Use of Section 6 of the German Foreign Tax Act for moves to Switzerland
Increases in value from shares in corporations held in private tax assets are subject to taxation if the shareholding is at least 1 %. However, the German tax authorities lose this right to taxation if the taxpayer gives up his or her domestic residence. For this reason, in such cases, the so-called exit taxation applies, which subjects the hidden reserves accumulated up to that point to taxation, even though no actual realization has yet taken place through the sale of the shares or similar. However, due to the fundamental freedoms applicable within the EU, this exit taxation requires restrictive regulations.
In relations between Switzerland and the EU/EEA, the joint agreement on the free movement of persons must be observed, which also grants the fundamental freedoms of the EU with regard to Switzerland. In this regard, the German Federal Fiscal Court clarified in its ruling of September 6, 2023 (case no. I R 35/20), which followed the ECJ ruling in the “Wächtler” case, that the exit taxation may be imposed in the event of a move to Switzerland, but must be deferred permanently and without interest.
The tax authorities have not yet followed this ruling beyond the case in question. Now, in a circular dated June 2, 2025, the German Federal Ministry of Finance has announced that interest-free deferrals are also to be granted in cases of relocation to Switzerland.
This requires an application by the taxpayer and collateral must generally be provided. Such a deferral may also be granted for taxes already paid (the tax would be refunded in the event of deferral and subject to interest at 6 % per annum). In this respect, there may be a need for action. However, it should be noted that the principles described above only apply to cases of moving away from Germany until the end of 2021. The law was amended on January 1, 2022, and no longer provides for deferral.