A change of residence to a non-EU country does not automatically remove German inheritance tax. Under § 2 (1) no. 1 sentence 2 letter b Inheritance Tax Act (Erbschaftsteuergesetz, ErbStG), German nationals are still treated as residents for up to five years, acquirers with a domicile in Germany remain subject to unlimited tax liability, and German domestic assets remain taxable even after that.
The idea of avoiding inheritance tax by changing residence to a non-EU country sounds simple: anyone who no longer lives in Germany should no longer owe German inheritance tax. Whether this is true depends, however, not on the destination state but on whether Germany still has a right to tax at the time of the succession or the gift. Several questions decide this: who is a resident, whose domicile matters, how long does German tax liability continue after the move, and which assets remain within German reach? This article explains the German tax consequences, names the statutory deadlines and shows which arrangements are legal. It contains no recommendation for a particular country. The legal position is as of October 2026. It is written for readers abroad as well, for example German citizens planning to emigrate or heirs living outside Germany.
Short Answer
A change of residence can reduce German inheritance tax or, in individual cases, largely remove it. But it is not a switch that one flips shortly before a death. Three obstacles often stand in the way: the five-year period for German nationals, the domicile or habitual abode of the acquirer, and German domestic assets. In addition, when moving to a low-tax state, there is extended limited tax liability under § 4 Foreign Tax Act (Außensteuergesetz, AStG). That the destination state lies outside the EU changes nothing about these points to be examined. In practice it mainly affects enforcement. An inheritance tax treaty exists in any case with only very few states, inside and outside the EU.
Who Is Subject to Unlimited Tax Liability in Germany
Under § 2 (1) no. 1 ErbStG, unlimited tax liability applies to the entire acquisition of property if the testator at the time of death, the donor at the time the gift is executed, or the acquirer at the time the tax arises is a resident. Under sentence 2, residents are in particular:
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| Group of persons | Requirement |
|---|---|
| Natural persons | Domicile or habitual abode in Germany (letter a) |
| German nationals | Have not stayed permanently abroad for longer than five years without having a domicile in Germany (letter b) |
| Germans in public service | Employment relationship with a domestic legal entity under public law with remuneration from a domestic public fund (letter c), subject to further requirements |
| Corporations and asset pools | Place of management or seat in Germany (letter d) |
What is decisive is that it suffices if one of the persons involved is a resident. If the testator moves away but the acquirer stays in Germany, the acquisition by the heir resident in Germany is subject to unlimited tax liability, and for everything that passes to him or her. A change of residence by the testator alone therefore suffices only if the heirs have also given up their German residence and the respective deadlines have expired.
Domicile and Habitual Abode
Under § 8 Fiscal Code (Abgabenordnung, AO), a person has a domicile who has a dwelling under circumstances that indicate he or she will keep and use it. Deregistration with the residents’ registration office does not end the tax domicile. Anyone who keeps a furnished dwelling in Germany to which he or she can return at any time can remain a resident. Under § 9 AO, a person has a habitual abode who stays in a place under circumstances that show that he or she is not merely staying there temporarily; a continuous stay of more than six months suffices in principle, with an exception for purely private stays for visits, recreation or cures of up to one year (§ 9 sentence 3 AO). Both are questions of the overall picture. The article Habitual abode in tax law explains the standards, the article on the rule of 183 days the common misunderstandings.
The Five-Year Period for German Nationals
§ 2 (1) no. 1 sentence 2 letter b ErbStG means that a German national is still treated as a resident for five years after moving away. In its judgment of 12 October 2022 (II R 5/20), the Federal Fiscal Court (Bundesfinanzhof) held, using gift tax as the example, that this connecting factor violates neither the general principle of equality nor the free movement of capital. A constitutional complaint has been lodged against the judgment (1 BvR 325/23); we are not aware of a decision by the Federal Constitutional Court.
The period has special features that are often overlooked:
- It begins not with deregistration, but when the person stays permanently abroad and no longer has a domicile in Germany.
- It applies separately to the testator, the donor and the acquirer. A separate period runs for each person.
- If someone keeps a domicile in Germany, the period does not even begin to run.
- For German nationals without a US passport who move to the USA, and for family members belonging to their household, a period of ten years replaces the five (Art. 3 of the Act of Consent to the Protocol of 14 December 1998 in conjunction with Art. 4 (3) of the Germany-USA inheritance tax treaty (DBA USA-ERB); BFH, order of 19 September 2022, II B 2/22). This does not apply to other heirs. Anyone moving to the USA should have it checked in advance whether he or she falls under it.
- Anyone who gives up German nationality ends this five-year rule. Giving it up has far-reaching personal consequences, however, and changes nothing about the application of § 4 AStG. On this see the article Keeping your nationality when emigrating.
After the Period Has Expired: Domestic Assets Remain Taxable
If neither the testator nor the acquirer is a resident, under § 2 (1) no. 3 ErbStG only the acquisition of property is taxed that consists of domestic assets within the meaning of § 121 Valuation Act (Bewertungsgesetz, BewG) or includes a claim to their transfer. This includes, among others:
- domestic agricultural and forestry assets and real property,
- domestic business assets,
- shares in corporations with their seat or place of management in Germany, if the shareholder, alone or together with related persons, holds at least one tenth,
- certain claims and rights secured by domestic real property.
This limited tax liability knows no time limit. A German property remains taxable even after decades abroad. Under § 16 (2) ErbStG, the allowance is reduced proportionately in the case of limited tax liability; the calculation is explained in the article Allowance in case of limited inheritance tax liability. An earlier option to apply in § 2 (3) ErbStG no longer exists according to the text of the law.
In its judgment of 23 November 2022 (II R 37/19), the Federal Fiscal Court had decided that a legacy of a domestic property, where the testator and the legatee lived abroad, was not subject to limited tax liability, because under German law a legacy gives rise only to a contractual claim to be given ownership. The legislature has closed this gap: since the new version, § 2 (1) no. 3 sentence 1 ErbStG also covers the claim to transfer of domestic assets, namely for acquisitions for which the tax arises after 27 March 2024 (§ 37 (20) ErbStG). A legacy is therefore today no way of keeping domestic assets out of German tax. For acquisitions in which the tax arose before 28 March 2024, the legal position under BFH II R 37/19 remains; anyone who still has such a case open should have it reviewed.
Extended Limited Tax Liability under § 4 AStG
When a German moves to a low-tax territory, limited tax liability can be extended beyond the domestic assets. Under § 4 (1) AStG, it covers all parts of the acquisition whose income would not be foreign income under unlimited income tax liability, for example balances at German banks. The prerequisite is that the conditions of § 2 (1) sentence 1 AStG are met for the testator or donor: at least five years of unlimited tax liability as a German in the last ten years before the move, low taxation in the destination state and substantial economic interests in Germany. Under § 4 (2) AStG, the extension lapses if it is proved that a tax corresponding to German inheritance tax of at least 30 percent of the German tax on the additionally covered parts is payable abroad.
The prerequisites, the duration of up to ten years and the exemption limits are explained in the article Extended limited tax liability under § 2 AStG. What is decisive for inheritance tax: the rule applies between the end of the five-year period and the end of the extended period; whether it applies depends on the specific destination state. An adviser on the spot must clarify its tax law.
Double Taxation: The Non-EU Issue
In double taxation, the dividing line is not between the EU and non-EU but between states with and without a treaty. The destination state can tax inheritances and gifts under its own law, and so can Germany as long as its right to tax exists. According to the overview of the Federal Ministry of Finance, Germany currently has an inheritance tax treaty only with Denmark, France, Greece, Switzerland and the USA; the ministry publishes the current list in its overview of double taxation treaties. Where there is no treaty, credit for foreign tax remains under § 21 ErbStG, which requires unlimited tax liability, is limited to certain foreign assets and does not compensate every double burden. The framework is described in the article Inheritance tax and double taxation treaties.
Exit Tax as the Second Calculation
Anyone who holds shares within the meaning of § 17 Income Tax Act (Einkommensteuergesetz, EStG) may trigger exit taxation under § 6 AStG on moving away. The tax is levied on a notional capital gain without any money flowing. Deferral under § 6 (4) AStG is granted on application in seven annual instalments, as a rule against provision of security; in the case of temporary absence, the tax can lapse on return within seven years, and the period can be extended on application by up to five years. A move made only because of inheritance tax can thus trigger an income tax burden higher than the inheritance tax saved. The article Avoiding exit taxation goes into the topic in more depth.
Which Arrangements Are Legal
It is legal to know and use the legal position. It is not legal to deceive the authority about the domicile. Anyone who declares a sham domicile abroad although the centre of life lies in Germany risks proceedings for tax evasion (§ 370 AO). Within what is permissible, the following come into consideration:
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| Arrangement | Prerequisite | Risk |
|---|---|---|
| Actual relocation of the centre of life with sufficient lead time | All persons involved, dwelling given up, deadlines taken into account | Period not expired; return extends German tax liability |
| Include heirs and recipients of gifts as well | Residence of the acquirers clarified | The acquirer’s unlimited tax liability remains if he or she is domiciled in Germany |
| Use allowances through gifts during lifetime | Ten-year cycle under § 14 ErbStG | Supplementary compulsory portion and gift tax in the state of departure |
| Review asset structure | Value domestic assets and bank balances | Tax burdens from the restructuring itself |
| Coordinate will and legacies | Law applicable to the succession clarified | Effect of foreign inheritance law may differ |
The general options for limiting inheritance tax legally are described in the article Avoiding inheritance tax legally.
Binding Ruling before Implementation
The legal position is not conclusively settled on several points, for example the pending constitutional complaint on the five-year period and the assessment of destination states under § 2 AStG. Before a move for inheritance tax reasons, the tax assessment should be secured by a binding ruling from the tax office (verbindliche Auskunft, § 89 (2) AO). It is possible for a precisely defined set of facts not yet realised, if considerable tax effects establish a special interest. The tax office is to decide within six months. The application costs a fee that depends on the value of the matter (§ 89 (3) to (7) AO); below a value of 10,000 euros no fee is charged. Where there is a foreign connection, a ruling in the other state may also be sensible. On the procedure see Binding ruling when moving abroad.
Three Mistakes Laypeople Often Make
- Only deregistering. Deregistration replaces neither giving up the dwelling nor the actual move. What matters is the overall picture.
- Looking only at the testator. If the heir remains resident in Germany, his or her acquisition remains subject to unlimited tax liability.
- Overlooking the German assets. Real estate, business assets and holdings of ten percent or more in German corporations remain within reach even without a running period.
Conclusion
A change of residence to a non-EU country can reduce German inheritance tax if all persons involved allow sufficient time, wait out the deadlines of § 2 ErbStG, examine domestic assets and § 4 AStG, and include exit tax in the calculation. It does not replace overall planning. Whether a move is worthwhile for inheritance tax reasons alone cannot be said without knowing the assets, the family and the destination state; a binding ruling and advice in the destination state are the means to reduce uncertainty.
Frequently Asked Questions
From when am I no longer liable to German inheritance tax after moving abroad?
As a German national, at the earliest after the five-year period of § 2 (1) no. 1 sentence 2 letter b ErbStG has expired, provided you had no domicile in Germany. Even after that, limited tax liability remains for domestic assets.
Is it enough if only the testator emigrates?
No. If the acquirer is a resident, his or her acquisition is subject to unlimited tax liability. The circumstances of both sides matter.
Does a different German rule apply to non-EU states than to EU states?
The rules on personal tax liability in § 2 ErbStG do not distinguish in this way. Differences arise mainly from whether a treaty exists, as well as from credit and practical enforcement.
Does my German property remain liable to inheritance tax after the move?
Yes, regularly. Domestic real property belongs to domestic assets under § 121 BewG and is subject to limited tax liability without a time limit.
Can I make gifts after the move without German tax?
Not as long as the donor or the recipient is a resident within the meaning of § 2 ErbStG. The five-year period also applies to gifts.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise emigrants and asset holders on the inheritance tax planning of a move abroad, from reviewing the deadlines through domestic assets to the binding ruling. Dr. Fiala has published extensively on questions of emigration and asset protection. Contact the firm without obligation to have your individual situation discussed in an initial consultation.
