German Wegzugsteuer (Exit Tax) and Moving to Georgia

The term "Wegzugsteuer" — literally "departure tax" — refers to Germany's mechanism for taxing unrealized capital gains when a taxpayer leaves the German tax system. For most freelancers moving to Georgia, the Wegzugsteuer does not apply directly. However, understanding it and the broader framework of German tax exit is essential for anyone leaving Germany.

The bigger risk for most freelancers is not the Wegzugsteuer per se, but inadvertently remaining in the German tax net through incomplete exit procedures — facing either unbeschränkte Steuerpflicht (full German tax residency) or erweiterte beschränkte Steuerpflicht (extended limited tax liability) for years after they've moved to Georgia.

What Is Wegzugsteuer (§6 AStG)?

The Wegzugsteuer is codified in § 6 of the Außensteuergesetz (AStG — Foreign Tax Act). It is a deemed disposal tax: when you leave German unlimited tax residency (unbeschränkte Steuerpflicht), Germany treats this as if you had sold your qualifying assets on the day of departure — even if no actual sale occurred.

Germany's logic: if you've built up unrealized capital gains on assets while resident in Germany, and now you're leaving before realizing those gains, Germany wants to tax the portion of those gains accrued during your German residency. Without this provision, you could simply leave Germany, wait for the gains to mature, realize them in a low-tax country, and Germany would never receive any tax on those gains.

Who Is Affected by Wegzugsteuer?

The Wegzugsteuer applies specifically to qualifying shareholdings. The key trigger is owning at least 1% of a corporation at any point during the preceding 5 years. This typically means:

• Founders and co-founders of GmbH or UG companies (even if you own 100%)
• Shareholders with ≥1% in AG companies
• Partners with qualifying interests in certain investment structures

This is critical: if you are a Freiberufler operating under your own name, without a GmbH or other corporate entity, the Wegzugsteuer typically does not apply to your business. Your concern is the clean exit from German personal income tax residency, not a deemed disposal tax on corporate shares.

How the Exit Tax Is Calculated

If you own qualifying shares, the Wegzugsteuer is calculated as follows:

1. Determine the fair market value of your qualifying shareholding on the day of departure
2. Subtract your cost basis (the original acquisition price)
3. The difference is the deemed capital gain
4. Apply the Abgeltungsteuer rate of 25% (plus Soli = effectively ~26.375%) to this deemed gain

Example: You own 100% of a GmbH with a fair market value of €500,000 and a cost basis of €25,000 (your initial capital contribution). The deemed gain is €475,000. The Wegzugsteuer would be approximately €475,000 × 26.375% ≈ €125,281 — due even though you've received no actual cash.

Deferral Options Under the 2022 Reform

Germany's Wegzugsteuer was significantly reformed in 2022. The new rules provide more flexibility, particularly for moves to non-EU countries like Georgia:

• EU/EEA moves: Automatic deferral without interest until the shares are actually sold, provided the taxpayer maintains certain connections to the EU/EEA
• Non-EU/EEA moves (including Georgia): The Wegzugsteuer is assessed immediately but can be paid in up to 7 annual installments upon request (if sufficient security is provided)
• If you return to Germany within 7 years, the assessed tax can be reversed (under certain conditions)

The installment option for non-EU moves (like Georgia) is a meaningful improvement over the old regime, where the full Wegzugsteuer was due immediately upon departure.

EU/EEA vs Non-EU Destinations

Georgia is not a member of the EU or EEA. This means German taxpayers moving to Georgia do not benefit from the automatic EU deferral. However:

• Germany and Georgia have a Double Taxation Agreement (DTA) which governs how various income types are allocated between the two countries
• The 7-installment option for Wegzugsteuer is available for Georgia-bound taxpayers
• The Georgia DTA provides protection against double taxation of most income types

Georgia Specifically: What You Need to Know

For German freelancers moving to Georgia:

If you have no GmbH shares

No Wegzugsteuer applies. Your exit from Germany is a straightforward personal income tax residency issue — Abmeldung, final tax return, termination of health insurance. See our full migration guide for the step-by-step process.

If you have a GmbH (e.g., a UG/mini-GmbH)

You need to carefully plan the timing and structure of your departure. Options include:

• Liquidating the GmbH before departure (triggering actual capital gains, but potentially in a tax-efficient way)
• Departing and paying Wegzugsteuer in installments (potentially manageable depending on the value of your company)
• Retaining the GmbH as a German entity while you operate personally as a Georgian IE (complex — seek specialist advice)

Unbeschränkte Steuerpflicht: Staying in the German System

Germany's unbeschränkte Steuerpflicht (unlimited tax liability) applies to anyone who has:

• A Wohnsitz (permanent home) in Germany, OR
• A gewöhnlicher Aufenthalt (habitual abode) in Germany — typically more than 6 months per year

If either condition is met, you remain fully taxable in Germany on your worldwide income — regardless of where you are formally registered or where your Georgian IE is based.

The most common mistake: moving to Georgia but keeping a German apartment "just in case" or for visits. If that apartment constitutes a Wohnsitz (a permanently available residence, even if you don't stay there often), it triggers unbeschränkte Steuerpflicht. The apartment doesn't need to be a primary home — even a secondary apartment or regularly available room can qualify.

Beschränkte Steuerpflicht: Partial German Tax Liability

After a clean Abmeldung with no remaining German home, you become a beschränkt Steuerpflichtige (limited tax liability person). In this status:

• You are only taxable in Germany on German-source income as defined by German domestic law and the Germany-Georgia DTA
• Income from German clients, paid to your Georgian IE, is generally not German-source income under the DTA (as long as you perform the services from Georgia)
• German rental income, German pension payments, and some other Germany-connected income may still be taxable in Germany under the beschränkte Steuerpflicht rules

Erweiterte Beschränkte Steuerpflicht: The Extended Trap

The erweiterte beschränkte Steuerpflicht (extended limited tax liability) is a specific provision in §2 AStG that applies to a subset of German emigrants — and it's one of the most important things to understand when moving to a low-tax country like Georgia.

It applies when ALL of the following are true:

1. You were an unbeschränkt Steuerpflichtiger in Germany for at least 5 of the last 10 years before departure
2. You have moved to a country where you pay significantly lower taxes than in Germany (broadly, any low-tax jurisdiction — Georgia clearly qualifies)
3. You maintain substantial economic ties to Germany — defined as having German income or German assets exceeding certain thresholds

Under erweiterte beschränkte Steuerpflicht, Germany can tax you on certain income types for up to 10 years after departure — even with a clean Abmeldung. The income categories covered include:

• Income from German sources that would otherwise escape German taxation under normal beschränkte Steuerpflicht rules
• Certain capital income where the underlying assets have German connections

The 183-Day Rule in the Germany-Georgia DTA

The Germany-Georgia Double Taxation Agreement (signed 2006, in force since 2009) uses the standard OECD framework. For employment and service income:

• Georgia has the right to tax income earned by residents of Georgia from activities performed in Georgia
• Germany retains the right to tax income earned by German residents or income with German-source elements
• The 183-day rule in the DTA: if a person spends fewer than 183 days in a country in a 12-month period, certain income attributable to activities in that country may not be taxable there

For the Georgia-based freelancer, the key principle is: establish Georgian tax residency (183+ days in Georgia), perform services from Georgia, and invoice through your Georgian IE. Under this structure, Germany has no taxing rights on your service income under the DTA.

Practical Checklist for a Clean Exit

• ☐ File all outstanding German tax returns (Einkommensteuer, Umsatzsteuer)
• ☐ Inform Finanzamt of planned departure in writing 2–3 months in advance
• ☐ If applicable: get professional valuation of GmbH shares before departure
• ☐ If applicable: assess and plan for Wegzugsteuer obligations
• ☐ Register Georgian IE through StartGE (can be done remotely before physical move)
• ☐ Open Georgian bank account
• ☐ Give up German apartment (do not retain any residence in Germany)
• ☐ File Abmeldung at Einwohnermeldeamt on or just before departure date
• ☐ Cancel GKV/PKV health insurance with proper notice
• ☐ Begin tracking 183-day Georgian residency from arrival
• ☐ Obtain Georgian tax residency certificate (available from Revenue Service after 183-day period)
• ☐ Update all invoicing to Georgian IE details
• ☐ File final German Einkommensteuererklärung for year of departure