Seizing opportunities, understanding boundaries
From Berlin to Paris, or London, or New York: Over the last few decades, taxpayers have enjoyed increased mobility due to globalisation and closer ties in Europe. There are numerous reasons to relocate abroad. The owner of a family business may want to retire to sun-kissed Italy, for instance. A younger member of the family might be seconded to the US, or fall in love while studying in another country and decide to stay there. A successful entrepreneur could dream of living with his or her family on Majorca. And a popular influencer may consider relocating to Dubai for its tax advantages. In all these cases, the tax and legal implications require careful attention, especially in view of the recent tightening of exit taxation. Relocating abroad can, under certain circumstances, trigger considerable tax burdens and, in the worst case, involve criminal law consequences. To ensure maximum freedom of movement and legal certainty, we comprehensively advise family-owned businesses and private clients on the relevant areas of tax law and other law, including country-specific features.
Global Mobility | A legal & tax journey for private clients
Our “Global mobility – A legal & tax journey for private clients” series is highly relevant for many of our clients. In highlighting essential tax and legal aspects, we examine what’s important for family-owned businesses and private clients when it comes to relocating from or to Germany. One Monday each month, leading experts in various fields assess and analyze country-specific features in discussion with local law firms.
Forthcoming and previous webcast series dates, each from 6:00 to 7:00 pm (CET).
Income and exit taxation upon relocation | 9 October 2023
Inheritance and Gift Tax Law | 13 November 2023
Tax consequences of mobility of managers and executives | 11 December 2023
Inheritance and family law | 8 January 2024
Family foundations under German, Swiss, Austrian and Liechtenstein law | 15 January 2024
Moving to an EU country
France | 11 March 2024
Italy| 8 April 2024
Austria | 13 May 2024
Portugal | 10 June 2024
Spain | 12 August 2024
Moving to a non-EU country
Switzerland | 8 July 2024
UK | 9 September 2024
USA | 14 October 2024
Singapore | 11 November 2024
Dubai | 9 December 2024
Canada | 13 Januar 2025
Australia/New Zealand | 10 February 2025
Our expertise at a glance
In brief: Exit taxation
Exit taxation, as regulated in Sec. 6 of the German Foreign Tax Act, can result in the owner of shares in a corporation (GmbH, AG) having to pay tax on the hidden reserves in his or her shares due to a relocation. In such instances, the relocation is treated as a notional sale of the shares at market value. The hidden reserves are taxed at effective rates of up to 28.5%. The only requirements are that the shareholder must have held at least 1% of the shares in the corporation at some point in the last five years and have been subject to unlimited income tax liability in Germany for at least seven of the last 12 years.
The taxpayer can pay the tax directly or, on request, in seven annual installments. If the taxpayer moves only temporarily for up to seven years (extendable to 12 years), the exit tax for the period of absence can be deferred interest-free and, upon timely return, retroactively waived (the “return provision”). Payments of installments over seven years and the use of the return provision are subject to various restrictive requirements. During this time, the shares must not be sold or gifted, and profit distributions are harmless only up to a certain amount. In practice, the tax authorities usually require a security deposit, which can make even a temporary relocation practically impossible.
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