When people and capital leave a country there are two possible responses: make the location more attractive, or make the exit more expensive. Germany and Austria opted for the second — and did so years ago. This article explains the two provisions that tax departure, why they grow more expensive with every year of growth, and what order of operations follows from that.
What is taxed — and what is unusual about it
Exit taxation reaches for something that does not yet exist: a gain that has not been realised.
Under section 6 AStG the departure of a natural person is deemed a disposal of their shares in corporations. Covered are holdings of one percent or more held within the previous five years. What is taxed is the difference between acquisition cost and market value at the time of departure — even though no sale has taken place and no money has moved.
Austria governs the same thing in section 27(6) EStG, with one decisive difference: on departure within the EU or the EEA the tax may be paid in instalments on application. On departure to a third country — and Georgia is one — it falls due immediately.
| Germany | Austria | |
|---|---|---|
| Legal basis in each case a deemed disposal at the time of departure | Section 6 AStG | Section 27(6) EStG |
| Departure within the EU or EEA EU law compels a relief mechanism | Deferral subject to conditions | Instalments on application |
| Departure to a third country Georgia, Switzerland, the UAE and the USA are third countries | Instalments subject to conditions | Due immediately |
| Tax base grows with company value, not with income | Value at the time of departure | Value at the time of departure |
| Continuing effect extended limited tax liability for low-tax jurisdictions | Section 2 AStG, up to ten years | Separate provisions |
Why the window is closing
The decisive property of these provisions is not their level but their dynamics.
The tax base is the company value at the time of departure. It therefore grows with every successful year — regardless of whether money ever flows. A company valued at EUR 500,000 today and at two million in five years has not generated a tax saving in that period but a quadrupled exit threshold.
Added to this is the widening of the assets covered: since the 2024 Annual Tax Act, holdings in investment funds and ETFs are also subject to exit taxation. The circle of those affected is thus considerably wider than the classic case of a shareholder in a private company.
The order of operations decides the cost
A practical consequence follows from the dynamics, and it is the exact opposite of the usual approach. Most people think: emigrate first, structure afterwards. The correct order is the other one.
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Establish the valuation before anything happens
The first step is not an incorporation but a number: what would the tax base be today? Without that number every further decision is a guess. It belongs in the hands of a tax adviser in your home country, not a foreign service provider.
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Build the structure while the valuation is low
Everything that raises the company value at home raises the later exit threshold. Building in the target jurisdiction from the outset avoids relocating a value that has already grown.
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Move residence last — but completely
Giving up the home, moving the centre of life, relocating actual management. A half-departure is the most expensive kind: it triggers exit taxation without delivering the tax benefit, because the new residence is not recognised in a dispute.
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Plan for the continuing-effect periods
Section 2 AStG covers German nationals for up to ten years after departure to a low-tax jurisdiction where substantial economic interests remain at home. Anyone who knows those interests can plan around them.
The consequence for founders is uncomfortable but unambiguous: the cheapest moment for an international structure is the beginning. Anyone starting from zero relocates nothing and triggers nothing. Anyone starting with a valued company buys their way out.
What sits on the other side
Georgia works as a destination for a sober reason: the structure can be built before departure takes place, and it functions afterwards without a presence requirement.
For sole traders the Small Business Status applies at 1 percent on turnover up to GEL 500,000; for companies the Estonian model taxes only on distribution. Foreign investment income is tax-free for private individuals with Georgian tax residency under Art. 82 of the Georgian Tax Code. Tax residency arises after 183 days, or alternatively via the HNWI programme.
What Georgia does not do: avoid exit taxation. That arises in the country of origin, and no destination state changes it. Anyone sold otherwise should change provider. Why a structure without an actual change of residence achieves nothing at all is set out in Account Seizure: How Far Enforcement Really Reaches and Georgian Company, German Authorities; why a residence is needed rather than none, in “Stateless” Is Not a Solution. From Switzerland the starting position differs — see Switzerland: Low Taxes, High Dependency.
Frequently asked questions
Who is affected by German exit taxation?
Natural persons holding, or having held within the previous five years, shares in corporations of one percent or more. Departure is deemed a disposal under section 6 AStG; what is taxed is the difference between acquisition cost and market value at the time of departure. Since the 2024 Annual Tax Act, holdings in investment funds and ETFs are covered as well, which has widened the circle of those affected considerably.
What is different on departure from Austria?
The basic construction is the same, governed by section 27(6) EStG. The difference lies in when it falls due: on departure within the EU or the EEA the tax may be paid in instalments on application. On departure to a third country — Georgia, Switzerland, the UAE or the USA — it falls due immediately. That is the decisive point for liquidity planning.
Why does leaving get more expensive over time?
Because the tax base is the company value at the time of departure. It grows with every successful year regardless of whether money ever flows. A company valued at EUR 500,000 today and at two million in five years has built a quadrupled exit threshold in that period. Room for manoeuvre decreases over time here, it does not increase.
Does a Georgian structure avoid exit taxation?
No. The tax arises in the country of origin and attaches to the departure of the person; the destination state changes nothing about it. What can be shaped is the timing and the starting valuation — not the tax liability itself. Providers promising otherwise are selling a risk.
In what order should one proceed?
First have the tax base established, then build the structure, then relocate residence completely. The most common and most expensive mistake is the half-departure: it triggers exit taxation but does not deliver the tax benefit, because the new residence is not recognised in a dispute. For founders that means the cheapest moment for an international structure is the beginning.
Am I affected as a freelancer without a company?
Generally not by section 6 AStG, as long as there is no participation of one percent or more and no significant fund or ETF holdings. For this group departure genuinely is straightforward. What remains to be examined are the general consequences of giving up a residence and, for German nationals with continuing economic interests at home, section 2 AStG with a continuing effect of up to ten years.
This article is general information and does not constitute legal or tax advice. The legal references relate to sections 6 and 2 of the German Foreign Tax Act, section 27(6) of the Austrian Income Tax Act and the consolidated Georgian Tax Code (Art. 82 and 90) as in force at the time of writing. Establishing the tax base in an individual case belongs in the hands of a tax adviser in the country of origin. As of July 2026, subject to changes in the law.