Germany's Exit Tax Exemption for Private Crypto Holders: A Narrow Escape

For German citizens holding Bitcoin and other cryptocurrencies privately, moving abroad does not trigger an exit tax on their capital gains. According to Section 6 of the Foreign Transactions Tax Act (AStG), the exit tax applies only to shareholdings in corporations, which Bitcoin is not considered to be.

This distinction is crucial because if a German investor holds their cryptocurrencies through a GmbH, the GmbH share itself can trigger the exit tax. The value of the coins inside the GmbH will determine how much tax is due.

When leaving Germany, the key factor is when one's unlimited tax liability ends. This happens when one stops having a residence or habitual abode in Germany. Section 8 of the Fiscal Code defines residence as keeping a dwelling under circumstances suggesting continued use, while Section 9 adds that staying for more than six consecutive months subjects one to unlimited tax liability.

Even after leaving the country, German investors may still be subject to taxation on their crypto gains if they sold within the one-year holding period. This period runs from the day of acquisition and ends regardless of where one lives by then. If an investor sells within this timeframe, they will pay the full German rate on the entire gain.

However, crypto ETPs, ETFs, and fund units are subject to a different tax treatment under Section 19 of the Investment Tax Act (InvStG). If these investments meet certain thresholds, holding at least one percent of a fund's issued units or acquisition costs exceeding €500,000, the end of unlimited tax liability is treated as a disposal at fair market value. This can result in a significant tax bill for German investors.