Cornelia Barnbrook (cornelia.barnbrook@ber-auren.de), Tax advisor and specialist consultant for international tax law. Member of the Auren Team Global Taxperts – our experts for cross-border tax issues
Need to take action by the end of the year
A significant tightening of exit taxation will come into effect on 1 January 2022. One of the most significant changes is the elimination of the deferral option in EU/EEA cases. This article describes the options for action available until 31 December 2021 where moving abroad is already planned and multiple residences are involved. in cases where moving abroad has already been planned and in the case of multiple residences.
Exit taxation applies, inter alia, to private individuals who have a shareholding of more than 1% in a company as part of their private assets and who have been subjected to unlimited tax liability in Germany for a total of at least ten years. The purpose of Exit Taxation within the scope of Section 6 of the German External Tax Relations Act (Aussensteuergesetz, AStG) is to ensure that unrealised capital gains on shares are taxed virtually at the last moment before Germany loses its right of taxation. There are other circumstances that may trigger Exit Taxation under Section 6 AStG. This article only deals with cases under Section 6(1) No. 1 AStG where the individual is relocating his or her residence or habitual abode. If residence is transferred abroad and Germany loses the right of taxation, unrealised capital gains as defined in Section 17 of the German Income Tax Act (Einkommensteuergesetz, ESTG) are subject to imputed taxation as if the share had been sold at its fair market value. This results in a de facto tax burden without an actual inflow of liquidity through a sale. Up to now, the Exit Tax could be deferred indefinitely when relocating to an EU/EEA State. When the place of residence is changed after 1 January 2022, the previous distinction between moving to a third country and moving within the EU/EEA will cease to apply and with it the possibility of deferral. In future, this deferral will be replaced by instalment payments; the tax can be paid in seven equal annual instalments on application, provided that collateral is provided.
If you belong to the group of persons for whom urgent action is required, you should take the above measures immediately after consulting your tax advisor. If you are already subject to tax in other countries, you should bring the tax advisors there on board so that the team of advisors involved can work out an optimal global tax strategy for you.
Do you need support? Contact our consultants
No token or token has expired.