Germany–Switzerland · Entrepreneurs
Scenario 06 · Moving Abroad & Moving to GermanyEntrepreneurs Relocating Between Germany and Switzerland
When an entrepreneur relocates between Germany and Switzerland, personal tax liability and the business structure must be analysed separately. Shareholdings may trigger exit taxation under section 6 of the German Foreign Tax Act (AStG), business assets may be subject to taxation when they leave Germany’s taxing jurisdiction, businesses and permanent establishments may remain taxable in the former country of residence, and relocating the place of management may even change the taxation of the company itself.
Basic Principle
An entrepreneur’s relocation does not automatically relocate the business
When an employee moves abroad, the main focus is often their personal tax residence. For an entrepreneur, additional considerations arise: shareholdings, business assets, companies, permanent establishments and management functions.
The first distinction is therefore whether the entrepreneur is merely changing their personal residence or also transferring assets, personnel, functions or entire business operations to the other country.
This distinction determines whether the move has only personal exit tax consequences or also triggers taxation of unrealised gains in business assets, requires permanent establishments to be reassessed, or relocates companies to another country for tax purposes.
Entrepreneur Moving to Switzerland
Key issues include the end of unlimited German tax liability, section 6 AStG, business asset exit taxation, continuing German-source income and whether management or business assets are actually being relocated.
Entrepreneur Moving to Germany
Moving to Germany generally brings worldwide income within German taxation. Swiss shareholdings, companies and permanent establishments must therefore be integrated into the German tax framework, and their acquisition costs or opening tax values for German purposes must be examined.
The Swiss Tax Perspective
This page focuses primarily on the German perspective. Swiss taxation on departure, arrival and business activities is covered on TaxRep Switzerland.
Scenario Comparison
What actually moves with you?
The tax difference often lies in which business assets and functions cross the border alongside the change of residence.
| Situation | Typical German Tax Question | Key Risk |
|---|---|---|
| Individual shareholder moves from Germany to Switzerland | Section 6 AStG for a substantial shareholding in a corporation | Taxation of unrealised gains without an actual sale |
| Sole proprietor moves from Germany to Switzerland while the German business remains | Which assets and functions remain in Germany? | Limited German tax liability continues |
| Sole proprietorship is fully relocated to Switzerland | Does Germany lose its taxing rights over business assets? | Business asset exit taxation |
| GmbH shareholder moves while the GmbH remains in Germany | Shareholder exit taxation and subsequent German-source income | Confusing the individual’s relocation with relocation of the company |
| Managing director relocates and runs the GmbH from Switzerland | Does the actual place of management move? | The company’s tax residence and permanent establishments |
| Swiss entrepreneur moves to Germany | How are existing Swiss shareholdings and businesses treated in Germany? | Worldwide income, AStG, place of management and taxation on a later exit |
Corporate Shares
Section 6 AStG may treat departure as a sale
If an individual moves from Germany to Switzerland and their unlimited German tax liability ends as a result, section 6 AStG may deem certain corporate shares to have been disposed of at fair market value.
This generally concerns shares falling within section 17 of the German Income Tax Act (EStG). The individual must have held, directly or indirectly, at least 1% of the company’s capital at some point during the preceding five years.
- Corporate shares within the meaning of section 17 EStG
- At least a 1% shareholding within the preceding five years
- Departure may trigger a deemed disposal gain
- Fair market value replaces an actual sale price
- Shares in foreign corporations may also be affected
- Liquidity planning is therefore required before departure
Personal Eligibility Requirement
Seven years of unlimited tax liability within the preceding twelve years
Section 6 AStG does not apply to every short stay in Germany. It generally covers individuals who were subject to unlimited German income tax liability for a total of at least seven years during the twelve years preceding the relevant triggering event.
This personal requirement is separate from the ownership threshold under section 17 EStG. Both tests must be satisfied.
| Test | Basic Requirement |
|---|---|
| Personal tax history | At least 7 years of unlimited tax liability within the preceding 12 years |
| Shareholding | Generally at least 1% within the preceding 5 years |
| Triggering event | Among other events, the end of unlimited tax liability through giving up a residence or habitual abode |
| Valuation | Deemed disposal at fair market value |
Payment
Exit tax may be paid in seven annual instalments upon application
Tax assessed under section 6 AStG may generally be paid in seven equal annual instalments upon application. The instalments are generally interest-free.
The tax office may generally require security. Certain events may also cause outstanding instalments to become payable early.
These include, in particular, the sale or transfer of the shares, certain substantial distributions and breaches of statutory notification obligations.
Instalments Do Not Eliminate the Tax
The seven-year payment arrangement provides liquidity relief. It does not change the fact that exit tax is generally assessed when the individual leaves Germany.
Returning to Germany
Exit tax on a temporary departure may be cancelled if the requirements are met
If the departure is only temporary and the individual becomes subject to unlimited German tax liability again within seven years, the tax claim under section 6 AStG may cease to apply, subject to the statutory requirements.
Among other conditions, the shares generally must not have been sold or transferred in a way that disqualifies the individual from relief during the intervening period, and Germany’s taxing rights must be restored to a sufficient extent.
Upon application, the seven-year period may be extended by up to five additional years in total if the intention to return continues.
Sole Proprietors
A sole proprietorship has no legal separation between owner and business
In a sole proprietorship, the entrepreneur personally owns the business assets. However, a change of residence does not automatically mean that all assets or the entire business relocate for tax purposes.
For example, if a fixed permanent establishment remains in Germany, Germany may continue to tax the profits attributable to it after the entrepreneur personally moves to Switzerland.
If, however, assets, functions or the entire business are transferred to Switzerland in a way that eliminates or restricts Germany’s taxing rights over the unrealised gains they contain, business asset exit taxation may arise.
Change of Residence Only
The entrepreneur relocates while the German business continues unchanged in Germany.
Partial Relocation
Functions or assets are transferred to Switzerland, while others remain in Germany.
Full Relocation
The business is economically relocated to Switzerland, and Germany loses taxing rights.
Business Assets
Business asset exit taxation differs from section 6 AStG
Section 6 AStG concerns certain corporate shares held by individuals. Business asset exit taxation (Entstrickungsbesteuerung), by contrast, concerns business assets and Germany’s taxing rights over their unrealised gains.
If Germany’s right to tax gains from the disposal or use of a business asset is eliminated or restricted, this may be treated as a withdrawal of the asset for tax purposes.
- Concerns business assets rather than privately held shares
- Unrealised gains may become taxable
- Transfers to a foreign permanent establishment are particularly relevant
- A change of residence alone does not necessarily trigger taxation
- The decisive factor is the loss or restriction of German taxing rights
- Transfers of business functions require a separate assessment
Example
A business asset previously attributed to a German permanent establishment is reassigned to a Swiss permanent establishment. As a result, Germany loses its existing right to tax a future disposal gain. This is a typical situation in which the business asset exit tax rules apply.
GmbH Remaining in Germany
A shareholder’s departure does not automatically relocate the GmbH
If a shareholder in a German GmbH moves to Switzerland, the GmbH initially remains a separate company. Its registered office and tax status do not change solely because the shareholder changes their personal residence.
Section 6 AStG may nevertheless apply to the shareholder. German-source income may also continue to arise after departure, for example from dividends or, under certain conditions, from a subsequent sale of German shareholdings.
The distinction is therefore essential: the individual’s departure is assessed at shareholder level, while the company’s tax residence is assessed at GmbH level.
The Shareholder and the Company Are Separate Taxpayers
This distinction becomes particularly important when the shareholder is also the managing director. The company may continue to exist while the question arises whether its actual place of management moves to Switzerland with the managing director.
Shareholder-Managing Directors
Is only the individual moving, or is management moving too?
In owner-managed companies, personal residence and actual business management may be closely connected. If the sole or principal managing director moves their centre of life to Switzerland and subsequently runs the company from there, the company’s place of management must therefore be reassessed.
The place of management is not determined solely by the articles of association, commercial register or formal registered office. What matters is where the key day-to-day business decisions are actually made.
Relocating management may affect tax residence, treaty treatment, permanent establishments, withholding taxes and the ongoing taxation of the company.
Registered Office
The registered office recorded in the German commercial register may remain in Germany even if the company is actually managed from abroad.
Actual Management
The key factors are significant ongoing management decisions and their actual implementation.
Dual Residence
If both countries become relevant under their domestic laws, the treaty treatment must be examined separately.
Continuing Business Operations
Germany may continue to tax business profits after departure
The end of unlimited German income tax liability does not mean that Germany loses all taxing rights.
If an entrepreneur who has moved to Switzerland continues to maintain a German permanent establishment or a German business, the resulting income may remain subject to limited German tax liability as German-source income.
The Germany–Switzerland double taxation agreement generally confirms the permanent establishment state’s right to tax the business profits attributable to that establishment.
| What Remains in Germany After Departure | Typical Consequence |
|---|---|
| German permanent establishment | German permanent establishment profits generally remain taxable |
| German partnership | Ongoing German taxation of the business partner may continue |
| German real estate held as a business asset | Germany generally retains taxing rights |
| German GmbH | The company remains a German taxpayer; shareholder taxation is assessed separately |
| German business activity | Section 49 EStG and the treaty must continue to be assessed |
Germany–Switzerland Tax Treaty
Moving to Switzerland involves additional treaty considerations
The first step is to establish when the individual ceases to be subject to unlimited tax liability under German law and which country is their state of residence under the treaty.
The Germany–Switzerland double taxation agreement also contains special provisions for certain departure scenarios that go beyond the usual treaty rules. An entrepreneur’s move to Switzerland should therefore not be assessed solely by reference to the general residence rules.
This is particularly relevant where substantial economic ties with Germany remain, German businesses continue to be held, or shareholdings are intended to be sold shortly after departure.
Plan the Year of Departure Separately
The date on which German residence actually ends, treaty residence, share disposals, distributions and business relocations should ideally be planned on a coordinated timeline before the move.
Switzerland → Germany
Moving to Germany brings Swiss businesses into the German tax framework
If a Swiss entrepreneur establishes a residence or habitual abode in Germany, unlimited German income tax liability generally begins.
From that point onwards, Swiss shareholdings, dividends, partnership income and business profits generally also need to be classified from a German tax perspective.
- German taxation of worldwide income generally begins
- Classify Swiss shareholdings for tax purposes
- Coordinate Swiss dividends and Swiss withholding tax
- Classify Swiss partnerships under German law
- Assess controlled foreign company taxation
- Reassess the place of management of Swiss companies
Tax Values on Arrival
Document acquisition costs and earlier increases in value in Switzerland
The starting tax basis of existing shareholdings is particularly important when moving to Germany. The taxation of a later sale in Germany may depend on the acquisition costs recognised for German tax purposes.
Section 17 EStG contains a special rule for certain inbound relocation cases: if the former state of residence actually subjected the increase in value accrued before the move to exit taxation comparable to section 6 AStG, the value used there may be relevant for calculating the German gain, subject to the statutory requirements.
Acquisition costs, historical ownership percentages, Swiss exit tax values and the corresponding tax assessments should therefore be fully documented at the time of arrival.
Swiss Company After the Move
A shareholder’s move to Germany may also affect the Swiss company itself
If the shareholder-managing director of a Swiss company moves to Germany and subsequently runs the business from Germany on an ongoing basis, the place-of-management issue may arise in the opposite direction.
In addition to its Swiss tax connections, the Swiss company may then develop a German taxable presence or even become subject to unlimited German corporate income tax liability.
Before the move, it should therefore be established which decisions will remain in Switzerland, which functions will be performed in Germany and whether the existing governance arrangements fit the intended structure.
Compliance
Which documents should entrepreneurs secure before relocating?
| Document | Why It Matters |
|---|---|
| Constitutional documents and evidence of shareholdings | Ownership percentages and assessment under section 17 EStG and section 6 AStG |
| Historical acquisition costs | Calculation of unrealised gains and subsequent disposal gains |
| Business valuations | Fair market value at the date of departure |
| Annual financial statements and tax returns | Valuation, AStG analysis and review of historical results |
| Fixed asset register | Identification of business assets and assessment of business asset exit taxation |
| Permanent establishment documentation | Attribution of functions and business profits |
| Management and corporate governance records | Documentation of the actual place of management |
| Residence and relocation documents | Determination of when personal tax liability ends or begins |
Planning
Assess an entrepreneur’s Germany–Switzerland relocation in eight steps
Residence
Determine when German tax liability actually ends or begins.
Shareholdings
Review ownership percentages and section 6 AStG.
Business Assets
Identify assets and their unrealised gains.
Functions
Assess which business functions actually move to the other country.
Management
Reassess the actual management of existing companies.
Permanent Establishments
Identify continuing and newly created permanent establishments.
Tax Treaty
Coordinate Germany’s and Switzerland’s taxing rights.
Timing
Coordinate the timing of the move, distributions, disposals and restructuring.
Frequently Asked Questions
Entrepreneurs Relocating Between Germany and Switzerland
Does every entrepreneur’s move to Switzerland trigger exit taxation?
What ownership threshold is relevant for section 6 AStG?
How long must I have been subject to German tax?
Must exit tax be paid in full immediately?
What happens if I later return to Germany?
Is business asset exit taxation the same as shareholder exit taxation?
What happens to my German GmbH if I move to Switzerland?
Can I remain taxable in Germany after leaving?
What happens to a German sole proprietorship when its owner moves abroad?
What applies when a Swiss entrepreneur moves to Germany?
Should I sell my shareholding before or after moving?
Further Tax Knowledge
Related Topics
Germany–Switzerland Tax Advice
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