Anyone who leaves Germany while holding at least one percent of a GmbH or AG wants to know one thing above all: how high will the exit tax (Wegzugsteuer) be? The calculation follows a clear scheme under Section 6 (1) of the Foreign Tax Act (Außensteuergesetz, AStG) in conjunction with Section 17 of the Income Tax Act (Einkommensteuergesetz, EStG). The law assumes a sale that does not actually take place. Because there is no purchase price, the fair market value (gemeiner Wert) of the shares takes its place; the literature often calls this the substitute tax base (Ersatzbemessungsgrundlage). This article shows step by step how the actual tax results from it and where the most common calculation errors lie.
If you first want to clarify whether the exit tax applies at all, the basics on the shareholding threshold, the prior holding period and the return rule are set out in the article Exit tax on GmbH shareholdings. This article is about the calculation itself.
In Brief: When a Calculation Is Needed at All
A calculation is only needed if the requirements of Section 6 AStG are met. Under the version in force since 2022 there are essentially three:
- You hold shares within the meaning of Section 17 (1) sentence 1 EStG, that is, within the last five years you directly or indirectly held at least one percent of a corporation.
- Your unlimited tax liability ends, typically because you give up your residence and habitual abode in Germany (Section 6 (1) sentence 1 no. 1 AStG). Equivalent are the transfer free of charge to a person who is not subject to unlimited tax liability (no. 2) and the exclusion or restriction of Germany’s right to tax for other reasons (no. 3).
- In the twelve years before this event you were subject to unlimited tax liability for at least seven years (Section 6 (2) sentence 1 AStG).
Whether a residence has been given up depends on the actual circumstances, not on deregistration (see Habitual abode in tax law). Section 6 AStG applies only to natural persons; if a corporation itself moves its registered office or place of management, Section 12 of the Corporate Income Tax Act (KStG) applies in particular.
What Does “Substitute Tax Base” Mean?
In a genuine sale, the gain under Section 17 (2) EStG is the sale price less selling costs and acquisition costs. On emigration there is no buyer and no price. Section 6 (1) sentence 1 AStG therefore treats the move as a sale “at fair market value”. The fair market value thus plays the role that the purchase price plays in a genuine sale. The version in force until the end of 2021 said so expressly: the fair market value of the shares at the relevant time took the place of the sale price.
“Substitute tax base” is therefore not a legal term with rules of its own but a description of this mechanism. For practice, one thing follows above all: whoever determines the fair market value determines the tax. An incorrect or inflated value feeds through one to one into the taxable gain.
The relevant point in time follows from Section 6 (1) sentence 2 AStG. In the basic case of emigration it is the moment at which unlimited tax liability ends. The valuation refers to that date, not to the date of the tax return or of the assessment notice.
Calculating the Exit Tax in Five Steps
The calculation can be divided into five steps. Each step has its own sources of error.
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| Step | Content | Legal basis |
|---|---|---|
| 1 | Determine the fair market value of the shares at the reference date | Section 6 (1) AStG, Section 11 Valuation Act (BewG) |
| 2 | Establish acquisition costs and selling costs | Section 17 (2) EStG |
| 3 | Apply the partial income method (60 percent taxable) | Section 3 no. 40 letter c, Section 3c (2) EStG |
| 4 | Check the allowance, where applicable | Section 17 (3) EStG |
| 5 | Calculate income tax at the personal rate, solidarity surcharge and, where applicable, church tax | Section 32a EStG, Solidarity Surcharge Act (SolZG) |
Step 1: Determining the Fair Market Value
Under Section 9 BewG, the fair market value is the price that could be obtained in an ordinary sale. For shares in corporations, Section 11 BewG sets out an order of priority:
- Listed shares: Under Section 11 (1) BewG, the lowest price quoted on the reference date applies. If there is no quotation on the reference date, the last price quoted within the 30 days before it applies.
- Unlisted shares, in particular GmbH shares: Under Section 11 (2) sentence 2 BewG, the value is to be derived primarily from sales between unrelated third parties that took place less than a year before the reference date. If there are no such sales, the value is to be determined taking earnings prospects into account or by another recognised method that is also customary in ordinary business for non-tax purposes.
- Floor: Under Section 11 (2) sentence 3 BewG, the net asset value, essentially the sum of the assets less the liabilities, must not be undercut.
A typical family or owner-managed GmbH has no sales between unrelated parties. The value then depends on an earnings-value method, and this is where the real dispute with the tax office lies.
The Simplified Earnings Value Method under Sections 199 et seq. BewG
Section 11 (2) sentence 4 BewG refers to the simplified earnings value method of Sections 199 to 203 BewG. It is built schematically:
- Operating results of the last three financial years before the reference date are determined (Section 201 BewG). The starting point is the taxable profit, which is adjusted under Section 202 (1) BewG. Added back are, among other things, special depreciation, write-downs of goodwill, one-off extraordinary expenses and the income tax expense. Deducted are, among other things, one-off extraordinary income and, under Section 202 (1) sentence 2 no. 2 letter d BewG, an appropriate owner’s salary to the extent it has not yet been taken into account in the result.
- Average earnings: The average of the three operating results is generally formed.
- Flat-rate income tax deduction: A positive operating result is reduced by 30 percent under Section 202 (3) BewG.
- Capitalisation: The annual earnings determined in this way are multiplied by the capitalisation factor. Under Section 203 (1) BewG it is 13.75. Under Section 203 (2) BewG, the Federal Ministry of Finance can adjust it to interest rate developments by ordinance.
- Added separately are non-operating assets, participations and so-called young business assets (Section 200 (2) to (4) BewG).
After the flat-rate tax deduction, the value is therefore nearly ten times the adjusted pre-tax result. For high-earning, person-dependent service providers, this can exceed what an independent buyer would pay.
The simplified method is not mandatory, however. It must not lead to obviously incorrect results, and you can submit your own valuation report to the tax office, for example under the IDW S1 standard. The tax authorities are not bound by it and examine such reports critically. Whether a report pays off in an individual case depends above all on how strongly the company’s value depends on you personally and how far the simplified method departs from it.
Step 2: Acquisition Costs and Selling Costs
The acquisition costs of the shares are deducted from the fair market value. On a formation these include the paid-in share capital, on a purchase the purchase price including incidental costs, and in both cases subsequent acquisition costs, such as payments into the capital reserve. For shares acquired free of charge, the acquisition costs of the predecessor are what counts.
The literature also takes the view that selling costs can be deducted even in a deemed sale, for example the costs of a valuation report or of advice on the exit tax. Whether and to what extent the tax office accepts such costs should be clarified in the individual case.
Acquisition costs from formations long ago are often poorly documented; in case of doubt, only what can be proven is then used. Articles of association, resolutions on capital increases and payment receipts therefore belong in the file early.
Step 3: The Partial Income Method
The gain under Section 17 EStG is not taxed in full. Under Section 3 no. 40 sentence 1 letter c EStG, 40 percent of the sale price is tax-exempt; on emigration this applies accordingly to the fair market value. Conversely, acquisition costs and selling costs may be deducted only at 60 percent under Section 3c (2) EStG. The result is that 60 percent of the increase in value is taxable.
A common calculation error is to apply the tax rate to the full increase in value; the tax is then set too high by two thirds. Equally wrong is the flat-rate withholding tax of 25 percent: gains under Section 17 EStG are income from a trade or business and are subject to the personal rate.
Step 4: The Allowance under Section 17 (3) EStG
Section 17 (3) EStG grants an allowance of 9,060 euros, but only proportionately to the shareholding. It phases out to the extent the gain exceeds the corresponding share of 36,100 euros. With a 10 percent shareholding, the allowance is therefore at most 906 euros and is lost entirely once the gain reaches 4,516 euros.
Whether the allowance applies at all to the exit tax is assessed differently in the literature. The prevailing view is that it does; there appears to be no final clarification by the courts, so the question should be agreed with the tax office in the individual case. In most exit cases the question does not matter because of the phase-out, as the increases in value involved are far above the limits. It becomes relevant at most for small shareholdings with little increase in value.
Step 5: Tax Rate, Solidarity Surcharge, Church Tax
The taxable portion is taxed together with the other income of the year of departure at the income tax rate of Section 32a EStG. With high increases in value, the top rate of 45 percent regularly applies. To this are added the solidarity surcharge of 5.5 percent of the income tax, to the extent the exemption limit is exceeded, and, where applicable, church tax.
Measured against the entire increase in value, this results in a burden of just under 28.5 percent in the upper income range without church tax (60 percent times 45 percent times 1.055). The exit tax is assessed as part of the income tax assessment for the year in which unlimited tax liability ends.
Worked Example: Simplified Method versus Valuation Report
Example (fictitious, figures freely chosen): Bernd holds 100 percent of the shares in a consulting GmbH that he founded 15 years ago. His acquisition costs are 100,000 euros (share capital and a later payment into the capital reserve). Costs of 20,000 euros arise for the report and advice on the move, which are assumed here to be selling costs. Bernd moves his residence abroad permanently and meets the prior holding period. The adjusted operating results of the last three years are 380,000, 420,000 and 400,000 euros; there are no non-operating assets.
Under the simplified earnings value method this gives: average 400,000 euros, less 30 percent flat-rate income tax gives 280,000 euros, times the capitalisation factor of 13.75 gives a fair market value of 3,850,000 euros. An IDW S1 report that takes into account the company’s strong dependence on Bernd as consultant arrives at 2,400,000 euros in this example.
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| Item | Simplified earnings value method | Valuation report |
|---|---|---|
| Fair market value (substitute for the sale price) | €3,850,000 | €2,400,000 |
| of which 60 % taxable (Section 3 no. 40 letter c EStG) | €2,310,000 | €1,440,000 |
| Acquisition and selling costs €120,000, of which 60 % (Section 3c (2) EStG) | €72,000 | €72,000 |
| Taxable gain | €2,238,000 | €1,368,000 |
| Allowance, Section 17 (3) EStG | €0 (phased out) | €0 (phased out) |
| Income tax, roughly 45 % | €1,007,100 | €615,600 |
| Solidarity surcharge 5.5 % | €55,390.50 | €33,858 |
| Total exit tax (without church tax) | €1,062,490.50 | €649,458 |
The calculation is deliberately simplified. It applies the top rate to the entire taxable gain and disregards the lower tax bands, other income, special expenses and church tax. The actual tax therefore differs. But the example shows the decisive point: the valuation method alone shifts the tax here by around 413,000 euros, without any change in Bernd’s economic position.
On application, the assessed tax can be paid in seven equal annual instalments (Section 6 (4) sentence 1 AStG), as a rule only against security. In the example that would be around 92,780 euros per year at the report value. The requirements, due dates and risks of paying in instalments are explained in the article Exit tax: payment in instalments over seven years.
What Changes the Calculation Afterwards
Once assessed, the exit tax is not set in stone. Several events after the move have a retroactive effect on the calculation:
- Return within seven years: If the move was based on a merely temporary absence and you become subject to unlimited tax liability again within seven years, the tax claim lapses under Section 6 (3) AStG, provided the shares were not sold, transferred or contributed to a business in the meantime, profit distributions and repayments of contributions did not exceed one quarter of the fair market value in total, and Germany’s right to tax exists again to the previous extent. On application, the period can be extended by a maximum of five years if the intention to return continues unchanged.
- Distributions: If the tax is being paid in annual instalments or is deferred in the case of a return, and the company distributes more than one quarter of the fair market value used, the tax not yet paid becomes due within one month to that extent under Section 6 (4) sentence 5 no. 5 AStG. In the case of a return, the relief under Section 6 (3) sentence 1 no. 2 AStG is also lost.
- Later genuine sale: To the extent the exit tax has been paid, the shares are deemed acquired at fair market value under Section 6 (1) sentence 3 AStG. This is meant to ensure that an increase in value that has already been taxed is not taxed again in a later German assessment. How the new country of residence values the shares depends on its own law and on the double taxation treaty; a local adviser should be consulted for this.
During the instalment period and the return period there are notification duties. Under Section 6 (5) AStG, the current address must be notified each year by 31 July, together with confirmation that the shares are still attributed to you. Harmful events must be reported within one month.
Special Case Investment Funds: Section 19 (3) InvStG
Since the Annual Tax Act 2024 (Jahressteuergesetz 2024), units in investment funds held as private assets are also taxed on emigration. The legal basis is not Section 6 AStG itself but Section 19 (3) of the Investment Tax Act (Investmentsteuergesetz, InvStG), which applies the rules of Section 6 AStG on return, payment in instalments and notification duties accordingly. It covers investors who within the last five years held at least one percent of the units issued by a fund, or whose units in a fund have acquisition costs of at least 500,000 euros. Under this provision, no withholding tax is levied on the deemed gain; it is captured in the assessment procedure.
For fund units, the calculation follows the investment tax rules, not the partial income method of Section 17 EStG. Notes on the securities account on emigration are in the article Securities account on leaving Germany.
Typical Calculation Errors and How to Avoid Them
Some recurring errors can be named from practice:
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| Error | Consequence | Remedy |
|---|---|---|
| Applying the tax rate to the full increase in value | Tax estimated far too high | Partial income method: 60 % taxable |
| Flat-rate withholding tax instead of the personal rate | Tax estimated too low at high values | Section 17 EStG is subject to the rate under Section 32a EStG |
| Simplified earnings value method adopted without checking | Overvaluation, especially for person-dependent service providers | Cross-check with a recognised method, report if necessary |
| Acquisition costs incomplete | Gain too high | Secure records of the formation, capital increases and reserves |
| Wrong reference date | Different value, especially with price fluctuations | Determine the date under Section 6 (1) sentence 2 AStG |
| Fund units overlooked | Unexpected tax under Section 19 (3) InvStG | Check the securities account against the thresholds |
| Distributions after the move not monitored | Immediate due date, loss of the return rule | Measure distributions against the quarter limit |
There is also a strategic error: anyone who only starts calculating after the move ends up commissioning a report under time pressure. The legal planning options before an emigration are covered in the article Avoiding exit taxation. An overview of further tax consequences of an emigration is given in the article on tax traps and planning options when leaving Germany.
Securing the Valuation Dispute: Binding Ruling
The amount of the exit tax depends on valuation and interpretation questions that the tax office may see differently. A binding ruling (verbindliche Auskunft, Section 89 (2) of the Fiscal Code, AO) is therefore worth considering before implementation; with it the tax office assesses a not yet realised set of facts in a binding way. It is subject to a fee (Section 89 (3) to (7) AO). For pure estimation questions on value it is suitable only to a limited extent, but it works well for legal questions such as the line between Section 6 AStG and Section 19 (3) InvStG or the consequences of planned distributions. Where there is a foreign connection, a ruling in the destination country can also make sense; that depends on the law there.
Conclusion
In principle, calculating the exit tax is a calculation under Section 17 EStG with one difference: the missing sale price is replaced by the fair market value of the shares. Acquisition costs and, where applicable, selling costs are deducted from it, the partial income method exempts 40 percent, and the remaining gain is taxed at the personal rate. The allowance under Section 17 (3) EStG plays no role in typical exit cases.
In practice, the valuation decides the amount of the tax, because the simplified earnings value method with the factor 13.75 can be well above a market price. Anyone who calculates early and has the valuation reviewed creates a reliable basis.
Frequently Asked Questions
How is the exit tax calculated?
Fair market value of the shares at the time of departure minus acquisition costs, of which 60 percent is taken under the partial income method, taxed at the personal rate plus solidarity surcharge and, where applicable, church tax.
What is the substitute tax base in the exit tax?
It means the fair market value of the shares. Because no sale price is achieved on emigration, Section 6 (1) AStG puts the fair market value in place of the sale price. The term describes this mechanism; it is not a provision of its own.
Does the tax office have to apply the simplified earnings value method?
No. The value from sales between unrelated third parties within the last year takes priority. If there are no such sales, the value can also be shown by another recognised method, for example a report under IDW S1. The simplified method must not lead to obviously incorrect results. The floor is the net asset value.
Does the 25 percent flat-rate withholding tax apply to the exit tax?
No. The deemed gain from shares within the meaning of Section 17 EStG is income from a trade or business and is subject to the personal rate under the partial income method. Separate investment tax rules apply to investment fund units under Section 19 (3) InvStG.
How high is the exit tax relative to the increase in value?
At the top rate with solidarity surcharge, just under 28.5 percent of the increase in value without church tax, less at lower income. The fair market value used remains decisive.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise shareholders and investors on calculating and reviewing the exit tax, from valuing the shares and determining the taxable gain to payment in instalments, the return rule and binding rulings. Dr. Fiala has published extensively on emigration and asset protection. Get in touch with the firm without obligation to discuss your individual situation in an initial consultation.
