Technical article

Germany: Five Years After You Leave, and the Exit Tax on Shares

For five years after a citizen leaves, the law treats her as still part of the German system.

By Neil Solomon · 4 min read

Imagine a German citizen in her sixties who sells the family flat in Germany and moves to Portugal. Her children live in Spain and the United States. She sets up no trust yet. She simply wants to know: once I have left, how long does German inheritance tax follow me?

The answer has three parts, each with its own clock.

Clock one: five years for inheritance and gift tax

Germany taxes inheritances and gifts on everything in the world when the donor, the person who died, or the person who receives is treated as living in Germany. Residence means keeping a home there, or a habitual stay, which starts counting from day one of a stay longer than six months. A holiday, a visit or a cure of up to a year is not a habitual stay.

For a German citizen who emigrates there is an added rule. She stays treated as living in Germany for five years of continuous time abroad, as long as she has no home in Germany. In those five years her gifts and her estate are taxed on worldwide assets, and so are gifts to her.

After the five years, German tax falls only on assets in Germany. These are German real estate, a German business, and a holding of 10% or more in a German company. The personal allowances are also reduced for that limited tax.

The rule is written for citizens. A person who left Germany without German citizenship is not named in it.

Clock two: the exit tax on shares

A person who owns 1% or more of a company, and who leaves, is taxed as if the shares had been sold on the day German unlimited tax ends. The conditions are that the person was taxed as a German resident for at least 7 of the last 12 years, and held the 1% stake at some point in the last 5 years. A gift of the shares to someone who is not a German resident can set off the same charge.

The tax is on a gain that has not been realised. It can be paid in 7 equal yearly instalments, usually with security. It lapses if the person comes back to Germany within 7 years, and that period can be extended by 5.

Clock three: ten years of German-source income

A person who leaves for a low-tax country, or for nowhere, may remain taxable in Germany for up to 10 years on German-source income. The conditions are that the person lived in Germany for at least 5 of the last 10 years, still has substantial German business interests, and the income is above EUR 16,500. Low tax means a burden more than one third lower than in Germany, measured on an income of EUR 77,000.

Relief from double tax

Germany has few inheritance treaties. A unilateral credit exists for foreign inheritance tax paid, but it needs an application. The foreign tax must have been paid, and the German tax must arise within five years of it. A law-firm article (tier C) notes that treaty relief is often unavailable.

You might say: "I have already left. Why would Germany care about my children's inheritance in Spain?" That is a fair thing to wonder. For five years after a citizen leaves, the law treats her as still part of the German system. After that the German reach narrows to German assets, and the clock stops.

You could look at three dates. The day you leave, the day five years later, and the day your holding in any company changes. A gift of shares to a child living abroad is one more date to check against the exit tax.

The people this touches are you, your children as heirs, and a partner who keeps a home in Germany. A home kept there can keep the clock from starting.

If you have left a country with a tail like this, how did you keep track of the dates? Share it here, because someone may benefit from your system.

Figures are estimates for planning, based on public data. Date read: October 2026.