For a gift made before moving abroad, gift tax depends on the time of execution and on whether the donor or the recipient is a German resident at that time (§ 2 (1) no. 1, § 9 (1) no. 2 Inheritance Tax Act, Erbschaftsteuergesetz, ErbStG). German nationals are still treated as residents for up to five years after moving away; shares in corporations can trigger exit taxation (Wegzugsbesteuerung) under § 6 Foreign Tax Act (Außensteuergesetz, AStG) when transferred to a person living abroad. Earlier acquisitions by the same person are aggregated over ten years.
Anyone who gives away assets before moving abroad often wants to limit taxes or prepare the move in an orderly way. The tax consequences of a gift before moving abroad depend on several questions: who is a German resident at the time of the gift, what is being given, where is the donor moving, and where does the recipient live? Gift tax, income tax on shares under § 6 AStG and several deadlines interlock. This article sets out the rules, the points in time and the deadlines. The legal position is as of October 2026. It is written for readers abroad as well, for example German citizens planning to emigrate or recipients living outside Germany.
When Gift Tax Arises and Who Is a Resident
Gift tax arises upon execution of the transfer, and this point in time decides residence status. In the case of a gift between living persons, the tax arises at the time the transfer is executed (§ 9 (1) no. 2 ErbStG). This point in time is what matters when assessing whether the donor or the recipient is a resident. The transfer is executed when the recipient has finally obtained the power of disposal; for land, according to the view of the tax administration it generally suffices that the conveyance (Auflassung) and the consent to registration are in place, provided registration follows (R E 9.1 Inheritance Tax Guidelines, ErbStR); for mixed gifts, proof of payment of the purchase price may matter. For shares, the exact point in time must be clarified in the individual case. The point in time should be clearly documented before the move.
The gift is subject to unlimited tax liability if the donor or the recipient is a resident at the time of execution (§ 2 (1) no. 1 ErbStG). The entire acquisition is then taxable, including foreign assets. The following are treated as residents:
- natural persons with a domicile or habitual abode in Germany,
- German nationals who have not stayed permanently abroad for longer than five years without having a domicile in Germany,
- certain German nationals in public service with a stay abroad.
Anyone who moves away therefore does not automatically fall outside German reach for gift tax purposes. For German nationals the five-year period runs, and a recipient remaining in Germany establishes unlimited tax liability in any case. Anyone who does not hold the nationality is, as a rule, no longer treated as a resident once he or she has moved away, provided no domicile remains. When domicile and habitual abode end is a separate question of fact.
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| Constellation at execution of the gift | Tax liability in Germany |
|---|---|
| Donor and recipient live in Germany | unlimited, entire acquisition |
| Donor has moved away, recipient lives in Germany | unlimited, because the acquirer is a resident |
| Donor is a German national and has been abroad for less than five years, recipient abroad | unlimited, entire acquisition |
| Donor more than five years abroad, recipient abroad, neither a resident (also no German within the five-year period, no domestic domicile) | limited, only domestic assets within the meaning of the Valuation Act; special case of extended limited tax liability possible |
Limited and Extended Limited Tax Liability
If neither the donor nor the recipient is a resident, only limited tax liability exists. If neither donor nor recipient is a resident, only domestic assets within the meaning of § 121 Valuation Act (Bewertungsgesetz, BewG) are taxed (§ 2 (1) no. 3 ErbStG). In this case the allowance is reduced by the part attributable to non-taxable assets from acquisitions from the same person within ten years (§ 16 (2) ErbStG).
For moves to low-tax territories there is extended limited tax liability under § 4 AStG. It is linked to § 2 (1) AStG: the person must have been subject to unlimited income tax liability as a German for at least five of the ten years before the end of unlimited income tax liability, must live in a low-tax territory or in no foreign territory at all, and must have substantial economic interests in Germany. The consequence extends to ten years after the end of the year in which unlimited tax liability ended and also covers parts of the acquisition whose income would not be foreign income within the meaning of § 34d Income Tax Act (Einkommensteuergesetz, EStG) under unlimited income tax liability. The consequence does not apply if it is proved that a comparable tax of at least 30 percent of the German tax is levied abroad (§ 4 (2) AStG). Details: Extended limited tax liability on emigration.
Allowances, Tax Classes and Tax Rates
Allowance and tax rate depend on the family relationship. The personal allowances depend on the family relationship (§ 16 (1) ErbStG):
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| Recipient | Tax class | Allowance |
|---|---|---|
| Spouse, registered civil partner | I | 500,000 euros |
| Child, stepchild (also child of a deceased child) | I | 400,000 euros |
| Grandchild (child of a child) | I | 200,000 euros |
| Parents and more remote ancestors (on gift) | II | 20,000 euros |
| Siblings, nieces, nephews, children-in-law and others | II | 20,000 euros |
| All other persons | III | 20,000 euros |
In the case of gifts, parents and more remote ancestors do not belong to tax class I; this classification applies only to acquisitions upon death (§ 15 (1) ErbStG). The tax rates depend on the value of the taxable acquisition (§ 19 (1) ErbStG):
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| Taxable acquisition up to | Class I | Class II | Class III |
|---|---|---|---|
| 75,000 euros | 7 % | 15 % | 30 % |
| 300,000 euros | 11 % | 20 % | 30 % |
| 600,000 euros | 15 % | 25 % | 30 % |
| 6,000,000 euros | 19 % | 30 % | 30 % |
| 13,000,000 euros | 23 % | 35 % | 50 % |
| 26,000,000 euros | 27 % | 40 % | 50 % |
| over 26,000,000 euros | 30 % | 43 % | 50 % |
When a value threshold is exceeded, a hardship clause limits the additional amount (§ 19 (3) ErbStG). In the case of several gifts from the same person, acquisitions within ten years are aggregated (§ 14 (1) ErbStG); tax already paid is credited. The allowances can therefore in principle be used anew every ten years. For structuring across several persons see Chain gifts and gift tax.
The recipient is the taxpayer; in the case of a gift, the donor also owes the tax (§ 20 (1) ErbStG). Both are liable as debtors, so the tax office can proceed against the donor. The gift must be reported within three months of knowledge, and also by the donor (§ 30 ErbStG).
Gifts of business assets, agricultural and forestry assets and shares in corporations can be privileged under certain conditions (§§ 13a, 13b ErbStG). The conditions, for example on the seat of the company, the size of the holding, administrative assets, payroll sum and holding period, must be examined in the individual case.
§ 6 AStG: When What Is Given Away Triggers Exit Tax
Exit taxation under § 6 AStG can already be triggered by the gift of shares. It concerns shares in corporations within the meaning of § 17 (1) sentence 1 EStG, that is, holdings of at least one percent within the last five years. Under § 6 (1) sentence 1 AStG, the following are treated as equivalent to a sale at fair market value:
- the end of unlimited tax liability by giving up domicile or habitual abode,
- the gratuitous transfer to a person who is not subject to unlimited tax liability,
- under certain conditions, the exclusion or restriction of Germany’s right to tax the capital gain on disposal.
Covered are natural persons who were subject to unlimited tax liability for a total of at least seven years within the last twelve years (§ 6 (2) AStG); for shares acquired gratuitously, the periods of the predecessors in title count as well.
What the Gift before the Move Achieves
Anyone who effectively gives shares before the move to a person subject to unlimited tax liability in Germany no longer holds them at the time of the move. The transfer to a resident is not a case of number 2. At the same time, no capital gain arises for the donor; the hidden reserves are in principle not disclosed, because the recipient takes over the donor’s acquisition costs (§ 17 (2) sentence 5 EStG); they pass on with the holding and are taxed only in the hands of the recipient when he or she sells or moves away himself or herself. If, by contrast, the recipient is not subject to unlimited tax liability, the transfer itself already counts as a sale at fair market value (number 2). For children living abroad, this is the standard case of this risk.
What the donor retains also counts. If he or she retains a part, it remains covered if he or she held at least one percent within the last five years. A reduction below one percent therefore takes effect only once five years have passed since the last holding of at least one percent; the holding of the predecessor in title counts in the case of gratuitous acquisition (§ 17 (1) sentence 4 EStG). For the overall mechanics see Exit tax on GmbH shares.
Return and Payment in Instalments
Special deadlines apply to return and payment in instalments. If the person who moved away returns within seven years and the absence was only temporary, the tax claim can lapse under certain conditions (§ 6 (3) AStG): in the meantime the shares must not have been sold, transferred or contributed to a business asset, distributions must not exceed a quarter of the value, and Germany’s right to tax must again exist to the former extent. The competent tax office can extend the period by no more than five years on application if the intention to return persists. If the tax is assessed, it can be paid on application in seven equal annual instalments, as a rule only against provision of security (§ 6 (4) AStG); on this see Exit tax: payment in instalments over seven years. Anyone paying in instalments must notify the tax office of his or her address every year by 31 July and confirm that he or she still owns the shares; in the case of a gift to a person abroad, this falls on the recipient. Sale, transfer and similar events must be reported within one month (§ 6 (5) AStG). Anyone who fails to do so risks the remaining tax becoming due immediately. A gift to a person who is not subject to unlimited tax liability can trigger the return rules for the recipient if he or she becomes subject to unlimited tax liability within seven years; this too is in the law (§ 6 (3)).
Holding Company, Family Pool and Family Foundation: Open Questions to Examine
Questions remain open for holding companies, family pools and family foundations. An upstream holding company does not remove exit tax by itself, because holding shares are also shares in a corporation and § 17 EStG covers indirect holdings. Anyone who contributes shares in exchange for new shares triggers a share exchange (Anteilstausch), whose valuation and lock-up periods are regulated in the Reorganisation Tax Act (Umwandlungssteuergesetz); particularly before a move, this must be examined separately. For family pools and family foundations, the treatment in connection with § 6 AStG cannot be answered in general terms. The transfer to a family foundation counts as a gift, and a family foundation with its seat or place of management in Germany is itself subject to substitute inheritance tax (Ersatzerbschaftsteuer) at intervals of thirty years (§ 1 (1) no. 4, § 2 (1) no. 2 ErbStG); on this see Family foundation and asset protection on emigration. If the acquirer is resident abroad, § 6 (1) sentence 1 no. 2 AStG must also be examined.
The Deadlines at a Glance
The following table summarises the relevant deadlines.
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| Deadline | Meaning | Provision |
|---|---|---|
| 5 years | German nationals are still treated as residents after moving away | § 2 (1) no. 1 ErbStG |
| 10 years | Aggregation of earlier acquisitions from the same person | § 14 ErbStG |
| 10 years after year-end | extended limited tax liability for low-tax territory | §§ 2, 4 AStG |
| 3 months | Reporting of the gift to the tax office | § 30 ErbStG |
| 5 years | Look-back for a holding of at least 1 percent | § 17 (1) sentence 4 EStG |
| 5 years | Credit for foreign tax only if the German tax arises within five years of the foreign tax | § 21 (1) ErbStG |
| 31 July annually / 1 month | Notifications when paying in instalments | § 6 (5) AStG |
| 7 of 12 years | Minimum duration of unlimited tax liability for § 6 AStG | § 6 (2) AStG |
| 7 years (up to 12) | Return, period extendable on application by no more than five years | § 6 (3) AStG |
| 7 annual instalments | Payment of the tax under § 6 AStG on application | § 6 (4) AStG |
Foreign Tax and Double Taxation
The destination state may also tax the gift, whether in the hands of the donor or the recipient. How the destination state taxes is to be assessed under the law of the destination state; an adviser on the spot should be consulted for this. Germany has treaties in the field of inheritance and gift tax with only a few states; which rules apply in the individual case is shown in Inheritance tax and double taxation treaties. Without a treaty, credit for foreign tax under § 21 ErbStG comes into question. It requires that the acquirer is subject to unlimited tax liability, that the foreign tax has been assessed, paid and is not eligible for reduction, and it is limited to the foreign assets that are also subject to German tax. In addition, the German tax must have arisen within five years of the foreign tax (§ 21 (1) last sentence ErbStG). If the taxation dates are further apart, credit is excluded. Credit is given only on application and requires proof, in the case of foreign-language documents possibly with a certified translation.
Securing before Implementation: Binding Ruling
The Federal Constitutional Court (Bundesverfassungsgericht) heard the inheritance tax cases on 12 and 13 October 2026, on the federal government’s competence for allowances and tax rates (1 BvF 1/23) and on the relief for business assets (1 BvR 804/22). A judgment is pending; until then the law in force applies. Changes are possible.
Anyone who has his or her inheritance or gift tax assessment reviewed in good time secures possible advantages from the future case law of the Federal Constitutional Court, even if it is issued only after the assessment. This is described as keeping the assessment proceedings open. The tax office does assess the tax provisionally on its own initiative on some points (§ 165 (1) sentence 2 no. 3 Fiscal Code, Abgabenordnung, AO), but it does not foresee all conceivable decisions of the Constitutional Court and, to that extent, does not keep a later change in favour of the citizen open. Once the assessment has become final, it in principle remains in place even if the court later objects to the provision (§ 79 (2) Federal Constitutional Court Act, BVerfGG). Here one must act within one month of notification (§ 355 (1) AO): file an objection (Einspruch), rely on the pending proceedings (1 BvF 1/23, 1 BvR 804/22) and make suitable applications, for example for the proceedings to be stayed, which then occurs by operation of law (§ 363 (2) sentence 2 AO).
Where the legal position is unclear or changing, implementation should not take place without safeguards. On application, the tax office can give a binding commitment on how it will treat a future set of facts for tax purposes (binding ruling, verbindliche Auskunft, § 89 (2) AO). A fee is charged for the ruling (§ 89 (3) to (7) AO). Where there is a foreign connection, a ruling in the other state may also come into consideration. Open, for example, is the treatment of certain structures in connection with § 6 AStG. How the procedure works is shown in Binding ruling when moving abroad.
Three Mistakes Laypeople Often Make
Laypeople above all underestimate the point in time, the five-year period and the effect on children abroad.
- Underestimating the point in time. What matters is the execution of the transfer; anyone who has the deed notarised a few days before the move and completes it only afterwards can change the classification as unlimited or limited tax liability.
- Overlooking the five-year period for nationals. Anyone who thinks gift tax is settled with the move overlooks the reach to foreign assets and the role of the recipient.
- Giving shares to children abroad. The transfer to a person who is not subject to unlimited tax liability can itself trigger taxation under § 6 AStG; gift tax is added.
Example (Fictitious)
Mr. Anders gives his daughter Ida, who lives in Germany, 500,000 euros in securities and then moves abroad. Both were residents at the time of execution, so the gift is subject to unlimited tax liability. The allowance for children is 400,000 euros, the taxable acquisition 100,000 euros, and the tax under class I at 11 percent is therefore 11,000 euros. Ten years later the allowance could again be available in relation to the same person; whether German tax liability then still exists depends on the circumstances then applying. If, by contrast, Mr. Anders were to give shares in a GmbH in which he holds ten percent to a son living abroad, § 6 AStG would additionally have to be examined. Names and figures are invented.
Conclusion
A gift before moving abroad can avoid or reduce gift tax, but does not by itself resolve all consequences. Decisive are the time of execution, the residence status of donor and recipient, the periods of five, ten, seven and twelve years and, for shares in corporations, § 6 AStG. Because of the interactions and the partly open legal questions, the planning should be secured by a binding ruling from the tax office and, where appropriate, coordinated with an adviser in the destination state.
Frequently Asked Questions
Is gift tax payable if I give gifts before moving abroad?
If the donor or the recipient is a resident at the time of execution, the gift is subject to unlimited tax liability. Tax arises to the extent that the acquisition exceeds the personal allowance (§ 16 ErbStG), with aggregation of earlier acquisitions of the last ten years.
How long do I remain a resident for gift tax after moving abroad?
German nationals without a domicile in Germany are still treated as residents for up to five years after moving away (§ 2 (1) no. 1 ErbStG). For low-tax territories, extended limited tax liability can apply for up to ten years beyond the year of the move (§ 4 AStG).
Does giving business shares to children abroad trigger exit tax?
The gratuitous transfer to a person who is not subject to unlimited tax liability is equivalent to a sale at fair market value under § 6 (1) sentence 1 no. 2 AStG if the conditions of § 6 AStG are met. Gift tax is added.
Do I have to report the gift to the tax office?
Yes, within three months; the duty to report applies to the acquirer and the donor (§ 30 ErbStG). It exists even if, because of the allowances, no tax is expected to arise, subject to the statutory exceptions.
Can the tax office give a binding ruling in advance?
Yes, on application under § 89 (2) AO for facts not yet realised; a fee is charged for the ruling (§ 89 (3) to (7) AO). Where there is a foreign connection, a ruling in the other state may additionally come into consideration.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise donors, recipients and shareholders on gifts before a move abroad, from gift tax through exit taxation under § 6 AStG to deadline planning and 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.
