Special business assets (Sonderbetriebsvermögen) of a partner in a partnership generally remain business assets when the partner emigrates; the critical tax question is whether Germany keeps its right to tax the individual asset. If it is lost, a withdrawal can be deemed to have occurred (§ 4 (1) sentence 3 EStG) although nothing was sold. The allocation is therefore decisive for each property, loan, shareholding or licence.
This article explores exactly that point: it explains how to distinguish special business assets I and II, how to take stock of your assets before emigrating and which structuring mistakes become expensive. The overall position of a KG (limited partnership), OHG (general commercial partnership) and GbR (civil-law partnership) on emigration, that is profit shares, treaty law, trade tax and commercially coloured partnerships, is covered by the article on co-entrepreneurship on emigration; these basics are repeated here only briefly. The legal position is as of October 2026.
What Special Business Assets Are
In a partnership, for tax purposes it is not only the partnership’s jointly held property (Gesamthandsvermögen) that counts. Assets that belong to a partner but serve the partnership’s business or the partner’s participation form the special business assets. They do not appear in the commercial balance sheet but in a special tax balance sheet of the partner. Its result flows into the profit of the co-entrepreneurship (Mitunternehmerschaft). Remuneration that the partner receives for making assets available, such as rent or interest, is attributed by § 15 (1) sentence 1 no. 2 EStG to trade income. It is thus also caught for trade tax. The statute does not define the term expressly; it has been developed by case law and the administration.
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| Group | Function | Typical examples |
|---|---|---|
| Special business assets I | Serves the partnership’s business directly | Property let to the KG; machinery; trademark or patent licensed to the partnership; business loan receivable |
| Special business assets II | Strengthens the partner’s participation | Shares in the general-partner GmbH; loan financing the partnership interest |
A further distinction is made between necessary and elective special business assets. Necessary is what is mandatorily allocated by its function; elective is what the partner, where objectively suitable, deliberately includes in the special balance sheet. Someone who uses an object only occasionally or to a minor extent for the partnership does not automatically have special business assets.
What Emigration Does Not Trigger by Itself
Emigration alone does not as a rule end the status as special business assets. As long as the partnership continues its business in Germany and continues to use the property, the business function remains. The private residence is not a criterion for this allocation. The co-entrepreneur’s interest itself is also not subject to exit taxation under § 6 AStG, which targets shares within the meaning of § 17 EStG. This distinction is important because the shares in the general-partner GmbH in special business assets II can nevertheless carry a risk of severance of the German taxing right (Entstrickung): for business assets the severance rules of the Income Tax Act apply, not § 6 AStG. § 6 AStG applies only subject to the rules of the EStG, KStG and UmwStG (§ 6 (1) sentence 1 AStG); according to the application decree on the AStG, it steps back where a provision regulated there applies to the same facts (Federal Ministry of Finance letter of 22 December 2023, para. 73). An express statement by the administration on shares in special business assets is missing; the delimitation in the individual case should be clarified before any structuring.
The Real Risk Point: § 4 (1) Sentence 3 EStG
Under § 4 (1) sentence 3 EStG, the exclusion or restriction of the German right to tax the gain from the sale or use of an asset is treated as a withdrawal. The hidden reserves are disclosed even if no purchase price flows. The test is made for each asset separately. What matters is whether, after emigration, it can still be functionally allocated to the partnership’s German permanent establishment.
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| Asset | Assessment after emigration |
|---|---|
| German property made available to the KG | Germany, as the state where it is situated, regularly keeps the right to tax; severance usually not |
| Loan receivable against the partnership | Usually small hidden reserves; § 50d (10) EStG allocates interest to the partnership’s permanent establishment, subject to a treaty provision and except where the permanent establishment is commercially coloured |
| Shares in the general-partner GmbH | Functional allocation decides; this is often where the severance risk lies |
| Trademark, patent, licence to the partnership | Risk if not functionally part of the German permanent establishment |
| Interest in a supplier company | Allocation in the individual case; examine carefully |
Whether a share in the general-partner GmbH belongs to special business assets II at all depends, according to case law, on the economic entanglement with the partnership; this is to be checked case by case. In its administrative principles on the application of double taxation treaties to partnerships (Federal Ministry of Finance letter of 26 September 2014), the tax administration relies on the functional significance of the asset for the permanent establishment. The assessment may have changed since then through case law and new letters; it must be updated before implementation.
Limited Tax Liability, Double Taxation Treaties and Trade Tax
After emigration the partner remains subject to limited income tax liability on income from the partnership’s German permanent establishment (§ 49 (1) no. 2 lit. a EStG). This also includes special remuneration from the special business assets. If the treaty contains no express provision, § 50d (10) EStG treats special remuneration and income from special business assets, for the application of the treaty, as business profits and allocates them to the partnership’s permanent establishment. Under sentence 7 no. 1 of the provision, this does not apply to commercially coloured partnerships within the meaning of § 15 (3) no. 2 EStG, which must be checked separately for a GmbH & Co. KG. Whether this treaty override is constitutional has not been decided by the Federal Constitutional Court; proceedings 2 BvL 15/14 were discontinued in July 2025 after the referral was withdrawn. On a comparable provision it has in principle approved a treaty override (decision of 15 December 2015, 2 BvL 1/12).
Questions of characterisation remain. The new state of residence may classify the partnership or the special business assets differently and also tax the income. Whether the treaty relieves the double burden depends on the state, on the method and on the book values. How the law of the state of arrival is designed must be assessed by a local adviser. Trade tax is separate from this: the partnership remains the taxpayer, and the special business result flows into the trade income as long as a domestic permanent establishment exists.
The framework of the treaties is explained in the article Double Taxation Treaties: Basics for Emigrants.
Liquidity: Compensation Item and Payment by Instalments
Severance can trigger tax without any cash flowing in. The statute knows two relief measures, both only temporal:
- § 4g EStG: If the right to tax is restricted or excluded in favour of an EU or EEA state that provides the necessary administrative and recovery assistance, a compensation item (Ausgleichsposten) can be formed on application. It is released, increasing profit, by one fifth each in the year of its formation and in the four following financial years. Certain events, such as a sale, lead to immediate release. The application is irrevocable.
- § 36 (5) EStG: For the tax on a deemed cessation gain under § 16 (3a) EStG, payment in five equal annual instalments can be considered where allocation is to an EU or EEA state, as a rule against security.
For emigration to a state outside the EU and EEA, § 4g and § 36 (5) EStG do not provide this spreading; only the general deferral under § 222 AO remains, the requirements of which are narrow. This is a significant difference for the choice of timing and for preparation. If the right to tax the gain from the sale of all assets of a business or part of a business is excluded or restricted, § 16 (3a) EStG treats this as a cessation of the business. The technical details are covered in the article on severance taxation of business assets.
An illustrative example (fictitious figures): Hanna is a limited partner in a KG and lets a hall to the partnership. The property is carried at 400,000 euros and has a market value of 700,000 euros. She also holds shares in the general-partner GmbH with a book value of 25,000 euros and a value of 300,000 euros. If Hanna moves away, the property, because it is situated in Germany, regularly remains within German reach. For the GmbH shares it must be examined whether they are functionally allocable to the German permanent establishment. If not, hidden reserves of 275,000 euros are at stake, even without a sale. The example is not a tax calculation; it shows why the examination must be made asset by asset.
Structuring Mistakes That Become Expensive
Transferring the Interest Without Special Business Assets
For tax purposes a co-entrepreneur’s interest also comprises the functionally essential special business assets. If only the interest is transferred and functionally essential special business assets are retained or sold at the same time, the continuation of book values under § 6 (3) EStG may lapse, and the hidden reserves may be disclosed. The details follow from the case law of the Federal Fiscal Court and the Federal Ministry of Finance letter of 20 November 2019 as amended on 5 May 2021. This concerns anticipated succession before emigration as much as a sale. On the link with succession planning see business succession when a partner emigrates.
Transfers Between Special Business Assets and Jointly Held Property
The transfer of an asset between special business assets and the partnership’s jointly held property is possible at book values under the conditions of § 6 (5) EStG, provided later taxation remains secured. Blocking periods and further conditions apply. A restructuring immediately before emigration must therefore be examined for its consequences.
Option for Corporation Tax
Commercial partnerships (Personenhandelsgesellschaften), professional partnerships (Partnerschaftsgesellschaften) and registered civil-law partnerships (eingetragene GbR) can opt for corporation tax under § 1a KStG. The option is treated like a change of legal form (§ 1a (2) KStG, § 25 UmwStG). Special business assets must be examined separately here, because what does not pass over can disclose hidden reserves; merely retaining the participation in the general partner is, under § 1a (2) KStG, not harmful for § 20 (2) UmwStG. Anyone who places emigration and the option close together in time should examine both operations jointly.
Termination of the Use Relationship
If the making available ends, the co-entrepreneur’s interest is sold or the property is transferred on its own, the business allocation can lapse. For properties made available to one’s own GmbH the rules of the business split (Betriebsaufspaltung) apply, see Business Split and Emigration.
What to Do Before Emigrating
An examination begins with a complete stocktaking, not with a structure. It comprises at least:
- special balance sheets and supplementary balance sheets of recent years,
- land register extracts, lease agreements and loan agreements with the partnership,
- partnership agreement, voting rights and representation rules,
- shares in the general-partner GmbH and their valuation,
- trademarks, patents and licence agreements,
- book values and market values for each asset to estimate the hidden reserves,
- allocation to the German permanent establishment and actual functions after emigration.
On this basis the tax can be estimated asset by asset, the question of liquidity answered, and a decision taken on timing, structure and filing of applications. If emigration to a state outside the EU and EEA is planned, the spreading under § 4g EStG does not apply; this must be taken into account when planning liquidity.
Binding Ruling Before Implementation
The allocation of assets to the permanent establishment, the treatment of the GmbH shares and the scope of § 50d (10) EStG are in part prone to dispute. Before implementation you should therefore secure the tax assessment by a binding ruling (verbindliche Auskunft) from the tax office (§ 89 (2) AO). It is possible for a precisely defined set of facts not yet realised, if significant tax effects justify a special interest. The tax office should decide within six months. The fee depends on the value of the matter (§ 89 (3) to (7) AO); below 10,000 euros it is waived. With a foreign connection, a ruling in the state of arrival may also be sensible. On the procedure see Binding Ruling on Emigration.
Three Mistakes Laypeople Often Make
- Looking only at the partnership interest. Property, loan and general-partner GmbH shares lie outside the partnership’s balance sheet and are overlooked.
- Regarding the property as safe and treating the other assets the same. German situs secures the right to tax the property, not shares or intangible assets.
- Calculating only after the move. Severance can trigger tax without any inflow; valuation and liquidity must be settled beforehand.
Conclusion
After emigration, special business assets generally remain business assets. Individual assets for which the German right to tax can lapse are tax-risky, above all shares in the general-partner GmbH and intangible assets. Whether the tax can be spread depends on the destination state. Anyone who takes stock early, values asset by asset and secures the assessment by a binding ruling avoids the most common surprises.
Frequently Asked Questions
Does my property lose its status as special business assets on emigration?
Not through emigration alone. As long as it remains made available to the partnership for its business and the partnership continues its German permanent establishment, it remains special business assets. The allocation can lapse if the use relationship ends or the property is transferred on its own.
Does the exit tax under § 6 AStG apply to shares in the general-partner GmbH?
Where they functionally belong, these shares are part of special business assets II. For business assets the severance rules of the Income Tax Act apply. Whether severance occurs is to be checked for each share.
Can I pay the tax from a severance in instalments?
Where allocation is to an EU or EEA state, spreading over time can be considered under the conditions of § 4g and § 36 (5) EStG. For states outside the EU and EEA, § 4g and § 36 (5) EStG do not provide for it.
Does my rental income from the property remain taxable in Germany after emigration?
Regularly yes. It is special remuneration and belongs to the income from the German permanent establishment (§ 15 (1) sentence 1 no. 2, § 49 (1) no. 2 lit. a EStG). The allocation as against the state of residence is regulated by the treaty.
Do I need a binding ruling?
Where allocation questions are open it is advisable, because it binds the administration if the facts later realised correspond to the application. It is subject to a fee and presupposes facts not yet realised.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise partners in partnerships and business families on emigration and special business assets, from the stocktaking through the severance review to the binding ruling. Dr. Fiala has published extensively on questions of emigration and asset protection. Contact the firm without obligation to discuss your individual situation in an initial consultation.
