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Germany–Switzerland · Leaving Germany

Section 1(4) EStG · Section 49 EStG · Article 4 DTA · Section 2 AStG

Limited German tax liability after moving to Switzerland

Moving to Switzerland does not necessarily bring all German income tax liability to an end. Individuals who no longer have a residence or habitual abode in Germany may remain subject to limited tax liability on German-source income. Moving to Switzerland also requires consideration of special provisions in the Germany–Switzerland double taxation agreement (DTA) and, where applicable, extended limited tax liability under section 2 of the German Foreign Tax Act (AStG).

Basic framework

Moving abroad does not automatically end German taxation

German income tax law distinguishes between unlimited and limited tax liability.

Individuals with a residence or habitual abode in Germany are generally subject to unlimited income tax liability. If both are effectively given up, unlimited tax liability may end.

However, if German-source income within the meaning of section 49 of the German Income Tax Act (EStG) continues to arise, Germany generally retains its domestic right to tax that income.

Three levels of assessment

Domestic law, the tax treaty and the Foreign Tax Act

Taxation after departure cannot be assessed solely by reference to section 49 EStG. The Germany–Switzerland DTA contains special rules allowing taxation to continue after departure.

  • EStG: Which income is taxable in Germany?
  • DTA: Which country may tax that income?
  • Article 4 DTA: Special rules for moves to Switzerland
  • AStG: Assess additional extended limited tax liability

Step 1

Does unlimited tax liability actually end?

Limited tax liability becomes relevant only when the individual has neither a residence for tax purposes nor a habitual abode in Germany.

Simply deregistering with the local residents’ registration office does not necessarily end a residence for tax purposes. The decisive question is whether a home remains available in circumstances indicating that it will be retained and used.

DE

A home remains available

A German home that is available for use at any time may cause unlimited tax liability to continue.

CH

Residence is fully relocated

If the German residence is actually given up, unlimited tax liability under domestic law may end.

DTA

Dual residence

If homes are available in both countries, treaty residence must also be determined.

The usual tie-breaker rules are not always sufficient under the Germany–Switzerland DTA

Article 4 contains special additional residence provisions for Germany and Switzerland. Even Swiss treaty residence therefore does not eliminate Germany’s taxing rights completely in every case.

Year of departure

Germany and Switzerland divide the year of departure into relevant periods

Article 4(5) of the Germany–Switzerland DTA contains an express rule for a change of residence during the calendar year.

If an individual is treated as resident in Germany for part of the year and in Switzerland for the remainder, each country may generally apply unlimited tax liability only for the period in which the individual is resident there for treaty purposes.

Practical consequence

In the year of departure, the periods before and after the change of tax residence must be clearly distinguished. German-source income may nevertheless remain subject to limited tax liability after departure.

Section 49 EStG

Which income remains taxable in Germany after departure?

Section 49 EStG lists the categories of German-source income. Living in Switzerland therefore does not make German income sources disappear.

Type of income German tax liability after departure Treaty assessment
German real estate Rental income generally remains German-source income. Germany may tax income from immovable property situated in Germany.
Sale of German real estate A taxable capital gain may remain subject to German taxation. The DTA also preserves taxing rights for the country where the property is situated.
German permanent establishment Profits of a permanent establishment may remain taxable in Germany. Article 7 DTA gives Germany taxing rights over the attributable profits.
Work physically performed in Germany Employment income relating to German working days may constitute German-source income. Assess Article 15 or, where applicable, Article 15a DTA.
Managing director remuneration and certain corporate office payments German tax liability may continue after departure. Consider special treaty rules for management and corporate office roles.
Dividends from German corporations German withholding tax on investment income generally remains relevant. For individuals, the DTA generally limits German withholding tax to 15%.
Certain German pensions Limited German tax liability may apply, depending on the type of pension. The relevant treaty article must be assessed separately.
Employment income arising entirely in Switzerland Without work performed in Germany or another German connection, section 49 taxation generally does not arise solely because of previous German residence. Nevertheless, assess the special rules in Article 4(4) DTA and section 2 AStG separately.

Germany–Switzerland DTA

The DTA can limit Germany’s domestic taxing rights while preserving special German rights

Limited tax liability under German law initially answers only whether Germany can tax under its domestic law. The next step is to assess whether the Germany–Switzerland DTA restricts that right.

Under a typical tax treaty, this would often complete the assessment. Article 4 of the Germany–Switzerland DTA, however, contains special provisions that can be particularly significant when moving from Germany to Switzerland.

4(3)

A home remains in Germany

Despite Swiss treaty residence, Germany may, under certain conditions, continue to tax under the rules applicable to unlimited tax liability.

4(4)

Continued taxation after departure

For certain individuals who move away, Germany may retain particularly broad taxing rights over German income and assets for several years.

4(5)

Change of residence during the year

The year of departure is generally divided into separate periods for treaty residence purposes.

Article 4(3) DTA

A home that remains available in Germany can be particularly problematic

A distinctive feature of the Germany–Switzerland DTA is the rule allowing overriding German taxation.

If an individual is treated as resident in Switzerland under the DTA but continues to have a permanent home available in Germany, or habitually stays in Germany for at least six months during the calendar year, Article 4(3) generally allows Germany to tax under the rules applicable to unlimited tax liability, notwithstanding other treaty provisions.

Keeping a German home after departure is therefore a significant tax issue

Anyone who keeps a German home available for personal stays after moving to Switzerland should assess the tax consequences before departure. Merely establishing formal Swiss residence does not resolve the issue.

Article 4(4) DTA

Special continued taxation after moving to Switzerland

Article 4(4) of the Germany–Switzerland DTA contains a special rule of particular importance when leaving Germany.

If an individual is resident in Switzerland after departure, does not hold Swiss nationality and was previously subject to unlimited tax liability in Germany for at least five years in total, Germany may tax certain German income and assets situated in Germany beyond the ordinary treaty rules.

Conditions

Article 4(4) DTA should be assessed in particular where:

  • The individual is now resident in Switzerland;
  • They do not hold Swiss nationality;
  • They were previously subject to unlimited tax liability in Germany for at least five years;
  • They continue to have income from German sources or assets situated in Germany.

Duration

The special rule applies in the year in which unlimited German tax liability ends and in the following five years.

Article 4(4) and section 2 AStG are separate provisions

The treaty rule on continued taxation has its own conditions and duration. It must be assessed independently of whether Switzerland qualifies as a low-tax jurisdiction under section 2 AStG in the particular case.

Exception to Article 4(4)

Genuine employment in Switzerland may qualify for an exception

Article 4(4) DTA contains an important exception.

The special rule on continued taxation does not apply where the individual becomes resident in Switzerland to take up genuine employment there with an employer in which, beyond the employment relationship, they have no substantial economic interest, whether directly or indirectly through a shareholding or in any other way.

✓

Typical employee

Moving for a genuine position with an independent Swiss employer may fall within the exception.

?

Shareholder-managing director

Where the individual holds shares or has another substantial economic interest, the exception cannot simply be assumed to apply.

!

Self-employed business owner

The exception is expressly designed for genuine employment.

Practical examples

Common situations after moving to Switzerland

Example 1

Swiss residence with a rental property in Germany

An individual fully gives up their German residence and moves to Zurich. They retain an apartment in Munich that is let to tenants.

The letting continues to generate German-source income. Germany may also tax the income from the German property under the DTA.

Example 2

Moving to Basel while a German home remains available for personal stays

The individual deregisters in Germany but keeps their previous home and can use it personally at any time.

Even under domestic law, it may be questionable whether the German residence has actually been given up. If the individual is treaty resident in Switzerland, Article 4(3) DTA must also be assessed.

Example 3

A German national moves to St. Gallen for a job with an independent Swiss employer

The employee was liable for tax in Germany for more than five years, gives up their German home and takes up a genuine position with an independent Swiss employer.

The employee exception must be specifically assessed when considering the special continued taxation rule in Article 4(4) DTA.

Example 4

A business owner moves to Switzerland and retains German shareholdings

An individual who is a German national moves to Switzerland but retains substantial economic connections with German companies.

In addition to ordinary limited tax liability, Article 4(4) DTA, section 2 AStG and, where applicable, exit taxation under section 6 AStG may raise distinct issues that need to be assessed in parallel.

Section 2 AStG

Extended limited tax liability for German nationals

In addition to ordinary limited tax liability, the German Foreign Tax Act provides for extended limited tax liability.

Section 2 AStG may be particularly relevant to German nationals who move to a low-tax jurisdiction and retain substantial economic interests in Germany.

DE

German nationality

Section 2 AStG generally requires German nationality.

5/10

Previous tax liability

Unlimited tax liability must have existed for at least five years in total during the ten years before German tax liability ended.

Low

Low taxation

The statutory low-tax test in section 2(2) AStG must be assessed in the specific Swiss circumstances.

DE+

Substantial interests

Shareholdings, businesses, income and assets in Germany may satisfy this condition.

Substantial economic interests

Section 2(3) AStG refers, among other things, to German commercial businesses, interests as a partner in a business, shareholdings within the meaning of section 17 EStG and quantitative thresholds relating to German income and assets.

Duration under section 2 AStG

Extended limited tax liability can continue for up to ten years

If all the conditions of section 2 AStG are met, tax liability extends beyond the ordinary categories listed in section 49 EStG.

It may continue until ten years have elapsed after the end of the year in which unlimited German tax liability ended.

EUR 16,500 threshold

Section 2 AStG applies for an assessment period only if the total income subject to limited tax liability under this provision exceeds EUR 16,500.

Separate provisions

Four different departure-related tax issues can arise at the same time

Provision What does it cover? Typical duration
Sections 1(4), 49 EStG Ordinary limited tax liability on German-source income. For as long as the relevant German income arises.
Article 4(4) DTA Special continued German taxation after moving to Switzerland. Year of departure plus the following five years.
Section 2 AStG Extended limited tax liability where low taxation and substantial German interests are present. Potentially up to ten years after the end of the year of departure.
Section 6 AStG Exit taxation of certain shareholdings. A taxable event arising from the departure itself.

Exit taxation is separate from limited tax liability

Section 6 AStG creates a separate taxable event for certain shareholdings. It must therefore be assessed independently of which income Germany may continue to tax on an ongoing basis after departure.

Tax calculation

Limited tax liability has its own rules for deductions and tax rates

Individuals subject to limited tax liability are not simply treated as German tax residents with a narrower range of taxable income.

Section 50 EStG contains special rules. Business expenses and income-related expenses are generally deductible only to the extent that they are economically connected with the German income. Various personal deductions are also restricted.

EXP

Income-related expenses

Generally deductible only where there is an economic connection with the German income.

BPA

Basic personal allowance

Under limited tax liability, the basic personal allowance is generally not available in the same way as under unlimited tax liability.

DED

Personal deductions

Many special expenses, allowances and personal tax reliefs are restricted or excluded.

Section 1(3) EStG

Treatment as an unlimited taxpayer may be available on application

Individuals without a German residence who continue to receive German income may, under certain conditions, apply to be treated as subject to unlimited tax liability for income tax purposes.

In particular, at least 90% of their income must be subject to German income tax, or the income not subject to German income tax must not exceed the statutory threshold.

Section 1(3) EStG can be relevant for residents of Switzerland

Assessment on application can make a significant difference to tax rates and available deductions, particularly for individuals whose income arises predominantly in Germany. The conditions must, however, be checked each year.

Investments

Using a German bank or broker does not automatically create German tax liability

For investments, the location of the securities account is not the only consideration. The specific type of income, its connection to a German source and then the DTA are decisive.

DIV

German dividends

Germany generally has a source-country taxing right, which is limited by Article 10 DTA.

INT

Interest

As a general rule, Article 11 DTA allocates taxing rights over interest to the beneficial owner’s state of residence.

ETF

Securities disposals

For ordinary movable assets, treaty taxing rights generally lie with the state of residence; special rules and departure-related taxable events must still be assessed.

Assessment sequence

Assess a move from Germany to Switzerland in eight steps

01

Residence

Check whether the German residence is actually being given up for tax purposes.

02

Treaty residence

Determine residence under Article 4 DTA for the year of departure.

03

Section 49 EStG

Identify all German income that will remain after departure.

04

Treaty allocation

Assess Germany’s treaty taxing rights for each category of income.

05

Article 4(3)

Check whether a German home or extended stays in Germany will continue.

06

Article 4(4)

Assess the five-year treaty rule on continued taxation and the employee exception.

07

AStG

Analyse section 2 AStG and, where applicable, section 6 AStG separately.

08

Tax returns

Coordinate German and Swiss tax return and withholding tax obligations.

Common mistakes

Frequent tax errors when moving to Switzerland

01

Deregistration = end of taxation

Treating deregistration with the local authorities as equivalent to giving up residence for tax purposes.

02

Overlooking section 49 EStG

Failing to consider German real estate, permanent establishments or German working days after departure.

03

Ignoring Article 4(4)

Failing to assess the special five-year treaty rule on continued taxation.

04

Forgetting section 2 AStG

Failing to analyse low taxation and substantial economic interests in Germany.

05

Keeping a German home

A home that remains available for use can have significant tax consequences.

06

Confusing the DTA with the EStG

Failing to assess domestic taxing rights and treaty limitations separately.

07

Confusing exit tax with continued taxation

Mixing up section 6 AStG and ongoing limited tax liability.

08

No advance planning

Analysing the tax treatment of shareholdings, real estate and contracts only after the move.

Frequently asked questions

Limited German tax liability after moving to Switzerland

Does deregistering in Germany automatically end my tax liability?
No. What matters is whether your residence and habitual abode have been given up for tax purposes. German income may also remain subject to limited tax liability after departure.
Do I still have to pay German tax on a German rental property after moving?
Generally, yes. Income from real estate situated in Germany generally remains taxable in Germany. The Germany–Switzerland DTA allows taxation in the country where the property is situated.
Does owning an apartment in Germany mean that I remain subject to unlimited tax liability?
Ownership alone is not decisive. What matters is whether the apartment is actually available to you as a residence. A property let exclusively to a third party on a long-term basis is assessed differently from a home available for your personal use at any time.
What does Article 4(4) of the Germany–Switzerland DTA mean?
This provision allows Germany to impose additional taxation on German income and German assets of certain individuals after they move to Switzerland, in the year of departure and in the following five years.
Does Article 4(4) also apply to Swiss nationals?
No. The provision expressly requires that the individual resident in Switzerland does not hold Swiss nationality.
Does the continued taxation rule apply if I move to Switzerland for a job?
Article 4(4) DTA contains an exception for individuals who become resident in Switzerland to take up genuine employment there with an employer in which they have no substantial economic interest beyond the employment relationship.
Is Switzerland automatically a low-tax jurisdiction under section 2 AStG?
No. The low-tax conditions must be assessed using the statutory test and the specific tax circumstances. The cantonal and individual tax burden may be relevant to that assessment.
How long can section 2 AStG continue to apply?
If all conditions are met, extended limited tax liability may continue until ten years have elapsed after the end of the year in which unlimited German tax liability ended.
Is section 2 AStG the same as exit taxation?
No. Section 2 AStG concerns extended limited tax liability after departure. Section 6 AStG, by contrast, concerns exit taxation of certain shareholdings.
Do I still have to file a German income tax return after moving?
This depends on the remaining German income, how the tax is collected and the applicable assessment rules. Rental or business income will generally continue to require German tax filings.
Can I apply for treatment as an unlimited taxpayer under section 1(3) EStG while living in Switzerland?
Yes, under certain conditions. In particular, at least 90% of your income must be subject to German income tax, or your foreign income must not exceed the relevant threshold.
Should limited tax liability be assessed before moving?
Yes. Taxation after departure should be analysed before the actual move, particularly where German real estate, shareholdings, businesses, managing director roles or a German home that remains available are involved.

Related topics

Relocation and assets between Germany and Switzerland

IHT

Extended inheritance and gift tax liability

German inheritance and gift tax after moving to Switzerland.

Gift

Making a gift before moving

Timing and tax planning for gifts before a move to Switzerland.

DE/CH

Germany–Switzerland

Further articles on residence, employment, assets and leaving Germany.

Cross-border tax advice

Are you planning to move from Germany to Switzerland?

We assess the end of unlimited German tax liability, remaining income under section 49 EStG, Articles 4(3) and 4(4) of the Germany–Switzerland DTA, extended limited tax liability under section 2 AStG and the interaction with exit taxation.

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