Anyone who moves to Serbia while holding shares in a corporation often asks whether exit tax (Wegzugsbesteuerung) can be avoided because a double taxation agreement exists between Germany and Serbia. The short answer: the treaty does not prevent exit taxation under Section 6 of the German Foreign Tax Act (Außensteuergesetz, AStG). It does, however, determine which state may tax which income after the move, and it limits the extended limited tax liability (erweiterte beschränkte Steuerpflicht) under Section 2 AStG. In practice, these two levels are frequently confused.
The general requirements of Section 6 AStG and the planning options before a move abroad are explained in the article Avoiding exit tax (in German). This article focuses on the particularities in relation to Serbia: the continuing treaty with the former Yugoslavia, its articles that matter in emigration cases, the interaction with Sections 6 and 2 AStG, and the social security agreement of 1968.
The Double Taxation Agreement with Serbia: Legal Basis
A separate double taxation agreement concluded with the Republic of Serbia is not yet in force. The applicable treaty is the Agreement between the Federal Republic of Germany and the Socialist Federal Republic of Yugoslavia of 26 March 1987 for the avoidance of double taxation with respect to taxes on income and on capital (Federal Law Gazette, BGBl. 1988 II p. 744). It entered into force on 25 December 1988 and has been applied since 1 January 1989. Its continued application in relation to Serbia was announced in the Federal Law Gazette (BGBl. 1997 II p. 961). According to the Federal Ministry of Finance’s overview as at 1 January 2026, a new agreement with Serbia was initialled on 27 June 2025 but is not yet in force. The current status should therefore be checked before any planning.
The treaty has 31 articles and its numbering differs from the OECD Model Tax Convention. The following articles are particularly important in emigration cases:
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| Article | Subject matter |
|---|---|
| Art. 4 | Residence and allocation in the case of dual residence |
| Art. 5 | Permanent establishment |
| Art. 7 | Business profits |
| Art. 11 | Dividends |
| Art. 12 | Interest |
| Art. 13 | Royalties |
| Art. 14 | Gains from the alienation of property |
| Art. 24 | Elimination of double taxation (methods article) |
How double taxation agreements are structured in general is explained in the article on double taxation agreements for emigrants.
Residence under Art. 4 of the Treaty
If the move abroad is not carried out unambiguously, for example because a dwelling in Germany is kept available or the family initially stays in Germany, dual residence may arise. Art. 4 (2) of the treaty then decides: the first criterion is the permanent home, then the centre of vital interests and, failing that, the habitual abode. If this still does not lead to a result, the competent authorities settle the question by mutual agreement. Unlike the OECD Model Tax Convention, the treaty does not contain a “nationality” step.
It is important to distinguish between two questions. Unlimited tax liability under domestic law pursuant to Sections 8 and 9 of the Fiscal Code (Abgabenordnung, AO) is not affected by the treaty; anyone who does not give up their German dwelling remains subject to unlimited tax liability in Germany. The tie-breaker, however, decides which state is regarded as the state of residence for treaty purposes, and thus also decides on the right to tax capital gains. This has direct consequences for exit taxation (see below).
Withholding Taxes and Capital Gains under the Treaty
Anyone who continues to receive income from Germany after moving abroad is subject to limited tax liability in Germany on that income to the extent permitted by the treaty:
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| Type of income | Article | German taxing right if resident in Serbia |
|---|---|---|
| Dividends | Art. 11 | Limited to 15% of the gross amount |
| Interest | Art. 12 | No German taxing right, taxation in the state of residence |
| Royalties | Art. 13 | Limited to 10% of the gross amount |
| Gains from the sale of German real estate | Art. 14 (1) | Germany may tax |
| Gains from the sale of shares | Art. 14 (5) | Only the state of residence |
Interest from ordinary German accounts and bonds is, as a rule, already not taxable under German law after the move (Section 49 (1) no. 5 of the Income Tax Act, Einkommensteuergesetz, EStG). Art. 12 of the treaty additionally excludes a German taxing right for all other interest. For dividends, German withholding tax on investment income (Kapitalertragsteuer) is initially withheld in full; a refund of the portion exceeding 15% must be claimed from the Federal Central Tax Office (Bundeszentralamt für Steuern) (Section 50c (3) EStG). Details of the withholding procedure are set out in the article on German withholding tax after emigration.
Under Art. 24 (2) of the treaty, Serbia in principle exempts income that Germany may tax under the treaty, subject to progression; for dividends, interest and royalties (Art. 11 to 13), it credits the German tax. The details of implementation should be clarified with an adviser in Serbia. For persons who remain resident in Germany, Art. 24 (1) in principle provides for exemption with progression and, for certain income, the credit method.
Why the Treaty with Serbia Does Not Prevent Exit Taxation under Section 6 AStG
A widespread misconception is that a double taxation agreement with the destination country protects against exit tax. This is not the case. Section 6 AStG is linked to the end of unlimited tax liability and, for that point in time, deems the shares to have been sold at their fair market value (gemeiner Wert). It covers shares within the meaning of Section 17 EStG, i.e. holdings of at least one per cent in a corporation within the last five years, if the emigrating person was subject to unlimited tax liability for at least seven of the last twelve years. What is taxed is therefore the increase in value up to the move, before the treaty allocates the right to tax later capital gains to Serbia.
The tie-breaker gives rise to a special feature. If a person becomes resident in Serbia under Art. 4 of the treaty despite keeping a German dwelling, Germany loses the right to tax the sale of shares (Art. 14 (5)). This alone can trigger exit taxation (Section 6 (1) sentence 1 no. 3 AStG), even though unlimited tax liability continues. Keeping a dwelling in Germany therefore does not automatically protect against Section 6 AStG.
Since the reform of the Foreign Tax Act, for moves from 2022 onwards the tax is in principle due immediately. On application, it can be paid in seven annual instalments, usually against the provision of security (Section 6 (4) AStG). If the taxpayer returns within seven years in the case of a merely temporary absence, the tax claim may lapse; on application, this period can be extended by up to five years (Section 6 (3) AStG). The details for shareholders of a GmbH are explained in the article on exit tax on GmbH shareholdings.
Structuring before the move, for example via partnerships or holding structures, does not depend on the destination country and requires a case-by-case review. Its viability must be clarified in advance, among other things with regard to Section 50i EStG and the allocation under the treaty. What matters with a holding company is described in the article on the holding structure before emigration.
Unclear legal position: obtain a binding ruling. Where the tax assessment in Germany is not certain or is foreseeably subject to change, an application for a binding ruling (verbindliche Auskunft) from the tax office (Finanzamt) should precede implementation (Section 89 (2) AO). It binds the tax office to the assessment given for a precisely defined set of facts that has not yet been realised, and a fee is charged for it. In our view, a tax adviser who does not recommend this in such a situation is acting irresponsibly: the client risks having to litigate over the result years later, which costs time and money.
Extended Limited Tax Liability under Section 2 AStG
In addition to Section 6 AStG, Section 2 AStG must be examined when moving to Serbia. The provision covers German nationals who were subject to unlimited tax liability for at least five years in the last ten years before the move, who are resident in a low-tax territory or in no state at all, and who retain substantial economic interests in Germany (Section 2 (1) to (3) AStG). The consequence applies until the end of ten years after the end of the year of the move if the income concerned exceeds EUR 16,500 per year.
Low taxation. Under Section 2 (2) no. 1 AStG, the income tax according to the tax scale in the state of immigration for a single person with taxable income of EUR 77,000 is compared with the German tax. If it is more than one third lower, taxation is deemed to be low. The taxpayer can prove that the taxes they actually pay amount to at least two thirds of the German tax. Whether low taxation exists depends on the income tax burden in Serbia. This must be determined under Serbian law and should be clarified with an adviser in Serbia.
Substantial economic interests. Under Section 2 (3) AStG, these exist, among other things, in the case of any retained shareholding within the meaning of Section 17 EStG in a German corporation, and also if certain income amounts to more than 30 per cent of total income or EUR 62,000, or if domestic assets amount to more than 30 per cent of total assets or EUR 154,000.
Limitation by the treaty. The treaty takes precedence over Section 2 AStG. To the extent that it allocates the taxing right to Serbia, for example for interest (Art. 12) or the sale of shares (Art. 14 (5)), the extended limited tax liability has no effect. Which income remains taxable in Germany and at what tax rate (Section 2 (5) AStG) must be calculated in each individual case.
Permanent Establishment Where Business Activity Continues
Anyone who continues an activity in Germany after moving abroad or establishes a company in Serbia must observe the definition of a permanent establishment in Art. 5 and the allocation of business profits under Art. 7 of the treaty. If business premises, an agent with authority to conclude contracts or the actual place of management remain in Germany, a permanent establishment may continue to exist there. Germany then retains the right to tax to that extent, and profits must be allocated. The principles are described in the article Moving the registered office abroad: tax consequences.
For a Serbian company controlled by persons subject to unlimited tax liability in Germany, the controlled foreign company rules (Hinzurechnungsbesteuerung) under Sections 7 et seq. AStG must also be considered. They require passive income subject to a tax burden of less than 15 per cent (Section 8 (5) AStG). Whether the tax burden of a Serbian company falls below this threshold depends on Serbian law and must be clarified with an adviser in Serbia. The formation or acquisition of a foreign company before the move must be reported to the tax office under the conditions of Section 138 (2) sentence 1 no. 3 AO (holding of at least 10 per cent or acquisition costs of all holdings exceeding EUR 150,000).
Social Security: The 1968 Agreement
Compulsory insurance and the right to insurance in Germany are in principle linked to employment or self-employment in Germany or to a residence or habitual abode in Germany (Section 3 of Book IV of the Social Code, SGB IV). Whether and how health insurance can be continued while resident in Serbia must be clarified with the health insurance fund (Krankenkasse) in the individual case.
In relation to Serbia, the Agreement between the Federal Republic of Germany and the Socialist Federal Republic of Yugoslavia on Social Security of 12 October 1968 continues to apply. It covers German health, accident and pension insurance as well as child benefit; unemployment insurance is governed by a separate agreement of the same date. This is significant for pensions because insurance periods in both states can be taken into account. The liaison agency for pension matters is Deutsche Rentenversicherung Bayern Süd. General information is provided in the article on German pension insurance when emigrating.
Checklist: Preparing the Move to Serbia from a Tax Perspective
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| Step | Content |
|---|---|
| 1. Giving up domicile | Document the abandonment of domicile (Wohnsitz) and habitual abode under Sections 8, 9 AO |
| 2. Residence | Examine future residence under Art. 4 of the treaty, avoid dual residence |
| 3. Section 6 AStG | Identify shareholdings within the meaning of Section 17 EStG, determine their value, examine instalment payment or return scenario |
| 4. Section 2 AStG | Examine the low-tax comparison and domestic interests, take into account the limitation by the treaty |
| 5. Ongoing income | Allocate dividends, royalties and real estate income under Art. 11 to 14, plan refunds under Section 50c EStG |
| 6. Permanent establishment | Examine remaining connecting factors in Germany under Art. 5 and 7 |
| 7. Social security | Clarify health and pension insurance with the health insurance fund and Deutsche Rentenversicherung |
| 8. Formalities | Deregistration under registration law, where applicable notification under Section 138 (2) AO, proof of residence from Serbia |
| 9. Serbian law | Clarify tax treatment in Serbia with a local adviser |
Example
Example: Stefan has held 30 per cent of a German GmbH for ten years and wants to move to Serbia. He would like to keep his flat in Cologne for the time being so as to remain flexible. He assumes that he will not be subject to exit taxation as long as he does not give up the flat. What he has overlooked is that, in the case of dual residence, he may be resident in Serbia under the treaty’s tie-breaker if he also has a permanent home there and his centre of vital interests is there (Art. 4 (2) (a)). Germany then loses the right to tax his shares, and Section 6 (1) sentence 1 no. 3 AStG may apply. At the same time, he remains subject to unlimited tax liability in Germany. If he keeps the shareholding after a complete move abroad, substantial economic interests within the meaning of Section 2 (3) AStG also exist.
Conclusion
The continuing treaty with the former Yugoslavia allocates the taxing rights to income, capital gains and capital between Germany and Serbia. It does not, however, prevent Section 6 AStG from capturing the increase in value of shares in corporations up to the move. Dual residence with allocation to Serbia can even trigger exit taxation without the German dwelling being given up. The extended limited tax liability under Section 2 AStG must, as a rule, be examined in the case of Serbia, but it is limited by the treaty. Anyone who takes these interrelationships and the 1968 social security agreement into account in their planning before the move can realistically assess the remaining German tax obligations.
FAQ
Does the double taxation agreement with Serbia protect against exit tax?
No. Section 6 AStG taxes the increase in value of shares up to the move. The treaty only governs which state may tax which income and gains thereafter.
Which double taxation agreement applies to Serbia?
The agreement with the Socialist Federal Republic of Yugoslavia of 26 March 1987, which continues to apply in relation to Serbia. A new agreement was initialled in 2025 but is not yet in force (Federal Ministry of Finance, status as at 1 January 2026).
Does a move to Serbia trigger exit tax even if the German dwelling is not given up?
That is possible. If the person is deemed resident in Serbia under the tie-breaker, Germany loses the right to tax the sale of shares, and Section 6 (1) sentence 1 no. 3 AStG may apply.
Does extended limited tax liability apply when moving to Serbia?
It must be examined, because low taxation within the meaning of Section 2 (2) AStG may be present. However, the treaty limits it; Serbia has the taxing right for interest and the sale of shares.
Are German pension periods taken into account in Serbia?
The 1968 social security agreement continues to apply in relation to Serbia and covers pension insurance. Deutsche Rentenversicherung Bayern Süd, as the liaison agency, provides information.
Attorney Dr. Johannes Fiala and the Munich-based firm, which focuses on international tax and corporate law, support clients in the tax planning of a move abroad, from examining exit taxation and applying the double taxation agreement to coordination with advisers in the destination country. Dr. Fiala has published extensively on tax and asset law issues. Please get in touch with the firm without obligation to discuss your plans in an initial consultation.
