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Hello,
I am seeking clarification on the potential triggering of exit tax in the following scenario:
A person holds unlimited tax liability in Germany and limited tax liability in Austria, as determined by the respective Double Taxation Treaty (DTT) between the two countries.
The individual generated income from employment in Austria, leading to the accumulation of a stock account with unrealized capital gains.
Scenario: Relocation from both Germany and Austria
Would the German exit tax rules exclusively apply, given the individual's unlimited tax liability in Germany in accordance with Article 4(2)(c) of the DTT between Germany and Austria (i.e., German citizenship)?
Alternatively, would both exit tax regimes be applicable to the corresponding portions of wealth originating from the respective countries? For example, the stock account originated in Austria—would it be subject to Austrian exit tax? Is wealth originating from Austria subject to Austrian exit tax, even if the individual's tax residency is in Germany?
I would greatly appreciate your assistance in comprehending this matter.
It would be best to discuss this with good Steuerberater in Germany and in Austria.
Does the tax treaty cover exit tax? It might not be specifically included, but there may be a catch-all clause that you can use.
Generally speaking, only Austrian tax rules would apply if you're non-resident in Germany under the tax treaty and Austria is your bonafide primary place of interest/residence. But there are circumstances where the connection to Germany could invoke a taxable event in Germany. We don't know the full details of your situation.
Artikel 13
Gewinne aus der Veräußerung von Vermögen
(5)Gewinne aus der Veräußerung des in den vorstehenden Absätzen 1 bis 4 nicht genannten Vermögens dürfen nur in dem Vertragsstaat besteuert werden, in dem der Veräußerer ansässig ist.
(6)Bei einer natürlichen Person, die in einem Vertragsstaat während mindestens fünf Jahren ansässig war und die im anderen Vertragsstaat ansässig geworden ist, berührt Absatz 5 nicht das Recht des erstgenannten Staates, bei Anteilen an Gesellschaften nach seinen innerstaatlichen Rechtsvorschriften bei der Person einen Vermögenszuwachs bis zu ihrem Ansässigkeitswechsel zu besteuern. Besteuert der erstgenannte Vertragsstaat bei Wegzug einer in diesem Staat ansässigen natürlichen Person den Vermögenszuwachs, so wird bei späterer Veräußerung der Anteile, wenn der daraus erzielte Gewinn in dem anderen Staat gemäß Absatz 5 besteuert wird, dieser Staat bei der Ermittlung des Veräußerungsgewinns als Anschaffungskosten den Betrag zu Grunde legen, den der erstgenannte Staat im Zeitpunkt des Wegzugs als Erlös angenommen hat.
(5) Gains from the sale of assets not mentioned in paragraphs 1 to 4 above may only be taxed in the Contracting State in which the seller is a resident.
(6) In the case of a natural person who has been a resident in a Contracting State for at least five years and who becomes a resident of the other Contracting State, paragraph 5 shall not affect the right of the former State to tax, in accordance with its domestic laws, any increase in wealth arising from shares in companies in the individual up to the time of change of residence. If the former Contracting State taxes the increase in wealth upon departure of a natural person resident in that State, when the shares are later sold and the resulting gain is taxed in the other State in accordance with paragraph 5, that State shall, in calculating the gain on sale, use as the acquisition cost the amount assumed by the former State at the time of departure as proceeds."
Being a tax-resident in Germany is actually beneficial for the given case as Austria`s exit tax is significantly more restrictive/aggresive related to unrealized gains in a stock portfolio.
If that's the only relevant clause, I think you have a legally uncertain situation when it comes to exit tax. It's unclear whose laws would apply. All the more reason to find a good Steuerberater.
Being a tax-resident in Germany is actually beneficial for the given case as Austria`s exit tax is significantly more restrictive/aggresive related to unrealized gains in a stock portfolio.
In that case, you could try becoming tax resident in Germany before exiting. Or you can try to find a way to use the legal uncertainty that exists to carve out a plan that suits your needs.
If both states' laws apply, you could probably use taxes paid in Germany as tax credit against Austria's claims, so at least you don't pay double.
I'm afraid the answer you seek isn't available without seeking legal advice. It's such a highly specific circumstance, where even the smallest details can play a deciding factor.
