GERMANY Trends and Developments Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
Reform of the German Partnership Law Case law and legal scholars have been amending the existing law on partnerships for decades. A bill passed in June 2021 was mainly aimed at codifying these developments. Moreover, civil-law partnerships can apply to be entered in a partnership register. Some civil-law partnerships do not have to be registered in this partnership register, which leads to even more transparency obligations. Partnerships holding real estate or interests in companies have to be regis - tered. In addition, German company law applies to all partnerships registered in Germany, regardless of the place of their main activity. This allows German partnerships to move their main activity abroad. The new law on partnerships came into force on 1 Janu - ary 2024. Recent Amendments to the Law on Exit Taxation Germany has revised its exit tax regime on the basis of the European Anti-Tax Avoidance Directive. The unlimited tax deferral in the case of exit tax for EU/EEA citizens within the EU/EEA area has been abolished. Moreover, the required period of unlimited tax liability for the application of exit taxation has been reduced from ten years to seven years. In contrast to former legislation, this calculation will not be based on the entire lifetime, but only on the last 12 years prior to exit. The exit tax lapses with retroactive effect upon re-establishment of German unlimited tax liability for a maximum period of 12 years (“temporary absence”). A limited tax deferral is possible in this case. The current exit tax regime has been applicable since 1 January 2022. Since the amendment, payment can be made in seven interest-free instalments. Exit Taxation Under the Investment Tax Act In 2024, Germany also introduced an exit tax on inter - est and shares in investment funds where the historic acquisition costs per fund unit/share class exceed the amount of EUR500,000. The above rules on the sus - pension of payment of exit taxes also apply to the exit tax in shares of investment funds. These new provi - sions in the German Investment Tax Act have been applicable to cases since 31 December 2024. Exit Taxation Relocation to Switzerland The Federal Fiscal Court ruled in 2023 on a 2011 relo - cation case to Switzerland, which applied the previous
legislation that did not provide a permanent, interest- free tax deferral for relocations to non EU/EEA coun - tries. The 2023 ruling was that such a tax deferral is applicable. Hence, it might be expected that the Fed - eral Fiscal Court will rule in favour of a permanent, interest-free tax deferral in current EU/EEA cases, even though the present legislation does not provide such a tax deferral. However, no adaption of the exit tax is in sight, and the German tax authorities issued a decree in 2025 that the ruling will only be applied to relocation cases to Switzerland prior to 2022. Tax Authorities on Exit Taxation Moreover, the German tax authorities recently pub - lished decrees in 2023 and 2025 on the application of the exit tax. In the case of a temporary absence, the exit tax only lapses with retroactive effect if Germany’s right of taxation is directly re-established exactly it was at the time of departure. Particularly in cases with double taxation conventions, it must be ensured that the double taxation convention (re)assigns the right of taxation to Germany directly upon re-establishment of German unlimited tax liability. Share distributions made after 16 August 2023 by cor - porations whose shareholders are subject to exit tax trigger immediate exit taxation if the share distribu - tions exceed one quarter of the fair market value of the corporation. Distributions From a Foreign Family Foundation Distributions from a foreign family foundation may be subject to income tax if they are comparable to divi - dends. In the case of a Swiss family foundation, the Federal Fiscal Court ruled in 2024 that the recipient of the distribution must be comparable to a shareholder. This is the case if they fulfil the requirements set out in the foundation’s statutes for receiving distributions, that is, if they belong to the group of beneficiaries and no consideration is to be paid in return. However, the recipient does not require any further asset or organi - sational rights under the foundation statutes. Taxation of Trusts in Germany Germany has always struggled with common law trusts. German civil law does not recognise trusts, since Germany is not a member of the Hague Trust Convention and has not ratified the provisions of the
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