Leaving France for Germany: exit tax, five-year clause and registration at the town hall

To move to Germany, three factors determine the success of your application. The exit tax, if you hold significant securities. The clause in the 1959 tax treaty which, after five years of residence, does not prevent France from taxing capital gains on your investments. And registration with the German town hall, which must be completed within two weeks of moving in.

What the BOFiP requires to sever French tax residency

Article 4 B of the French General Tax Code (CGI) is based on three categories of criteria: personal, professional, and economic. Meeting only one of these criteria is sufficient to establish residency in France. Spending more than six months in France during the year counts towards principal residence, although this is not an absolute requirement. Principal activity is defined as the activity that occupies the most time spent in France. The center of economic interests refers in particular to the location of major investments and the principal place of business.

Only one criterion is needed: if your home, your main activity or your center of economic interests remains in France, France can consider you as domiciled.

If Germany also considers you a resident, the convention will decide. The tie-breaker is set out in Article 2, paragraph 4(b), and not in Article 4, which deals with business profits. The order of precedence is as follows: permanent home, then center of vital interests if you have a home in each state; otherwise, habitual residence; then nationality; and finally, agreement of the competent authorities.

Exit tax: conditions, deferral and relief

Two conditions must be met. You must have been domiciled in France for at least six of the ten years preceding the transfer. You must also hold at least 50% of the profits of a company, or securities with a total value of €800,000. The two official documents do not define this threshold in the same way: the explanatory note says "greater than," while the public information sheet says "at least." If your securities are close to this amount, have your application reviewed.

Income tax is 12.8%. Social security contributions are 17.2% for a transfer in 2025 and 18.6% for a departure in 2026.

France Diplomatie presents Germany as a member of the European Union. The page draws no further conclusion: the classification of the arrival country is verified on the date of your departure, according to the list of non-cooperative states in force.

Article 7 § 6 of the convention: the five-year clause

The 1959 Convention was amended on this point by the amendment of March 31, 2015. Article 7, paragraph 6, addresses individuals who have been residents of one State for five years or more and then become residents of the other. Paragraph 5 does not, therefore, prevent the first State from taxing, under its domestic law, the capital gain realized during the period of residence of that individual in that State on interests in a company resident in that State.

When the first state taxes this capital gain following a transfer of residence, and the shares are subsequently sold and the gains are taxed in the other state, the latter uses the value of the shares at the time of the transfer of residence as the acquisition value. If the sale price is lower than this value, the sale price is used by the first state to determine the capital gain. The clause refers to the domestic law of the state of departure.

Becoming a German resident: accommodation, or more than six months

The German Tax Code (Abgabenordnung) uses two criteria. First, domicile: you have it where you have accommodation under conditions that suggest you will keep and use it (§ 8). Second, habitual residence: a continuous stay of more than six months constitutes habitual residence from the outset, short interruptions being disregarded (§ 9). This rule does not apply to a purely private stay (visit, rest or leisure, treatment, or similar private purposes) that does not exceed one year. Regarding duration, the German text states "mehr als sechs Monaten" (more than six months), while the official English translation published by the Federal Ministry of Finance states "not less than six months' duration": the page follows the German text, and the exact wording should be verified with the source.

The German Income Tax Act (EStG, § 1) then applies taxation without limitation to those who have a domicile or habitual residence in Germany. Others are taxed only on their German income. The applicable German rules are those of the country of arrival: have them reviewed with a local tax advisor.

Registration at the town hall: two weeks

The Federal Registration Act (BMG, § 17) requires registration with the registration office "innerhalb von zwei Wochen nach dem Einzug," meaning within two weeks of moving in. France Diplomatie clarifies that French citizens staying for more than three months must register their residence with the local town hall, which issues a registration certificate (Anmeldung). A passport or national identity card is sufficient for entry; since May 2025, identity checks have been possible at German borders.

The year of departure on the French side

Filing a tax return is mandatory. Form 2042 includes your income from January 1st to your departure date; foreign-source income is reported on Form 2047. Form 2042-NR only includes your French-source income taxable in France from your departure to December 31st. Afterward, the Non-Resident Tax Office manages your file if you still have French-source income, and the French Wealth Tax (IFI) falls under the same office. To pay online, you need an account domiciled in France or within the SEPA zone.

What France continues to impose

As a non-resident, you are taxed only on your French-source income, subject to tax treaties. The minimum rate is 20% of your income up to €29,579 in 2025, and then 30% of your income thereafter. You can still opt for the average rate.

Under the tax treaty, income from real estate is taxable only in the country where it is located (Article 3): your French rental income remains taxable in France. For pensions and annuities, Article 13 § 8 stipulates the beneficiary's country of residence; Article 14 deals separately with public pensions.

Starting with €1,450,000 in securities: a numerical example (fictitious profile)

Situation. A fictitious executive, domiciled in France for over ten years, holds shares in his French company worth €1,450,000, representing an unrealized capital gain of €620,000. He relocates to Germany in December 2026.

Issue. He wants to know the tax involved and the time frame for tax relief, and whether the agreement changes anything regarding the tax base.

Strategy. He applies 12.8% of the % and 18.6% of the % to the unrealized capital gain, then compares the value of his securities to €2,570,000. He notes that Article 7 § 6 does not prohibit France from taxing, according to its domestic law, the capital gain realized during his residence on his shareholdings in a French company.

Result. Income tax: €79,360. Social security contributions: €115,320. Total: €194,680, representing 31.4% of the capital gain. His securities are valued below €2,570,000: the tax relief period is 2 years. With €3,000,000 worth of securities, it would be 5 years. The automatic deferral depends on the state's classification at the time of departure. Profile and amounts are fictitious.

What changes depending on your situation

• The value and nature of your securities, which determine the tax relief period.
• The classification of the destination state at the date of departure.
• Your ties remaining in France: home, work, economic interests.
• The duration of your residence in France, for the five-year clause.
• Your family situation and your moving schedule.

The rule depends on your situation. No results are guaranteed.