Anyone planning to move away from Germany often faces tax questions that neither the statute nor case law answers clearly. A binding ruling (verbindliche Auskunft) from the tax office under Section 89 (2) of the German Fiscal Code (Abgabenordnung, AO) can create planning certainty for German tax purposes: before the move, the tax office commits itself to how it will assess a precisely described transaction that has not yet been carried out. This article explains when such a ruling is advisable on emigration, what the application must contain under the Tax Ruling Ordinance (Steuer-Auskunftsverordnung, StAuskV), which tax office is competent before and after the move, how the fee is calculated on the basis of the value in dispute and where the binding effect ends (legal position: October 2026).
Overview: What a Binding Ruling Achieves on Emigration
The binding ruling is an administrative act by which the tax authority determines in advance how it will assess a planned project. For emigrants, this matters above all where a misjudgement can lead to tax on unrealised gains.
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| Question | Short answer |
|---|---|
| Legal basis | Section 89 (2) AO, Tax Ruling Ordinance (StAuskV), Application Decree on the Fiscal Code (Anwendungserlass zur AO, AEAO) on Section 89 |
| Subject matter | Precisely defined transaction not yet carried out, with significant tax consequences |
| Competent authority | The tax office that would be competent once the transaction is carried out; where there is no domestic competence, the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt) |
| Processing period | A decision is to be made within six months of receipt |
| Costs | Fee based on the value in dispute in accordance with Section 34 of the Court Fees Act (Gerichtskostengesetz, GKG); no fee below a value in dispute of EUR 10,000 |
| Binding effect | Only if the transaction later carried out does not deviate, or deviates only insignificantly |
Legal Basis: Section 89 (2) AO and the Tax Ruling Ordinance
Under Section 89 (2) sentence 1 AO, the tax offices and the BZSt may, on application, issue binding rulings on the tax assessment of precisely defined transactions that have not yet been carried out, where there is a special interest in this in view of the significant tax consequences. Details of form, content and binding effect are governed by the StAuskV. The tax authorities have set out their interpretation in the AEAO on Section 89.
Three requirements shape practice on emigration:
- Not yet carried out. The move abroad or the planned restructuring must essentially not yet have taken place. According to the AEAO, preparatory steps are harmless as long as other arrangements are still possible.
- Precisely defined. General questions such as “What happens tax-wise when I move abroad?” are not sufficient. The questions must concern specific legal consequences of a specifically described project.
- Special interest. The tax consequences must be significant. This is regularly the case for shareholdings in corporations whose increase in value can be taxed on emigration.
What the Binding Ruling Does Not Achieve
According to the AEAO, information given by the tax office outside Section 89 (2) AO, for example over the telephone, is as a rule not binding. The AEAO also sets limits: rulings are not to be issued where obtaining a tax advantage is the main focus, for example when tax saving schemes are being examined. The tax authority may also refuse the ruling at its discretion if a statutory provision, a decision of a supreme court or an administrative instruction on the legal question is expected in the foreseeable future. A ruling on several alternative structuring options is not permissible; the applicant must decide on one project.
Typical Emigration Questions for a Binding Ruling
Legally, emigration itself is not a single uniform event. Depending on assets and personal circumstances, different provisions are affected. The overview lists questions for which a ruling may be considered; the substantive rules are covered in separate articles.
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| Constellation | Possible legal question | Further reading |
|---|---|---|
| Shareholding of 1 percent or more in a GmbH or AG | Does the planned sequence of steps trigger the exit tax provision of Section 6 (1) of the Foreign Tax Act (Außensteuergesetz, AStG)? | Exit tax on GmbH shareholdings |
| Home in Germany is retained, residence abroad under the double taxation agreement (DTA) | Is there an exclusion or restriction of the right of taxation under Section 6 (1) sentence 1 no. 3 AStG? | Treaty law and the question of residence |
| Contribution of the shares to a holding partnership | Are the shares functionally attributable to a domestic permanent establishment? | Holding structure before emigration |
| Sole trader or freelancer | Does the planned relocation lead to an exit taxation (Entstrickung) of individual assets or of the business? | Exit taxation under the Income Tax Act (EStG) |
| Temporary stay abroad with planned return | Are planned measures during the absence compatible with Section 6 (3) AStG? | Instalment payments and return rule |
| German nationals moving to a low-tax country | Is extended limited tax liability under Section 2 AStG triggered? | Separate examination |
On the basic principles: under Section 6 (1) AStG, the termination of unlimited tax liability is treated as equivalent to a sale of shares within the meaning of Section 17 EStG at fair market value (gemeiner Wert). This affects natural persons who were subject to unlimited tax liability for a total of at least seven years within the last twelve years (Section 6 (2) AStG). On application, the tax can be paid in seven interest-free annual instalments, as a rule against provision of security (Section 6 (4) AStG). Whether residence and habitual abode actually end is covered in the article on habitual abode in German tax law. Extended limited tax liability under Section 2 AStG requires, among other things, that the person was subject to unlimited tax liability as a German for at least five years in the last ten years, moves to a low-tax territory and retains substantial economic interests in Germany; these criteria frequently give rise to questions of demarcation.
Example: Intention to Return and Temporary Absence
In the past, the tax authorities required the intention to return to exist at the time of emigration; many people therefore protected themselves with a binding ruling. In its judgment of 21.12.2022 (I R 55/19) on the former version of the law, the Federal Fiscal Court (Bundesfinanzhof, BFH) held that an intention to return existing at the time of emigration is not necessarily decisive; what matters is a return within the deadline. Under current law, the return period is seven years and can be extended on application by a maximum of five years if the intention to return continues (Section 6 (3) AStG). The need for a ruling on the intention to return itself has therefore decreased. It remains relevant for the question of whether certain measures during the absence, such as distributions, capital measures or restructurings, jeopardise the later lapse of the tax claim.
Example: Holding Partnership
A common consideration is to contribute shares, before the move, to a commercially active partnership with a domestic permanent establishment. Whether the partnership is commercially active and the shares are functionally attributable to the permanent establishment depends on management functions, services actually rendered and documentation: a classic case for a binding ruling. Because of the AEAO limit for structures in which the tax advantage is the main focus, the application should set out the economic reasons for the structure in a comprehensible way.
The Application: Content Under Section 1 StAuskV
The application must be submitted in writing or electronically to the competent tax authority (Section 1 (1) sentence 1 StAuskV). It must contain the following information:
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| No. | Mandatory information under Section 1 (1) sentence 2 StAuskV | Note for the emigration case |
|---|---|---|
| 1 | Precise identification of the applicant with residence or habitual abode and, if available, tax number | State the current address in Germany and the planned address abroad |
| 2 | Comprehensive, self-contained description of the transaction not yet carried out | Date of the move, housing situation in Germany, shareholdings, planned measures |
| 3 | Explanation of the special tax interest | Order of magnitude of the possible tax on the notional capital gain |
| 4 | Detailed explanation of the legal problem with a thorough justification of the applicant’s own legal position | Evaluate statutory provisions, case law and the view of the tax authorities |
| 5 | Formulation of specific legal questions | One question per legal consequence, no collective questions |
| 6 | Declaration that no ruling on the same transaction has been applied for from any other tax authority | Also applies to the BZSt |
| 7 | Assurance that the information is complete and true | Incomplete information jeopardises the binding effect |
In addition, the applicant should set out the value in dispute (Gegenstandswert) (Section 89 (4) sentence 2 AO). The tax office bases its assessment on the transaction as presented and does not investigate it itself; gaps later affect the binding effect.
Competence Before and After the Move
Basic rule (Section 89 (2) sentence 2 AO): The competent authority is the tax authority that would have local competence once the transaction on which the application is based is carried out. The future circumstances are therefore decisive. For an application made before the move concerning the consequences of terminating unlimited tax liability, this will in many cases be the previous tax office for the place of residence. This remains a question of the individual case, for example where several types of tax are affected. In that case, according to the AEAO, the authorities involved are to coordinate with each other or conclude an agreement on competence.
Special rule (Section 89 (2) sentence 3 AO): If, at the time of the application, no tax office is competent for the applicant under Sections 18 to 21 AO, the BZSt decides on taxes administered by the state tax authorities on behalf of the Federal Government. This includes, in particular, income tax. The ruling of the BZSt then also binds the tax office that later becomes competent. According to the AEAO, what matters is whether tax-relevant circumstances giving rise to a filing obligation already exist in Germany. According to the AEAO, income subject to a final withholding tax does not, in principle, establish competence.
Anyone who no longer has income in Germany subject to a filing obligation after the move and, for example, is planning a return will therefore, as a rule, address their income tax application to the BZSt. Anyone who continues to declare rental income from a German property, by contrast, has a competent tax office. It should also be noted that the decision on extending the return period under Section 6 (3) AStG is made by the tax office that was competent under Section 19 AO at the time unlimited tax liability ended. Anyone who needs a contact person in Germany after emigrating will find guidance in the article on tax representation after moving abroad.
Timetable: Allow for a Six-Month Processing Period
A decision on the application is to be made within six months of its receipt by the competent tax authority (Section 89 (2) sentence 4 AO). If the authority cannot meet this deadline, it must inform the applicant, stating the reasons. There is no legal fiction: according to the AEAO, the ruling is not deemed to have been issued as applied for even after the deadline has expired.
The decisive point for emigration: if the transaction is carried out after the application has been submitted but before the decision, the issuing of a binding ruling is excluded according to the AEAO. Anyone who moves before the tax office has decided loses the ruling, but may still have to bear the fee. For planning purposes, this means that the facts, the valuation of the shares and the legal questions should be prepared about nine to twelve months before the move, and the application should be submitted no later than about eight months beforehand. These are values based on experience, not statutory deadlines.
Costs: Value in Dispute and Fee Under Section 89 (3) to (7) AO
A fee is charged for processing the application (Section 89 (3) sentence 1 AO). According to the AEAO, it is also payable if the tax office takes a different legal view, refuses the ruling or the application is withdrawn. The fee must be paid within one month of notification of its assessment; the authority may defer its decision until payment has been made.
Value in dispute: The fee is based on the value that the ruling has for the applicant (Section 89 (4) sentence 1 AO). According to the AEAO, the tax that would arise if the applicant’s legal view were applied is compared with the tax that would arise under the opposing legal view of the tax authority. Church tax and the solidarity surcharge are disregarded for income tax questions. The authority is to follow the value stated by the applicant unless this leads to an obviously incorrect result (Section 89 (4) sentence 3 AO).
Amount of the fee: The fee is charged by applying Section 34 GKG accordingly at a rate of 1.0; the value in dispute is capped at EUR 30 million in accordance with Section 39 (2) GKG (Section 89 (5) AO). If the value in dispute is less than EUR 10,000, no fee is charged. Based on the currently published GKG fee table, the following values result, for example:
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| Value in dispute (tax difference) | Fee at a rate of 1.0 |
|---|---|
| Below EUR 10,000 | No fee |
| EUR 25,000 | EUR 435.50 |
| EUR 50,000 | EUR 638.00 |
| EUR 110,000 | EUR 1,198.00 |
| EUR 200,000 | EUR 2,038.00 |
| EUR 500,000 | EUR 4,138.00 |
Example: The fictitious shareholder Clara holds 100 percent of a GmbH and is planning to emigrate. She wants clarification on whether a certain sequence of steps triggers the exit tax provision. According to her calculation, income tax of EUR 200,000 is at stake. With a value in dispute of this amount, the fee according to the table is EUR 2,038. In addition, there are her adviser’s costs for drafting the application.
Time-based fee and reduction: If the value in dispute can be neither determined nor estimated, a time-based fee of EUR 50 is charged for each half hour or part thereof; no fee is payable for processing times of less than two hours (Section 89 (6) AO). If the application is withdrawn before the decision is notified, the fee may be reduced (Section 89 (7) sentence 2 AO); according to the AEAO, to zero if processing has not yet begun, otherwise proportionately. The actual fee can therefore only be determined on the basis of the specific value in dispute and the stage of processing.
Binding Effect and Its Limits
The ruling issued is binding for taxation purposes if the transaction later carried out does not deviate, or deviates only insignificantly, from the one on which the ruling was based (Section 2 (1) sentence 1 StAuskV). This results in several limits that are of practical importance on emigration:
- Deviation in the facts. A different date for the move, a home retained contrary to the application or a changed shareholding structure can cause the binding effect to lapse.
- Change in the law. The binding effect lapses as soon as the underlying statutory provisions are repealed or amended (Section 2 (3) StAuskV). As the Foreign Tax Act has been amended several times, an older ruling should be reviewed before implementation.
- Incorrect ruling. If the ruling turns out to be incorrect, it can be revoked or amended with effect for the future (Section 2 (4) StAuskV). According to the AEAO, if the transaction had essentially already been carried out when the revocation was notified, the binding effect remains.
- Unlawful to the taxpayer’s detriment. If the ruling contradicts applicable law to the detriment of the taxpayer, it is not binding (Section 2 (1) sentence 2 StAuskV).
- Authority without competence. According to the AEAO, a ruling issued by an authority lacking subject-matter or local competence has no binding effect from the outset.
The binding effect applies only to the German taxes to which the ruling relates. It says nothing about how the destination country will treat the transaction.
If the Tax Office Decides Otherwise: Objection and Negative Ruling
Both the ruling issued and its refusal are administrative acts against which an objection (Einspruch) may be lodged (Section 347 AO). If the tax office departs from the applicant’s legal position (negative ruling, Negativauskunft), a fiscal court, according to the AEAO and the BFH judgment of 29.2.2012 (IX R 11/11), reviews it only to a limited extent, namely whether the facts were correctly recorded and whether the legal classification is consistent and not evidently wrong in law. A full substantive review is reserved for proceedings against the subsequent tax assessment notice.
A negative ruling nevertheless allows a decision to be made before the move: adapt the project, abandon it, or deliberately implement it and pursue the dispute in the assessment procedure. An objection may also be lodged against the fee assessment notice.
Ruling in the Destination Country
The German ruling binds only German tax authorities. Whether the destination country has a comparable advance ruling procedure and what binding effect it has should be assessed by a local adviser. Both applications should be coordinated so that the descriptions of the facts match. In addition, a certificate of tax residence is often required in order to claim treaty benefits.
Mistakes in Practice When Applying Before Emigration
- Applying too late. Anyone who submits the application only a few weeks before the move risks the transaction being carried out before the decision.
- Incomplete facts. Anything missing from the application is not covered by the binding effect. A retained home or a planned distribution belongs in the description.
- Alternative questions. “Option A or B?” will not be answered.
- Value in dispute set too low. An obviously incorrect value will not be accepted and delays processing.
- Implementation deviates. Even a different reference date can cost the binding effect.
- Adviser does not recommend a ruling. In our view, where the legal situation is unclear or changing, the application is part of careful advice. If this advice is not given, questions of liability may arise.
An overview of legal structuring approaches that should be secured by a ruling where legal questions remain open is given in the article Avoiding exit taxation (in German).
Conclusion
The binding ruling under Section 89 (2) AO is the central instrument for clarifying open tax questions before moving abroad. It requires a precisely described transaction not yet carried out, an application containing the information required under Section 1 StAuskV, and time: the authority is to decide within six months, and anyone who moves before then loses the ruling. The fee depends on the tax in dispute. The binding effect applies only to the transaction described and only to German taxes. Where the legal position is open, for example with holding structures or measures during a temporary absence, it remains open until a ruling has been issued or the courts have decided.
Frequently Asked Questions
Can I still apply for a binding ruling after emigrating?
Not for the move itself, because the transaction has then been carried out. For future projects, such as a return, a restructuring or the sale of shares, an application is still possible. The competent authority is then the tax office that would be competent once the transaction is carried out or, where there is no domestic competence, the BZSt.
What does a binding ruling on exit tax cost?
The fee depends on the value in dispute, i.e. the tax difference between your legal view and the opposing view. No fee is payable below a value in dispute of EUR 10,000. At EUR 200,000, it amounts to EUR 2,038 according to the current GKG table, at EUR 500,000 to EUR 4,138.
How long does processing take?
The law provides that a decision is to be made within six months of receipt. If the authority does not meet this deadline, it must state the reasons. There is no automatic approval once the deadline has expired.
Does the ruling remain binding if the law changes?
No. The binding effect lapses from the date on which the provisions on which the ruling is based are repealed or amended (Section 2 (3) StAuskV). Before implementation, it should therefore be checked whether the legal position has changed since the ruling.
Does the German ruling also apply in my new country of residence?
No. It binds only German tax authorities. Whether the destination country has a comparable procedure should be clarified with a local adviser.
Attorney Dr. Johannes Fiala and the Munich-based firm, which focuses on international succession law, tax law and asset protection, advise emigrants and shareholders on securing their move abroad by means of a binding ruling, from formulating the legal questions and determining the value in dispute to coordinating with advisers in the destination country. Dr. Fiala has published extensively on questions of emigration and asset protection. Please get in touch with the firm without obligation to discuss your individual situation in an initial consultation.
