Many emigrants have a number in mind: after 10 years abroad, German inheritance tax is supposedly no longer an issue. Others speak of five years. Both numbers have a kernel of truth but are often applied wrongly. German inheritance tax for emigrants knows several periods with different requirements and consequences: the five-year period for German nationals under the Inheritance and Gift Tax Act (ErbStG), the ten-year period under the Foreign Tax Act (Außensteuergesetz, AStG) and special rules in individual double taxation treaties. There is also one constellation with no period at all: if the heir lives in Germany, the deceased’s longest time abroad does not help. This article shows how long after a move German inheritance and gift tax threatens and how the periods are counted (legal position as of October 2026).
Short Answer: Three Periods to Keep Apart
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| Period after the move | Legal basis | Who must meet the requirement? | What Germany taxes |
|---|---|---|---|
| As long as a residence or habitual abode in Germany exists | Section 2 (1) no. 1 sentence 2 letter a ErbStG | Deceased, donor or acquirer | the entire acquisition worldwide |
| Up to five years after the move | Section 2 (1) no. 1 sentence 2 letter b ErbStG | German nationals without a domestic residence, on both sides | the entire acquisition worldwide |
| Until the end of the tenth year after the year of the move | Section 4 AStG in conjunction with Section 2 AStG | only deceased or donor | domestic assets under Section 121 of the Valuation Act (BewG) and additionally extended domestic assets |
| Without a time limit | Section 2 (1) no. 3 ErbStG | none of the parties is a resident | only domestic assets under Section 121 BewG |
The ten years therefore do not mean that the entire worldwide estate remains taxable in Germany for a decade. The ten-year rule applies only under narrow requirements and merely widens the circle of German assets that are taxed.
Starting Point: Residents on Both Sides
Under Section 2 (1) no. 1 ErbStG, German inheritance and gift tax asks whether the deceased 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 (Inländer). If even one of these persons is a resident, the entire acquisition is subject to unlimited tax liability, regardless of the state in which the assets are located.
Residents are first of all all natural persons with a residence or habitual abode in Germany. Deregistration with the registration authorities alone does not end a tax residence; under Section 8 of the Fiscal Code (AO), what matters is whether someone has a dwelling under circumstances that indicate he or she will keep and use it. The distinction is covered in the article on habitual abode in tax law.
The Five-Year Period for German Nationals
Requirements under Section 2 (1) no. 1 sentence 2 letter b ErbStG
German nationals who have not stayed abroad permanently for more than five years without having a residence in Germany are also treated as residents (extended unlimited tax liability, erweiterte unbeschränkte Steuerpflicht).
Three features must coincide:
- German nationality at the relevant time. Anyone who also holds another nationality remains German and also falls under the rule.
- No residence in Germany. If a residence still exists, the five-year period does not matter at all; the regular unlimited tax liability under letter a then applies without a time limit.
- Permanent stay abroad of no more than five years. The period runs from the move, that is, from giving up the domestic residence and habitual abode.
Whether you remain a German national on emigrating and what consequences naturalisation in the destination state can have is explained in the article on nationality on emigration.
The Period Works on Both Sides
The five-year rule applies to the deceased or donor just as to the acquirer. Example: Lena moved to Canada three years ago and remained German. Her father, who has lived in Portugal for twenty years and is no longer a German national, gives her a Portuguese securities account. Although the donor and the assets are abroad, the gift can be subject to German gift tax through Lena’s resident status.
A Retained Residence Stops the Period
The period begins only when there is no longer a domestic residence. A dwelling that remains available at any time and is used regularly can maintain the residence, in some circumstances also a holiday home occupied for several weeks a year. If the dwelling is sold or let to third parties long-term, the residence regularly ends. As long as it exists, unlimited tax liability remains without a time limit.
Return and Re-Establishing a Residence
Anyone who establishes a residence in Germany again during the five years is subject to unlimited tax liability in that time anyway. According to a widespread view, the five-year period starts again after the renewed abandonment, because the statute requires a permanent stay abroad. Short visits without a residence and without a habitual abode do not harm according to the prevailing view. Longer stays should be documented and reviewed in advance.
Special Case: Employees of the German Public Service
Independently of the five-year period, under Section 2 (1) no. 1 sentence 2 letter c ErbStG, German nationals are residents who, without a domestic residence, are in an employment relationship with a domestic legal entity under public law and draw salary from a domestic public fund, together with their German household members, provided the state of residence taxes them for inheritance tax purposes only similarly to limited tax liability. Typical are seconded embassy staff; retired civil servants as a rule do not fall under it.
Full Allowances During the Period
As long as unlimited tax liability exists, the full allowances under Section 16 (1) ErbStG apply, for example 400,000 euros for children. The price is access to worldwide assets.
After Five Years: Limited Tax Liability for Domestic Assets
If none of the parties is a resident any longer, under Section 2 (1) no. 3 ErbStG Germany taxes only domestic assets within the meaning of Section 121 BewG, in particular German real property, domestic business assets and shares in German corporations of ten percent or more. Private bank balances as a rule do not belong to them. This limited tax liability has no time limit: a German property remains subject to inheritance tax even after thirty years abroad, with an allowance reduced proportionately under Section 16 (2) ErbStG. The reduction and the catalogue of domestic assets are explained in the article on the allowance under limited tax liability.
The Ten-Year Period: Extended Limited Tax Liability under Section 4 AStG
What Section 4 AStG Provides
This is the origin of the number “10 years”. If Section 2 (1) sentence 1 AStG was applicable to the deceased or donor at the time the tax liability arose, under Section 4 (1) AStG limited tax liability extends beyond domestic assets to all parts of the acquisition whose income, under unlimited income tax liability, would not be foreign income within the meaning of Section 34d of the Income Tax Act (EStG). Limited tax liability under Section 2 (1) no. 3 ErbStG is a prerequisite; as long as the five-year period runs or an acquirer is a resident, Section 4 AStG is not needed.
The Requirements of Section 2 AStG
Section 4 AStG refers to extended limited income tax liability. All of the following features must be present for the deceased or donor:
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| Feature | Content under Section 2 AStG |
|---|---|
| Former unlimited tax liability | In the last ten years before the end of unlimited income tax liability as a German, subject to unlimited income tax for a total of at least five years |
| Low taxation | Resident in a foreign territory with low taxation or in no foreign territory (Section 2 (1) sentence 1 no. 1, (2) AStG) |
| Substantial economic interests | Substantial economic interests in Germany (Section 2 (1) sentence 1 no. 2, (3) AStG) |
| Period | Until the expiry of ten years after the end of the year in which unlimited income tax liability ended |
Under Section 2 (2) no. 1 AStG, taxation is low if the foreign income tax on an income of 77,000 euros for an unmarried person is lower than the German tax by more than one third; under no. 2, preferential taxation suffices, for example for new arrivals. Counter-evidence that one in fact pays at least two thirds of the German tax is possible. Whether an arrival regime falls under this is a question for the individual case; its design should be confirmed by an adviser on the spot.
Substantial economic interests exist under Section 2 (3) AStG if one of three alternative requirements is met. First, it suffices to be the entrepreneur or co-entrepreneur of a domestic trade or business, to be entitled as a limited partner to more than 25 percent of the income from the partnership within the meaning of Section 15 (1) sentence 1 no. 2 EStG, or to hold a shareholding within the meaning of Section 17 (1) EStG in a domestic corporation (no. 1). Second, it is enough if the income that is not foreign income makes up more than 30 percent of all income or exceeds 62,000 euros (no. 2). Third, it suffices if the assets whose income would not be foreign income amount to more than 30 percent of total assets or exceed 154,000 euros (no. 3). Even a larger securities account with a German bank can therefore be enough.
What Is Additionally Captured
The extended domestic assets go well beyond Section 121 BewG. Typical are balances with German banks and claims against domestic debtors, shareholdings of less than ten percent in German corporations, securities of domestic issuers, certain pension and retirement claims against domestic debtors and movable assets located in Germany. An interposed foreign company does not shield these assets without more, because Section 5 AStG attributes its assets proportionately under its conditions.
The 30 Percent Exception
Under Section 4 (2) AStG, the extension lapses if it is proven that abroad a tax corresponding to German inheritance tax is payable on the additionally captured parts of the acquisition that amounts to at least 30 percent of the German inheritance tax that would be attributable to these parts under paragraph 1. Limited tax liability for the regular domestic assets remains unaffected. The taxpayer must furnish the proof, not the tax office.
How the Ten Years Are Counted
The ten years do not begin on the day of the move but with the end of the calendar year in which unlimited income tax liability ended. Anyone who moves in March therefore remains within the scope for almost eleven years. The five-year inheritance tax period, by contrast, runs from the day of the move. Section 4 AStG therefore becomes practically significant above all between the end of the five-year period and the end of the tenth year after the year of the move. The requirements of Section 2 AStG must be met at the time the tax arises; anyone who is then no longer taxed at a low level or no longer has substantial domestic interests drops out.
Special Case: German Nationality Given Up
The five-year period presupposes German nationality at the time of the acquisition, whereas Section 2 AStG requires only former unlimited tax liability as a German. Anyone who gives up German nationality after the move therefore ends extended unlimited tax liability but remains within the scope of Section 4 AStG under the other requirements, then even before five years have passed. Giving up nationality also has far-reaching personal consequences.
Timeline: One Move and Its Periods
Example (fictitious): Martin, a German who has been subject to unlimited tax liability in Germany for twenty years, gives up his dwelling and habitual abode on 15 March 2024 and moves to a low-tax state within the meaning of Section 2 (2) AStG. He keeps five percent of a German GmbH, a German securities account and a let apartment in Cologne. His children live abroad.
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| Time of the inheritance or gift | Tax liability of the acquisition | What Germany captures |
|---|---|---|
| until 15 March 2029 | unlimited via Martin (Section 2 (1) no. 1 sentence 2 letter b ErbStG) | all assets worldwide, full allowances |
| 16 March 2029 to 31 December 2034, requirements of Section 2 AStG still met | limited, extended under Section 4 AStG | apartment in Cologne, GmbH shares, German securities account and bank balance |
| 16 March 2029 to 31 December 2034, requirements of Section 2 AStG no longer met | limited (Section 2 (1) no. 3 ErbStG) | only the apartment in Cologne |
| from 1 January 2035 | limited | only the apartment in Cologne |
| at any time, if a child is a German national and has not yet lived abroad for five years or lives in Germany | unlimited via this child | the entire acquisition of this child worldwide |
The last row shows why Martin’s own period alone is not enough. Where time margins are tight, the end of the period must be checked to the day.
The Acquirer’s Perspective
For heirs and donees: anyone who lives in Germany is subject to unlimited tax liability, regardless of how long the deceased has already lived abroad. Anyone who has emigrated himself or herself and holds German nationality remains a resident for five years. The acquirer, by contrast, cannot trigger Section 4 AStG; the provision is tied solely to the deceased or donor.
If parents and children emigrate at different times, the periods overlap. Every transfer should therefore be reviewed with the nationality, date of move and remaining dwellings of all parties. Taxable acquisitions must be notified to the tax office within three months under Section 30 ErbStG, even if the acquirer lives abroad.
Special Periods in Inheritance Tax Double Taxation Treaties
Germany has concluded treaties in the field of inheritance tax with only a few states, including Switzerland and the USA. An overview is given in the article on inheritance tax and double taxation treaties. Two treaties matter for the question of periods, whereby a treaty does not establish German tax but merely regulates whether Germany may exercise a right to tax that exists under German law.
Switzerland: Under Art. 4 (4) of the treaty, Germany may tax the estate of a deceased who has moved to Switzerland under German law if in the last ten years before giving up his or her last permanent home in Germany he or she had had such a home for at least five years and the deceased dies in the year of giving it up or in the following five years (that is, up to almost six years after the move). Exceptions apply to establishing residence in Switzerland through employment without an economic interest in the employer, to establishing residence through marriage to a Swiss national and to the case where the deceased was already a Swiss national at the time of giving up the home. The “ten years” here concern the earlier duration of residence, not the duration of tax liability. In addition, Art. 8 (2) permits German taxation if the acquirer has a permanent home or his or her habitual abode in Germany. Details are explained in the article on inheritance tax in relation to Switzerland.
USA: Under Art. 4 (3) of the treaty, a person who is a national of only one contracting state and who has a domicile in both states under the treaty is deemed to be resident in the state of his or her nationality if his or her domicile in the other state did not exist for more than ten years. The rule does not, however, extend the German five-year period for emigrants to the USA to ten years. It presupposes a treaty domicile in Germany, which after the five-year period without a domestic residence is regularly absent. It regulates priority within the five years but does not extend German tax liability. US estate tax should be assessed by an adviser on the spot.
Double Taxation During the Periods
In the first years after the move, a double burden threatens because Germany taxes worldwide assets via the five-year period and the new state of residence possibly does as well. Without a treaty, credit under Section 21 ErbStG remains, which applies only under unlimited tax liability and only on application. It does not apply under limited and extended limited tax liability; there, relief is primarily a matter for the state of residence, which an adviser on the spot should clarify.
Structuring: Timing and Asset Structure
The adjustable factors are timing and the composition of the assets. A gift before the move uses the full allowances but captures the entire assets; after all periods have expired, only domestic assets are captured, with a reduced allowance. For GmbH shares, the consequences of the exit tax on GmbH shareholdings are added. Legal approaches are described in the article Avoiding inheritance tax legally; structures without an economic reason can be measured against Section 42 AO.
Common Mistakes in Practice
- Deregistration confused with giving up a residence: A usable dwelling in Germany maintains unlimited tax liability without a period.
- Only the deceased checked: An acquirer in Germany or a recently emigrated German child triggers unlimited tax liability.
- Ten-year rule over- or underestimated: Section 4 AStG does not capture worldwide assets, but it does capture German bank balances and small shareholdings.
- Start of the period miscalculated: The five-year period runs from the move, the ten-year period from the end of the year of the move.
For Open Questions: Binding Ruling
Several points are open in the individual case, for example whether an arrival regime is preferential taxation within the meaning of Section 2 (2) no. 2 AStG, whether a new five-year period runs after a return or how the allowance is to be calculated under extended limited tax liability. Where the German legal position is not secure or may change, a binding ruling (verbindliche Auskunft) from the tax office under Section 89 (2) AO should be requested before implementation. It binds the tax office to the assessment of a precisely described set of facts not yet realised and is subject to a fee; the fee under Section 89 (3) to (5) AO is as a rule based on the amount in dispute. With a cross-border element, an enquiry to the authorities in the destination state may also make sense.
Conclusion
For inheritance tax after emigration there is not one single period. German nationals remain subject to unlimited tax liability for five years after the move, provided they keep no residence in Germany; afterwards Germany taxes domestic assets without a time limit. The ten years often mentioned concern Section 4 AStG, which applies only with low taxation in the destination state and substantial domestic interests and widens the circle of German assets. Treaty periods with Switzerland and the USA do not extend German tax liability. And if the acquirer lives in Germany or has himself or herself emigrated only recently, the deceased’s time abroad helps little.
Frequently Asked Questions
Am I exempt from German inheritance tax after ten years abroad?
Not completely. German domestic assets such as real property remain taxable without a time limit, and if the acquirer lives in Germany, his or her entire acquisition is taxable.
Does the five-year period also apply if I have a second nationality?
Yes. The rule is tied to German nationality. An additional foreign nationality changes nothing about this.
Does the ten-year rule of Section 4 AStG apply to every emigrant?
No. For the deceased or donor, it requires that in the ten years before the move he or she was subject to unlimited income tax as a German for at least five years, is taxed at a low level in the destination state and has substantial economic interests in Germany.
Does the treaty with the USA extend the period to ten years?
As a rule not. The ten-year rule decides priority only where there is a domicile in both states and does not establish German tax liability.
From when does the five-year period count?
From the move, that is, from giving up residence and habitual abode in Germany. A retained dwelling or a renewed establishment of a residence can postpone the start.
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 their families on inheritance tax planning around the move, from reviewing the five-year period through extended limited tax liability under the Foreign Tax Act to coordination with double taxation treaties. 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.
