Oliver Eidel · March 06, 2026 · Updated April 06, 2026

Germany's Exit Tax: All You Need to Know

In short: You are liable to pay Germany's exit tax if you own at least 1% in any company (foreign companies included!) or at least 500k€ cost basis in one mutual fund and subsequently leave Germany, this means for you that you have to pay the German exit tax which often is six figures or higher. No joke. Most people don't know this.

So, in short, the German exit tax affects small business owners and investors (>1% ownership in a company), or people with substantial savings (>500k€ e.g. in an ETF).

Alright. What is Germany's exit tax?

Germany's Exit Tax

As always, I like to simplify things greatly to make them easier to understand.

In the broadest sense, Germany's exit tax applies to you if:

You hold more than 1% in a corporation (Kapitalgesellschaft). In simple terms, these often are limited liability companies e.g. a GmbH. But this is not limited to your holdings of German companies - it covers all your holdings of corporations >1%, e.g. a UK Ltd, a Singaporean Pty Ltd, a US Inc., you get the idea.
You are self-employed or run a business which is not a limited liability company (= Personengesellschaft), e.g. a as a sole proprietor (Einzelunternehmen) or as a GmbH & Co. KG.
You privately hold more than 500k€ worth in one ETF (this is new in 2025!).

Now there are some interesting distinctions, too.
Germany's exit tax does not apply to you if:

You're simply an employee somewhere and don't have any sort of business and are not self-employed.
You are self-employed, but as a freelancer (Freiberufler), in simple terms "selling time for money", e.g. as a consultant, software developer, etc.; in contrast to "selling goods", e.g. software, which would not be a Freiberufler and would create an exit tax situation again.
You privately hold ETFs, but none of those positions are above 500k€ (it's the purchasing price which counts, not the current value).

Let's discuss the ETF situation first, because it's probably the simplest.

Germany's Exit Tax On ETFs

Starting in 2025, Germany has further increased the scope of its exit tax. While the exit tax only covered company holdings and self employment (in the broadest sense) in the past, it now also covers private holdings, specifically funds, including ETFs, in a brokerage account.

Why? From what I gather, it apparently was a tax loophole for super rich people to essentially move their own company holdings into a soon-to-be-created ETF (?) which would then be owned by them (??) and not covered by exit tax.

Anyway, it seems that normal private individuals who are simply saving up for their retirement somehow got caught in the crossfire (.. great, thank you). The idea here is this:

The exit tax applies to you on funds / ETFs where the purchase value is >= 500k€.

That's it. So let's say your brokerage account has holdings of €1M and it looks like this:

€1M iShares MSCI World
Nothing else.

Then yes, these holdings are hit by Germany's exit tax. Now, if instead your brokerage account looks like this:

€333k iShares MSCI World
€333k xtrackers MSCI World
€333k Invesco MSCI World

.. then this is not subject to Germany's exit tax. So yeah. I don't really know what the people were thinking when they created this new law, but in any case, I guess you know what you'd have to do. Importantly, it's the purchase price which counts, not the current valuation. So, in your brokerage account, you need the check the column which mentions the actual price you paid for those ETF shares some years ago when you purchased them. That has to be below €500k for each of your holdings. If not, sell them and balance things out.

So that's "solved". If you're still interested in this, I wrote up a more detailed post here. In all likelihood, you're probably interested in the "other" German exit tax on company holdings as that's way harder to solve, so I'll move on to that shortly. But before that, a separate topic on which I'm pretty clueless:

Exit Tax On Self-Employment And Partnerships

I'm currently not self-employed and don't have any parts in partnership companies (Personengesellschaften), therefore my knowledge here is very limited.

When leaving Germany as a tax resident, the idea here would be that you have to do something called an "Entstrickung". This mostly boils down to getting a valuation for your assets and then paying tax on those as if you had sold those. So let's say you're self-employed selling software subscriptions (SaaS), then you'd have to get a dude or dudess to write up a valuation of your assets (the software) and you'd pay tax on those. Yeah, it sounds messy.

Especially where do those "assets" end? If you're doing consulting, technically you shouldn't be subject to exit tax because you're a freelancer / "Freiberufler". But maybe you do have assets? Your website? Your consulting client list? Sales funnels? I have no clue. Good luck figuring this out.

No more knowledge on this topic. I'll move on to something I've done much more research on: When you own shares of corporations (Kapitalgesellschaften).

Exit Tax On Holdings Of Corporations

The most common case is this: You've founded a limited liability corporation (GmbH) in Germany and you own more than 1% of the shares, typically 100% if it's entirely owned by you, or 33% or 50% if you have cofounders, you get the idea.

What would happen if you naively left Germany, without preparing anything for your exit tax situation?

The financial authorities would take the average earnings of the past 3 years, multiply that by 13.75 (an insane multiple), and that would be the valuation.
On that valuation, you'd pay ~28.5% in taxes (long version: 40% are tax-free, 60% are taxed at your personal tax rate, I assume this would be ~42-45% if you've already been receiving a salary).

Let's look at an example. You've got a small GmbH neatly chugging along and making a consistent €100k of earnings every year.

€100k earnings * 13.75 multiple of financial authorities = €1,375M valuation
€1,375M valuation * 28.5% estimated tax rate = ~€392k exit tax.

So you'd pay almost €400k in exit tax for your company. That's a pretty crappy situation, given that you're not receiving any "income" at this stage, i.e. it's not like you've sold your company and can use a part of those profits to pay for your exit tax. No, you keep you company and have to pay the exit tax.

So that's the most common situation. There are all sorts of variations to this, too.

Holding Corporations

Let's assume you own 100% of a holding corporation (typically a UG or GmbH) which itself owns 100% of your actual corporation (typically a GmbH). How does exit tax apply here?

In short, it only applies to your personal holdings, i.e. you owning more than 1% of the holding corporation. However! The value of that holding corporation includes the value of the actual corporation inside it, so.. this doesn't result in any sort of benefit as the total sum subject to exit tax is still the same, and the process is the same, too. It's actually slightly more complicated because now you have to calculate the value of your holding company and all its holdings.

Taking this thought further, owning a holding corporation actually might be a net drawback here. Why? Because, let's say, you're as semi-intelligent as I am and do some angel investments through your holding company. If your goal was to optimize your German tax situation - great idea! If, however, your goal now shifts to optimizing your exit tax situation - terrible idea! Because.. remember the 1% rule?

Let's assume you privately do an angel investment and receive 0.5% of a company in return. Cool. Not subject to exit tax because it's less than 1%.
However, let's assume you do an angel investment through your holding company. You own 100% of your holding company which owns 0.5% of your angel investment. Bad luck. Exit tax applies to your ownership of your holding company and all its holdings, so the value of your angel investments is included.

It's a bit ironic that many German tax optimizations like holding companies suddenly look like terrible ideas when considering their exit tax implications. Who would've thought.

Anyway, onwards. I already talked about valuations a bit, and we learned about the crazy 13.75 multiple which the German financial authorities use. This calculation actually assumes a company is profitable, which, you know, is kind of a rare thing if you're living in the Berlin startup bubble, where startups get millions of venture capital (VC) Euros without making any significant profit. So, yeah.. what about those?

Exit Tax Valuation of VC-Funded Corporations

Let's assume you do the typical Berlin hipster-founder startup career path:

You find a co-founder in a fancy entrepreneur bootcamp and found a GmbH, each of you owns 50%.
You create a shiny Powerpoint presentation and get one million Euros from VC investors for 10% of your company.
As always, the startup blogs pick up on this and post pictures of you posing in black jumpers in front of your fancy, empty office. They note that the valuation of your company is "ten million Euros" which technically is correct, because you just sold 10% of your company for one million Euros
(my VC / dilution math might not be 100% correct, but you get the idea)
You run your company for a few years and optimize for hyper-growth, because that's what VCs like to see, however your company is not profitable and making losses every year.
You want to leave Germany for various reasons - maybe because your partner is from another country, or maybe because you're tired of the non-existent public administrative infrastructure in Berlin (just saying).

So that's the situation. How will the financial authorities value your startup? Will they take their usual factor of 13.75, which would result in a negative value as you're making losses (will they pay you "exit tax money"?), or will they take the valuation from your VC funding round (which is rather inflated)?

I've talked to a few people about this, and the consensus seems to be that they indeed take the VC funding valuation. This is crazy for all sorts of reasons:

Most VC-funded startups fail, so there's a ~95% likelihood it might be worth €0 in 5 years or so. However, this is not taken into account. It's the valuation at the time of you leaving Germany which counts.
VC valuations tend to be rather inflated anyway. If your startup is valued €10M after a funding round, it's usually not the case that random people message you and want to buy some shares at that crazy valuation.

So yeah. It's the VC valuation which seems to count. The learning here is that if you're in a VC-funded startup, your exit tax situation in Germany is not great. Or, well, the better learning would be that if you consider building a VC-funded startup, you should probably leave Germany before taking on the funding (or, you should be 100% committed to staying in Germany for the rest of your life).

Okay, so we've learned so far that:

The exit tax on corporations sucks.
The valuation is either 13.75 x earnings if it's profitable, or the VC valuation is you got VC money.
On this (inflated) valuation, you'll pay ~28.5% taxes.

So that's a terrible situation so far.

Luckily, there are strategies to "optimize" this. Usually, they are "sold" by tax advisors with hourly rates upwards of €400. Some of it is available for free on YouTube, so here are my notes.

German Exit Tax Solutions

But before we get into the details on how it's calculated, the good news is that there are many solutions to the German exit tax - and, in some of them, you end up not paying any German exit tax at all! This is perfectly legal, as you e.g. trade "not paying the exit tax" for "taxing all dividends in Germany in the future".

Yeah, that's where it gets complicated.. anyway, I've compared all German exit tax solutions in this Notes & Hacks post, but the top 3 solutions are:

Do a low valuation of your company and pay the tax: Can be a good idea if your company's yearly profit is within 0-200k€ and you only own 1-2 companies.
Return within 1-2 years or return and leave again after 6 years: If you're planning to return to Germany anyway, you get the exit tax back if you return within a few years.
Setting up a GmbH & Co. KG and moving your shares there: Zero exit tax, but by moving your shares into a GmbH & Co. KG, all future dividends and sales are taxed in Germany. Also, this setup is rather clunky as you need a physical presence in Germany and German managing director. But besides that, it has the huge benefit of zero exit tax.

There are also more complex solutions like setting up a family trust in Germany or even Liechtenstein; also, you can ask for a deferral, but that's often not a good idea due to high interest rates. Finally, there are outright scams like consultants claiming that setting up a cooperative would solve your exit tax problems - I'm very skeptical of that as there are no data points that this has worked. All of these setups have the added complexity that you can only do them together with a tax advisor as the tax office is mostly likely to ask you some questions, whereas the top 3 setups above are "less tightly coupled" to tax advisors (even though you still need them) as they can be considered more "normal".

So yeah, those are the solutions to Germany's exit tax. All of that is pretty absurd, right?

Leave a comment below if you have any questions!

By the way: Are you also dealing with the German exit tax? Send me a message any time, I'm interested to talk to people like you. And if you'd like to connect with even more people, join this German exit tax Telegram community I created :)

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