The Great Exit: How to Legally End Your German Tax Liability in 183 Days

Let me start with an inconvenient truth:

Most tax advisors will never honestly tell you how to leave Germany with a clean tax record.

Why? Because they’d lose a client.

I see things differently. As someone who has gone through this process myself and supports entrepreneurs in this every day, I know: The German tax exit is possible, legal, and often the logical next step for internationally-minded business owners.

But—and this is a big but—it must be planned strategically and executed flawlessly.

In this article, I’ll show you the complete roadmap. No sugarcoating, no tax office traps—just the practical details you actually need.

Are you ready for the most honest tax exit guide you’ll ever read?

Why the 183-Day Rule Alone Isn’t Enough

Here comes the first shock for many of my clients:

The famous 183-day rule is just one piece of the puzzle—and often not even the most important one.

The tax office actually checks much more than just your physical presence. That’s why focusing solely on this rule often leads straight into expensive traps.

The Most Common Misconceptions About Exit Taxation

Misconception No. 1: “Less than 183 days in Germany = no German tax liability”

This is incorrect. The 183-day rule only applies to limited tax liability—that is, after you’ve already changed your place of residence. As long as Germany is still your tax residence, you pay German tax on your worldwide income.

Misconception No. 2: “Just deregister and go”

Dangerous. The tax authority differentiates between your habitual abode and your residence. Even after deregistration, you can remain taxable if your center of life is still in Germany.

Misconception No. 3: “Registering abroad is enough”

Unfortunately not. Without real substance (economic substance) in the new country, German authorities will consider your move a sham transaction.

What the Tax Office Really Checks

From my experience, the tax office looks precisely at these factors:

• Family ties: Where do your spouse and children live?
• Economic interests: Where are your main sources of income?
• Social connections: Where is your circle of friends and social life?
• Assets: Where is your main wealth (property, accounts, portfolios)?
• Professional activity: Where do you carry out your main work?

Bottom line: A clean exit strategy must cover all these areas.

Properly Assessing Tax Residence vs. Habitual Abode

This gets technical, but stick with me—this is crucial:

Your tax residence (§ 8 AO – German Fiscal Code) is where you have a dwelling under circumstances indicating that you intend to keep and use it.

Your habitual abode (§ 9 AO) is where you stay under circumstances suggesting you are not just there temporarily.

What this means: Even if you give up your German apartment, you can still have a habitual abode if you regularly return and have essential ties here.

The magic threshold is about 6 months per year—but again, the overall circumstances matter most.

The Preparation: Taking Stock Before Your Tax Exit

Before you take even one step towards leaving, you need an honest assessment of your situation.

I often hear entrepreneurs tell me: “Richard, I just want to get out.” I get it. But emotions are a poor advisor when it comes to tax planning.

So first, let’s look at what you actually have and what’s at stake.

Conduct an Asset Analysis and Valuation

Draw up a complete statement of your assets. It may sound boring, but it’s absolutely essential:

Particularly critical: Shareholdings over 1% in German corporations. Here, the exit tax under § 6 AStG applies—more on that later.

A real-world example: One of my clients had a 15% stake in his former GmbH. Market value: €2 million; acquisition costs: €100,000. Exit tax: over €700,000!

That could have blown up his entire exit project.

Strategically Evaluating Company Shares and Holdings

If you hold shares in German companies, things get tricky:

Option 1: Sell before leaving
Sell your shares before your departure. The capital gain is still taxed in Germany, but you avoid the exit tax.

Option 2: Transfer to a holding company
Set up a holding company in your new country and transfer the shares. Warning: This can trigger tax traps regarding valuation.

Option 3: Deferral of the exit tax
You can defer payment of exit tax under certain circumstances. However, that keeps you tied to the German tax office.

From my experience: Option 1 is usually the cleanest solution, even if it seems more expensive upfront.

Consider Timing and Tax Pitfalls

When you leave makes or breaks your success:

Avoid year-end moves: Leaving on December 31st automatically raises tax office questions. It’s better to move in the middle of the year.

Watch out for waiting periods: Certain transactions (like restructuring or selling stakes) have holding periods before you can exit for tax purposes.

Plan ahead: Allow for at least 6–12 months lead time. Good tax planning takes time.

A concrete example: If you want to leave in 2025, you should start planning by mid-2024 at the latest.

Step-by-Step Guide: Ending German Tax Liability

Now things get practical. Here’s the exact roadmap I use with my clients:

The good news: It’s a proven process. The less good news: It requires discipline and precision.

Let’s go through it step by step.

Phase 1: Legal Preparation (Months 1–2)

Month 1: Choose destination country and structure

• Define destination based on your business model
• Check double taxation treaty (DTT) between Germany and your destination
• Plan tax structure in the new country
• Clarify residence permit/visa requirements
• Retain an international tax advisor in the new country

Month 2: Prepare German structures

• Get shareholdings valued (by an independent expert)
• Calculate the tax cost of your exit
• Plan liquidity for exit tax
• Coordinate with German tax office (if useful)
• Review contracts and obligations in Germany

From experience: A valuation by an independent expert is worth its weight in gold. It may cost €5,000–15,000, but it gives you legal certainty with the tax office.

Phase 2: Asset Transfers and Structures (Months 3–4)

Month 3: Companies and Holdings

• Establish foreign holding company
• Open bank account in new country
• Transfer or sell shares
• Transfer intellectual property (trademarks, patents)
• Gradually relocate business operations

Month 4: Transfer assets

• Move investment assets to foreign banks
• German property: Sell or arrange rentals
• Review and adjust insurance policies
• Gradually transfer private banking relationships

Important: Never transfer everything at once. Sudden panic moves raise suspicions at the tax office. Make the transfer gradually over several months.

Phase 3: Change Residence and Deregistration (Months 5–6)

Month 5: Prepare for the physical move

• Rent or buy an apartment/house in the new country
• Hire a moving company
• Move household and personal belongings
• Build social contacts in the new country
• Relocate business activities fully

Month 6: Official deregistration

1. Register in your new country: Register abroad first, then deregister in Germany
2. Deregister with the German municipality: Provide proof of registration abroad
3. Deregister with the tax office: Submit the “Notification of Departure” form
4. Final return: File last tax return for the departure year
5. Certificate of tax exemption: For foreign banks

Critical point: Sequence is essential. Always register in the new country first, then deregister in Germany. Otherwise, you are technically stateless for residency, which causes major issues.

The Critical Pitfalls When Leaving Germany

Now we get to the parts your old tax advisor probably never told you about.

These pitfalls cost hundreds of entrepreneurs millions of euros every year—and often their financial existence.

Be warned.

Understanding Exit Tax under § 6 AStG

The exit tax is Germany’s sharpest weapon against tax fugitives.

It automatically applies if you:

• Hold more than 1% in a German company AND
• Were tax resident in Germany for more than 5 years within the last 10 AND
• Leave Germany

In this case, all hidden reserves in your shareholdings are deemed realized—you pay tax as if you sold, even though you’re still the owner.

Example calculation:
Current holding: €2m
Acquisition cost: €200,000
Hidden reserves: €1.8m
Tax (approx. 28%): €504,000

That’s more than €500,000 in tax for a sale that never actually happened!

Lifeline: Deferral

You can defer exit tax if you move to an EU state. But beware: The tax debt remains and you must submit annual reports.

In my opinion: Deferral is just a delay, not a solution. Usually, selling your shares before departure is better.

Properly Managing Permanent Establishments and Source of Income

This gets really tricky for entrepreneurs:

Even after you’ve left, you can still be taxable in Germany if you maintain a permanent establishment here.

A permanent establishment exists if you have:

• Fixed business premises in Germany
• Permanent representatives with authority to conclude contracts
• Warehouses or delivery facilities
• Construction sites lasting over 12 months

This means: Your German GmbH can still cause tax headaches after you exit, especially if you continue to run things from Germany.

Practice tip: Install a local managing director with real decision-making power. A straw man won’t do—the tax office checks who is actually making business decisions.

Strategically Using Double Tax Treaties

Double taxation treaties (DTTs) are your safety net against double taxation—but they’re full of traps:

Heed the tie-breaker rules:
What if both Germany and your new country consider you tax resident? The DTT tie-breaker rules then apply:

1. Where is your permanent home?
2. Where is your center of vital interests?
3. Where do you habitually reside?
4. What is your nationality?

In practice, point 2—the center of vital interests—is usually decisive. That’s why you must genuinely shift your economic, family, and social connections to your new country.

Withholding tax pitfall:
Even after leaving, German-source income can be subject to withholding tax:

Always apply for the DTT reduction—otherwise, you’re leaving money on the table.

Tax Exit Destinations: Where You Truly Save

Now for the most exciting part: Where should you go?

I’m often asked: “Richard, what’s the best country for a tax exit?”

My answer: There is no “best” country. There’s only the country that’s right for you.

Let’s go through the major options.

Dubai & UAE: The 9% Solution

Tax facts:

• Corporate tax: 9% above 375,000 AED profit (ca. €95,000)
• Personal income tax: 0%
• Capital gains tax: 0%
• Inheritance tax: 0%

Requirements for tax residency:

• At least 90 days physical presence per year
• Valid Emirates ID
• Owned property or long-term rental contract
• Bank account in the UAE

Who it suits:
Dubai is ideal for entrepreneurs with digital business models, frequent travelers, and an international clientele. The infrastructure is outstanding, with flights to almost all of Europe in 4–6 hours.

Downsides:
– High cost of living (rents from €2,000–3,000)
– Cultural adjustment required
– Substance requirements are getting stricter

One of my clients saves over €300,000 in taxes every year in Dubai—while enjoying a very comfortable lifestyle.

Cyprus: EU Advantages with Tax Saving Potential

Tax facts:

• Income tax: Progressive up to 35%
• Corporate tax: 12.5%
• Dividends: 0% (subject to conditions)
• Capital gains: 0% (on securities)

Non-domiciled status:
As a non-dom, you pay no tax in Cyprus on overseas income not remitted to Cyprus. This allows for creative planning.

60-day rule:
You can become a Cyprus tax resident if you:

• Spend at least 60 days in Cyprus AND
• Carry out business activities there AND
• Spend no more than 183 days elsewhere AND
• Are not tax resident elsewhere

Who it suits:
Cyprus is perfect for those who want to keep EU citizenship and work regularly in Europe. Especially interesting for holding structures.

Portugal: The NHR Program

Non-Habitual Resident (NHR) Program:

• 10 years’ tax benefits
• Foreign-source income: 0% (if taxed in source country)
• Certain Portuguese income: 20% flat tax
• Foreign pensions: 10%

Requirements:

• At least 183 days in Portugal per year
• Register as a taxpayer in Portugal
• Not Portuguese tax resident in previous 5 years

Attention: Changes from 2024:
The NHR program will be reformed. New applicants from 2024 face reduced benefits. If you’re interested, act fast.

Other Options: Malta, Switzerland, Singapore

Malta:
– EU member with 35% corporate tax
– But: 6/7 rebate possible (effective 5%)
– Non-dom status available
– Minimum 90 days’ stay required

Switzerland:
– Lump-sum taxation possible
– Very high quality of life
– But: high cost of living
– Complex residence requirements

Singapore:
– 17% corporate tax
– Territorial system (only local income taxed)
– Excellent infrastructure
– But: high cost of living

After the Exit: Compliance and Long-Term Security

Congratulations—you’ve left Germany for tax purposes!

But now the real work begins: Securing your new tax residency for the long term.

Because a tax exit is only as good as its staying power.

Fulfil Reporting Obligations and Keep Good Records

German reporting obligations after leaving:

• Tax return for departure year: By July 31st of the following year
• Exit tax filings: Annually if exit tax is deferred
• Withholding tax applications: Apply for DTT reductions for German income
• Reporting structural changes: Sale of shareholdings, etc.

Meticulous documentation is vital:

Carefully record all of the following:

• Your days spent in various countries
• Where you conduct your business
• Family and social contacts
• Asset movements and associated reasons
• Contracts and agreements

I recommend a digital travel log. There are apps which track your stays automatically.

Permanently Fulfilling Substance Requirements

The magic word is substance—economic substance.

Without real substance, your tax exit will sooner or later be challenged. Here are the key rules:

Physical presence:

• Meet minimum stay requirements in your new country
• Keep evidence (flight tickets, hotel bills, etc.)
• Keep a travel diary

Economic activity:

• Centrally manage your main business activities in your new country
• Hold important meetings there
• Make strategic decisions on site

Social integration:

• Build real social contacts
• Get involved locally (clubs, charities, etc.)
• Use local service providers (doctors, lawyers, etc.)

Real-world example: One client was audited after three years because, despite being registered in Dubai, he took all key business decisions late at night from his German home office. That ended up costing him over €800,000 in back taxes.

Avoiding Return Traps

The biggest pitfall is when you return to Germany.

The 5-year trap:
If you return to Germany within 5 years of leaving, the tax office may deem your original exit a sham.

This leads to:

• Back-taxation of all foreign income
• 6% interest per year
• Possible charges of tax evasion

Safe return strategies:

1. After 5 years: Only after 5 years is a return relatively safe
2. Gradual return: First limited, then unlimited tax liability
3. Leave assets abroad: Don’t bring everything back right away
4. Professional guidance: Get expert advice for your return

Honest advice: Most tax emigrants underestimate how hard it is to come back. Plan your exit as a permanent move.