Are you planning to leave Germany in 2026? Do you have ETFs or share portfolios? Then you must know about Germany’s strict exit tax rules. Many people are not aware of this new rule. It can cause big problems for private investors. This article will explain everything in simple terms.
What is Germany’s Strict Exit Tax Rules?
Germany’s strict exit tax rules are called “Wegzugsbesteuerung” in German. This is a special tax when you move out of Germany. The tax office treats your investments as if you sold them on the day you leave. Even if you did not actually sell anything. This is called a “fictitious sale.”
Before 2025, this tax only applied to company shares where you owned more than 1%. But now, from 2025 onwards, the rules have become much stricter. Now it also applies to investment funds and ETFs. This is a big change. Many private investors will be affected.
The German government made this change to stop people from moving money abroad without paying tax. They want to tax the profit that was made while the person lived in Germany.
The New 2025/2026 Danger for ETF Investors
The biggest danger for 2026 is the new rule for investment funds and ETFs. Before, people thought putting money in ETFs was safe from exit tax. That is no longer true.
From January 1, 2025, investment funds and ETFs are included in Germany’s strict exit tax rules. You can be affected in two ways:
First, if you own more than 1% of a fund’s shares. This is not common for most people.
Second, if the acquisition cost of your fund units is more than €500,000. This is per fund, not total. So if you have two funds with €300,000 each, you might think you are safe. But no, each fund is checked separately. If one fund has more than €500,000, that fund is subject to exit tax.
This €500,000 threshold is not very high. Many middle-class investors who have been saving for years can easily cross this limit.
How Does the Fictitious Sale Work?
Let us understand with a simple example.
Suppose you bought ETF shares for €400,000 five years ago. Now they are worth €700,000. You have made a profit of €300,000 on paper. But you have not sold them. So you have not received any money yet.
Now you decide to move to Spain in 2026. On the day you leave Germany, the tax office will pretend you sold all your ETF shares. They will calculate the profit of €300,000 and ask you to pay tax on it. Even though you still own the shares and have not received any cash.
This is why it is called a “hidden” tax. It is hidden because you do not see it coming. You think you are just moving to another country. But suddenly you have a big tax bill.
The same thing applies to company shares. If you own shares in a company that have increased in value, you will have to pay tax on the increase when you leave.
Who Must Pay This Tax?
Not everyone who leaves Germany must pay this tax. There are specific conditions:
You must have lived in Germany for at least seven out of the last twelve years. This rule is for people who have been long-term residents.
You must be moving your residence abroad permanently. This means you are leaving Germany for good. If you are just going for a short vacation, this does not apply.
You must have the right kind of investments. These include:
- Shares in corporations where you own at least 1%
- Investment funds and ETFs where your acquisition cost is more than €500,000
- Special investment funds (these are always included)
The tax applies to German citizens and foreigners alike. Your nationality does not matter.
The €500,000 Threshold Explained
The €500,000 threshold is very important. It is the main way most private investors will be caught by this new rule.
Let us say you have been investing in an ETF for many years. You started with small amounts. Over time, your investment grew. Now the total amount you paid for the shares is €520,000. This is your acquisition cost.
Even if the current value is less than €500,000 now because of market fall, it does not matter. The rule looks at what you paid, not what it is worth today.
So if you paid more than €500,000 for any single fund, you are in the tax net. This is a point many people misunderstand. They think if their portfolio value is down, they are safe. But no, the tax office looks at your purchase price.
Another important point: Each fund is separate. If you have three funds with €200,000 each, you have total €600,000. But since each fund is below €500,000, you might think you are safe. However, some tax experts say that special rules might apply if you have many funds from the same provider.
How Much Tax Will You Pay?
For investment funds and ETFs, the profit is taxed at a flat rate of 25%. This is called Abgeltungsteuer. On top of this, you pay a solidarity surcharge of 5.5% of the tax amount. If you are in a church, you might also pay church tax.
Let us calculate with an example. You have a profit of €300,000 on your ETFs.
- Tax at 25% = €75,000
- Solidarity surcharge at 5.5% of €75,000 = €4,125
- Total tax = €79,125
This is a lot of money to pay when you have not actually sold anything.
For company shares, the calculation is different. The partial income procedure applies. This means 60% of the gain is taxable. Then your personal income tax rate applies. This can be as high as 45%.
The tax is due immediately when you leave. But there are ways to defer payment.
Payment Options and Deferral
Paying a big tax bill when you have not sold your investments is difficult. The German government knows this. So they have provided some options.
You can apply to pay the tax in seven equal annual instalments. This is for both company shares and investment funds. The good news is that no interest is charged on these instalments. The bad news is that you must provide security.
Security means you must give the tax office something as guarantee. This can be:
- A bank guarantee
- Pledging your shares
- Other assets
This security can be a problem. If you pledge your shares, you cannot sell them easily.
Another important change: Before 2025, if you moved to another EU or EEA country, you could get an indefinite deferral. This is now abolished. Now, EU and non-EU moves are treated the same. This is a big tightening of the rules.
If you return to Germany within seven years, the tax can be cancelled. But you must still hold the shares. If you sold them while abroad, you cannot get this benefit.
Why This is a Hidden Danger
Many people call this a “hidden” tax for good reasons. First, most people do not know about it. You might have a financial advisor who never told you about exit tax. Or you might have read old articles that said ETFs are safe.
Second, the tax is triggered by an action that is not a real sale. You are just moving house. You are not thinking about taxes. You are thinking about packing, shipping, finding a new home. The tax comes as a surprise.
Third, the €500,000 threshold is easy to cross. If you have been investing for retirement, you might have much more than this. Many middle-class families who started investing early can be affected.
Fourth, the tax bill can be huge. And you have no cash from selling the investments. You might have to sell some investments just to pay the tax. This is ironic because the tax is supposed to be on unrealised gains.
Fifth, the rules changed recently. Even if you checked the rules two years ago, they are different now. This is why 2026 is a dangerous year.
What You Can Do to Prepare
If you are thinking of leaving Germany in 2026, you must take action now. Do not wait until the last minute. Here are some steps you can take.
1. Calculate Your Acquisition Costs Make a list of all your investment funds and ETFs. Calculate how much you paid for each one. If you are close to €500,000 for any fund, be careful.
2. Consider Selling Before You Leave If you have large unrealised gains, it might be better to sell the investments while you are still in Germany. This way, you pay the same tax, but you have the cash to pay it.
3. Use Gift Allowances You can gift shares to family members before you leave. Germany has generous gift tax allowances. You can gift €400,000 to children and €500,000 to your spouse tax-free every 10 years. This can reduce your holdings below the threshold.
4. Spread Investments Across Funds If you have €600,000 in one ETF, you could sell some and buy a different ETF. This way, each fund stays below €500,000. But do this at least one year before you plan to leave.
5. Get Professional Help Talk to a tax advisor who knows about Germany’s strict exit tax rules. Do this at least one year before your move.
6. Consider Temporary Move If you are not sure about leaving permanently, plan to return within seven years. This way, the tax can be reversed.
Common Mistakes to Avoid
Mistake 1: Thinking ETFs are Safe Many people read old information online that says ETFs are not subject to exit tax. This is outdated. The rules changed in 2025.
Mistake 2: Looking at Current Value People think if their ETF value is down now, they are safe. But the tax office looks at acquisition cost, not current value.
Mistake 3: Not Planning Early Some people start planning only one month before they move. This is too late. You need at least 6-12 months.
Mistake 4: Forgetting Special Funds Special investment funds are always included. There is no €500,000 exemption for them.
Mistake 5: Not Getting Security If you apply for instalment payments, you must provide security. Many people forget this.
Conclusion
Germany’s strict exit tax rules are not something to ignore. The new rules for ETFs starting in 2025 have created a hidden danger for many private investors. The €500,000 threshold is easy to cross. The tax bill can be huge. And you have to pay even if you did not sell anything.
If you plan to leave Germany in 2026, you must take action today. Calculate your acquisition costs. Talk to a tax advisor. Plan your strategy. The earlier you start, the more options you have.
Remember, this tax is not just for rich people. Many middle-class investors who have been saving regularly can be affected.
Do not let this hidden tax ruin your plans to move abroad. Plan ahead, stay informed, and get professional help.
Disclaimer: This article is for information only. It is not tax advice. Please talk to a qualified tax advisor about your personal situation.
