Article 4 paragraph 4 of the convention. The step-up under Article 13 paragraph 5 of the convention avoids double taxation where Switzerland taxes the gain, which is rare for private shareholdings. Planning therefore concentrates on the timing of the move in relation to the value of the company, on restructuring before departure and on the return rule. A move made while the company is still young, or before a significant increase in value, costs less exit tax than a move on the eve of a sale. Restructuring measures, such as the conversion of a corporation into a partnership whose assets remain attributable to a German permanent establishment, can avoid the exit tax in certain cases, but they have their own tax costs and require a binding ruling.⁷

Notes

1. PwC Deutschland, “BMF: Unbefristete und zinslose Stundung bei Wegzügen in die Schweiz”, Steuern & Recht blog, 3 June 2025, https://blogs.pwc.de/de/steuern-und-recht/article/249231/bmf-unbefristete-und-zinslose-stundung-bei-wegzuegen-in-die-schweiz/, summarising the CJEU judgment of 26 February 2019, C-581/17, Wächtler. ↩
2. PwC Deutschland, “BMF: Unbefristete und zinslose Stundung bei Wegzügen in die Schweiz”, cited above, reporting BMF-Schreiben of 2 June 2025, IV B 5 – S 1348/00008/004/159, and BFH, judgment of 6 September 2023, I R 35/20. PwC emphasises that the letter concerns only the version of § 6 AStG in force before 1 January 2022. ↩
3. Deubner Verlag, “Wegzugsbesteuerung: Alle Änderungen im Blick?”, https://www.deubner-steuern.de/themen/atad-umsetzungsgesetz/wegzugsbesteuerung/, noting that the previous deferral rule no longer exists from 2022 and that the minimum period of prior unlimited tax liability was reduced. ↩
4. lx gesetze, “§ 6 AStG – Besteuerung des Vermögenszuwachses”, https://lxgesetze.de/astg/6, reproducing § 6 paragraphs 1 and 2 AStG, including the condition that the taxpayer was “insgesamt mindestens sieben Jahre unbeschränkt steuerpflichtig” within the twelve years before the end of unlimited liability. ↩
5. lx gesetze, “§ 6 AStG”, cited above, reproducing § 6 paragraphs 3 to 5 AStG. ↩
6. Noerr, “Einführung einer Wegzugsbesteuerung für (Spezial-)Investmentanteile im Privatvermögen – was Fondsanleger ab 01.01.2025 zu beachten haben”, https://www.noerr.com/de/insights/einfuehrung-einer-wegzugsbesteuerung-fuer-spezial-investmentanteile-im-privatvermoegen. ↩
7. Happe and Kistler, Steuer Revue 12/2019, cited above, discussing conversions into a GmbH & Co. KG, gifts subject to a reserved usufruct and other planning measures before the move. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.