The exit tax is a hindrance for many GmbH shareholders if they want to emigrate abroad. But since 2025 there is also an exit tax, which affects all those taxpayers in this country, who want to move with their already existing investments in investment funds. What this new exit tax on investment funds is all about, we explain in this article.

1. New exit tax on investment funds – Introduction

Most of our regular readers are familiar with exit taxation from many blog posts. Also, that every few years there are innovations, with which we of course deal extensively. And in 2025 the time has come again: there is now and completely new an exit tax at investment funds.

If you read this, the first thought will probably be: “Wow, the legislator always comes up with a new source for skimming!” And yes, the approach of now also imposing exit taxes on holders of investment funds is surprising. But already at second glance one has to realize that this approach has a certain logic.

Therefore, we now introduce you to the secrets of the new exit tax on investment funds, clarify why it was virtually inevitable, and show you how to escape it.

2. legal bases for the new exit tax on investment funds

The statutory changes in tax law, which include the new exit tax, introduced the legislature with the annual tax law 2024 (JStG 2024). They concern in particular §§ 19 and 49 InvStG. In § 19 InvStG, paragraph 3 was newly introduced. This is the essential legal regulation for the new exit tax on investment funds. Additional provisions on special investment shares in § 49 paragraph 5 InvStG were also added. The new regulations are based on those that exist in § 6 AStG and § 17 EStG. The legislature was particularly oriented towards the provisions on classical exit taxation in the Foreign Tax Act.

Now many of you are probably wondering why these regulations were inserted in the Investment Tax Act instead of in the Foreign Tax Act. Finally, the classic exit taxation is the subject of § 6 AStG. There one would also suspect the inclusion of the legislation on the new exit tax. Perhaps the answer to this is that it was originally necessary for the first taxation of special tax circumstances with an international reference to a separate law. For the taxation of investment funds, however, there is already a special law with the Investment Tax Act. In this respect, the introduction of the new regulations into the special law is quite understandable.

3. What is the new exit tax for investment funds?

Let us now consider the regulations on the new exit tax for investment funds in detail. First of all, it should be noted that taxation only takes place under certain conditions. As a result, many departures of holders of investment fund shares/units are still possible tax-free. In addition, it only applies since 2025, so that a retroactive effect is excluded. So much for the good news.

The flip side of the coin describes the criteria according to which a taxation of the fictitious profits takes place if you permanently escape the German tax liability. For example, the affected taxpayers must have been subject to unlimited income tax in Germany for at least seven of the last ten years, which should usually be the case. In addition, the right of BRD to taxation must actually be lost. This also applies to Perpetual Travelers, for example for so-called digital nomads. Furthermore, the sum of the taxable profit must be positive. This makes it possible to offset losses and profits from different fund participations. Instead of linking taxation to individual shareholdings, taxation pursues the goal of a comprehensive consideration of the profits and losses of all investment fund shares of a taxable person.

But even if these conditions apply, you can still avoid the exit tax on investment fund shares. Because if the acquisition costs for the acquisition of the investment funds were less than EUR 500,000, the legislator refrains from taxation. Alternatively, however, one must also look at the participation rate in the past: if the participation rate in the previous five years was directly or indirectly 1% or more, the new exit tax applies to investment funds. Otherwise, you get lucky and miss it.

Incidentally, all passive funds, i.e. the common index funds (ETFs), and all actively managed funds are affected. The latter include equity funds as well as real estate funds, ship funds, media funds, mixed funds and many other alternatives.

4th example of the new exit tax for investment funds

Below we give you some examples to show you when the new exit tax on investment funds takes effect:

4.1. Consideration of acquisition costs

Farouk Reiselustig (if Farin were on holiday here, we might have problems) has been living in Germany since his birth in 1963. He has thus been unrestrictedly taxable in this country for more than seven years in the last ten. In 2022, he acquired funds of EUR 370,000. By 2025, the year of his departure abroad, a profit of EUR 5,000 has set in. Nevertheless, there is no exit tax because the acquisition costs are less than EUR 500,000.

Let us now assume that Farouk Reiselustig invested another EUR 200,000 in another fund in 2024. This recorded an increase in value of EUR 15,000 by 2025. This also remains tax-free when moving away, because the acquisition costs are each less than EUR 500,000.

If Farouk Reiselustig had instead used the EUR 200,000 to acquire further shares of the investment fund he already has, he would have to tax the profit on his departure.

4.2. Consideration of the total profit

Now Farouk Reiselustig has instead acquired fund shares worth EUR 700,000 in 2022, but instead of profit, the fund has brought him a loss of EUR 3,000. This move also remains tax-free, this time because there is no positive result.

Let’s now assume that he acquires 2024 shares in another fund, the initial cost of which is EUR 510,000. These bring a profit of EUR 2,000 by the end of the year. Nevertheless, both fund investments remain tax-free when moving away, because the sum results in a loss of EUR 1,000.

4.3. Observance of participation rate

In the next case, Farouk Reiselustig acquires a 1.1% stake in a fund for EUR 400,000 in 2022. With him, he recorded a profit of EUR 15,000. This time there is an exit tax on this investment fund. Although the acquisition costs are well below the legal limit, his participation rate in the legal period of five years is higher than the fixed limit of 1 %.

Let’s start from the same case, but this time with a loss instead of a profit. However, there is now no exit taxation, because again no profit was realized here.

4.4. Observance of the duration of unlimited tax liability in Germany

Tom Fritz moved to Germany for the first time from Belgium in 2022. Here he invested EUR 800,000 in an investment fund, which brought him a profit of EUR 17,000 until the end of 2024. At the beginning of 2025, Tom Fritz from Germany moves away again (one rumored to Dubai).

Although both the acquisition costs are above the legal limit and a profit was achieved, Tom Fritz is spared the exit tax. In the past ten years, he has been subject to unlimited taxation in Germany for less than seven years.

5. How to avoid the new exit tax on investment funds

As with any tax derailment – and the exit tax in general, as well as the new one for mutual funds, are just that – there are ways to avoid it. We now discuss some of these approaches, which are mainly based on the legal framework of the new § 19 paragraph 3 InvStG.

The design by means of usufruct reservation is promising if you have invested in dividend funds. Because then you can get rid of the fund contributions on the one hand, and on the other hand still benefit from the dividends that the fund yields. The person to whom the investment fund shares are transferred would then of course have to remain in Germany. Otherwise, the risk of an exit tax would also apply to them. The usufruct reservation would then at least lower the acquisition costs. But perhaps this also makes it possible for the acquiring person to move abroad?

A partial sale of the shares is even easier, so that you come with acquisition costs under EUR 500,000 in the area below the exemption limit. In particular, own family members are eligible as buyers. Also a gift using the allowance for gift tax comes into consideration here, even offers the advantage that no income taxation of the possible profit takes place.

A transfer also provides for the third proposed option, this time either to a charitable or to a family foundation. When transferring investment fund shares to a family foundation, the advantage of participating in future profits is preserved.

The transfer of tax-deferred investment fund shares into a partnership is, however, not a suitable vehicle to avoid the exit tax. On the one hand, it is then subject to the regulations according to § 4 EStG, which would lead to taxation anyway. On the other hand, indirect participation is also included as a decisive feature in the new law.

New exit tax on investment funds – Conclusion

6.1. Reasons for the new exit tax on investment funds

The fact that the exit taxation since 2025 also affects shareholders of investment funds has several reasons. On the one hand, this is only the logical further development of the classic exit tax. Anyone who experiences asset growth in Germany should also pay taxes on it. At the latest, this is the case with the exit tax at the moment when Germany loses its taxation right in potential profits. This takes place regularly if the unlimited tax liability in Germany ends, for example, by a move abroad. With the new exit tax at investment funds, the legislature therefore only closes a previously existing legal gap.

The fact that this was actually a relevant avoidance strategy emerges from the explanatory statement. There, with reference to evaluations of the communications on cross-border tax arrangements according to §§ 138d ff. AO showed that entrepreneurs who wanted to emigrate abroad had previously created a fund for their GmbH shares in order to be able to move away tax-free. Especially in startups, the application of this design model could be seen more often.

6.2. Problems with the new exit tax on investment funds

Nevertheless, the exit taxation on investment fund shares accompany similar problems as the general exit tax. This creates a tax, although no actual liquidity flow takes place. Such a financial cut can significantly influence the decision to move abroad; at least from the point of view of European law a questionable context. This is hardly better with a deferral of the exit tax. In addition, the limits on the acquisition costs and the participation rate were apparently arbitrary. The fact that avoidance is still possible does not round off the matter.

So how to assess this new exit tax on investment funds? Perhaps the initial idea for the new exit tax was good and at least justified from the point of view of the Federal Republic as a state. However, it is incomprehensible that the legislation has relied on the model of § 6 AStG despite the existing problems with exit taxation. It would have been desirable to have had a regulation that takes much more account of this problem among those affected. Above all, this leads to a conclusion: Germany has no interest in moving away from the questionable design of exit taxation under European law.

However, it is worth taking a closer look at the legislative process that brought us the new exit tax at investment funds. Because in the original draft law, which the Cabinet submitted to the Bundestag for resolution, there was no mention of it. Only at the instigation of the Bundesrat did the Finance Committee of the Bundestag draw up the finally adopted introduction of this new exit taxation.

6.3 View beyond the box

Incidentally, it is worth taking a look across the national borders to Austria. Unlike, for example, currently in the UK and some other countries, one also knows in Austria an exit tax. However, it also applies there, of course, to shares in investment funds – without concession of an exemption limit or even an allowance. At least in this respect, Austrian tax law has proven to be independent of German tax law.