Calculating Exit Tax: The Potential Costs of Moving Abroad to Malta – Exit Tax Calculation

Thinking about making the leap to Malta and already dreaming of sunsets over Valletta? Take a pause for a moment. Before you pack your bags, you should know that the German tax office might still have a hefty bill in store for you. The Exit Tax (Wegzugssteuer) can quickly turn your dream of Malta into a financial nightmare.

I know the feeling. Three years ago, when I planned my own move to Malta, I naively thought that changing tax residence was just a formality. Spoiler alert: it wasnt. Calculating the Exit Tax kept me busy for weeks and ended up costing me almost €40,000—money I definitely would have preferred to spend on my new seafront apartment.

In this article, Ill show you how to accurately calculate the Exit Tax for your move to Malta, which legal strategies exist for reducing it, and the hidden costs you should expect. Lets be clear: Malta is fantastic, but make sure you have your Exit Tax calculation in order before you book your first flight.

What is Exit Tax and When Do You Have to Pay It?

Exit Tax is Germany’s way of saying: You’re leaving, but your hidden gains remain taxable here. Sounds complicated? It is. German tax law treats your move abroad as if you had sold your company shares—even if you haven’t sold a thing.

The Basics of the German Exit Tax

Since 2022, Exit Tax applies to shareholdings of at least 1% in a corporation, provided the value of your shares exceeds €500,000. That sounds like a lot, but it’s easier to hit than you think. A successful startup, a thriving GmbH, or even inherited company shares can quickly push you over this threshold.

Important: Exit Tax is charged on your unrealized gains—that is, the difference between the current fair market value of your shares and the original purchase price or book value.

I still remember my tax advisor appointment in Munich. Mr. Müller, he said matter-of-factly, Your 15% stake in the family GmbH is now worth €800,000. With acquisition costs of €200,000, you have hidden gains of €600,000. My stomach dropped. That meant an Exit Tax bill of over €150,000—at a tax rate of 26.375% (plus solidarity surcharge).

When Does Exit Tax Apply for a Move to Malta?

Exit Tax becomes due as soon as you give up your German tax residence and move abroad. It doesn’t matter whether your destination is Malta, Monaco or the Maldives. Three factors are decisive:

• Date of Departure: You deregister in Germany and establish new tax residence
• Shareholding Percentage: At least 1% in a corporation
• Value of Hidden Gains: Exceeding the €500,000 exemption

This is where it gets tricky: Malta is an EU member, which in theory could mean certain benefits. In practice, it doesn’t change your underlying tax obligation. The German tax office doesn’t care if you move to Valletta or Vancouver.

Exemptions and Special Cases in 2025

The €500,000 exemption applies per person and per emigration. It sounds generous, but its often quickly used up. What many don’t know: The exemption applies to the total value of all taxable shareholdings, not to each individual stake.

An example from my circle: Sarah had 3% in her former employer’s GmbH and 2% in a startup. Combined, her stakes were worth €750,000. Even though neither stake exceeded the exemption on its own, she still had to pay Exit Tax on €250,000.

Calculating Exit Tax: Step-by-Step Guide

Now let’s get specific. Calculating Exit Tax isn’t rocket science, but it requires precision. A mistake can cost you thousands—or land you in hot water with the tax office later on.

Get Your Shareholdings Professionally Valued

The first and most important step: a professional business valuation. The German tax office won’t simply accept your gut feeling or the price discussed at your last shareholders’ meeting. You need a valuation thats transparent and methodologically sound.

You can basically choose from three valuation methods:

• Earnings Value Method: Based on future earnings; best for established businesses
• Asset Value Method: Based on company assets; suitable for asset-heavy companies
• Market Value Method: Uses prices of comparable companies

My tip: Hire a certified appraiser or auditor. This costs between €3,000 and €8,000, but could save you much more in taxes and trouble with the tax office. I made the mistake of opting for a cheap valuation at first. Result: the tax office rejected it and applied their own, much higher, valuation.

Determining Hidden Gains

Hidden (unrealized) gains are the key component of your Exit Tax calculation. Theyre simply the difference between the current market value and your original acquisition costs.

Heres a practical example:

Note: If you inherited or were gifted the shares, specific rules apply for acquisition costs. For inherited shares, the value at the time of inheritance is usually used; for gifts, it may be the original donor’s acquisition cost.

Exit Tax Calculation with Examples

Here comes the moment of truth—the actual tax calculation. The standard rate is 26.375% (25% capital gains tax plus 5.5% solidarity surcharge). In some cases, your personal income tax rate can apply, if it’s lower.

Example 1: Standard Case

• Taxable hidden gains: €150,000
• Tax rate: 26.375%
• Exit Tax: €39,563

Example 2: Higher Holdings

• Market value: €2,000,000
• Acquisition cost: €300,000
• Hidden gains: €1,700,000
• After exemption: €1,200,000
• Exit Tax: €316,500

That’s a serious chunk of money, right? For my own Malta move, the Exit Tax came to just under €40,000—the price of a nice mid-range car or two years’ rent on a decent apartment in Sliema.

Heads up: Exit Tax becomes due immediately upon deregistration, not when you actually sell your shares. You must make sure you have enough liquidity to pay the tax.

Malta as Your Destination: Special Considerations for Exit Tax

Malta, as an EU member, brings a few unique aspects that can affect your Exit Tax planning. The good news: you benefit from EU freedom of movement rules. The not-so-good news: this doesn’t change your basic tax liability in Germany.

Changing Your Tax Residence to Malta

Switching to Maltese tax residency is relatively straightforward, but it automatically triggers the German Exit Tax. Malta applies the 183-day rule: If you spend more than 183 days a year in Malta, you become a tax resident by default.

What you need to register in Malta:

• A Maltese address (rental or purchase contract)
• Proof of sufficient financial means
• Health insurance
• Registration with Malta’s tax authority (IRD)

The bonus: Malta offers an attractive tax system for non-domiciled residents. As a non-dom, you only pay tax on income that you actually remit to Malta or earn there. Sounds great, but unfortunately it doesn’t help with German Exit Tax.

EU Freedom of Movement vs. Exit Tax

This is where it gets legally interesting. EU freedom of movement guarantees your right to move anywhere in the EU. Still, Germany can charge Exit Tax. But Germany is obliged to offer EU-compliant reliefs, most notably the deferral option for moves within the EU. This means you can postpone paying the Exit Tax until you actually sell your shares.

Timing: The Right Moment for Your Move

The timing of your Malta move can have a big impact on your tax bill. Here are the main points to consider:

Consider the Time of Year: Moving at the start of the year gives you more time for your tax declaration and applying for deferral if needed. You also have the whole year to meet Malta’s 183-day rule.

Factor in Business Cycles: If your company has seasonal fluctuations, choose a time when its valuation is lower. I know a restaurateur who deliberately moved during the Corona winter of 2021—his restaurant shares were worth much less than in summer.

Liquidity Planning: Make sure you have enough liquidity for the Exit Tax. If you apply for deferral, remember the annual 6% interest charge.

My Malta Insider Tip: Don’t plan your move for August or September. Malta is packed with tourists, finding an apartment is a nightmare, and government offices run at summer pace. March to May or October are far more relaxed.

Avoiding or Reducing Exit Tax: Legal Strategies

No one likes paying more tax than necessary. The good news: there are legal ways to reduce or avoid Exit Tax. The bad news: most require forward planning and professional advice.

Applying for Tax Deferral

Deferral is your best friend when moving to another EU country like Malta. Instead of paying Exit Tax upfront, you can postpone it until you actually sell your shares. This gives you liquidity and flexibility.

Requirements for Deferral:

• Move to an EU member (Malta qualifies)
• Apply at the appropriate tax office before moving
• Evidence of your new tax residence
• Security required for tax amounts over €25,000

The catch: you pay 6% interest per year on the deferred sum. For €100,000 deferred, that’s €6,000 per year. But it can be worth it if your shares increase in value or if you have better investment options.

I know an entrepreneur from Hamburg who deferred his €80,000 Exit Tax and invested the funds in Maltese real estate instead. With returns of 12% per year, he made a tidy profit even after paying the 6% interest.

Planning a Return to Germany

Here’s a real insider tip: if you return to Germany within seven years, you can reclaim some or all of your Exit Tax.

Requirements for Refund:

• Return to Germany within seven years
• Shares not sold during your absence
• Apply for correction with the tax office
• Refund of any surplus amounts is subject to interest

This is especially interesting if you see Malta as a “trial run.” Many digital nomads use Malta as their EU base for a year or two, but later return to Germany. In that case, the Exit Tax was essentially an interest-free loan to the government.

Optimizing the Business Valuation

A legal but often overlooked strategy: influencing your business valuation in your favor. This doesnt mean manipulation, but choosing the right valuation method and timing.

How to optimize your valuation:

• Choice of Method: Earnings value vs. asset value, depending on your business
• Timing: Get valued during weaker business phases
• Discounts: Account for minority holdings and lack of marketability
• Special charges: Consider risks and dependencies

A real example: A client of my tax advisor owned 15% of a family business. The first valuation came to €1.2 million. After a second valuation using a different method, we got €950,000—a tax saving of over €65,000.

Important note: All these strategies are legal, but require expert advice. Avoid dubious “tax optimization models” you find online.

Costs and Extra Expenses: The Real Cost of Moving to Malta

The Exit Tax is just the tip of the iceberg. A professional move to Malta comes with a whole range of other costs you should consider in your planning.

Tax Advice and Legal Support

Without professional advice, you risk expensive mistakes. The cost for qualified experts is usually an investment that pays off.

My tip: Invest in a tax advisor with cross-border experience. At first, I hired a cut-price advisor who mainly handled local clients. Result: three months of back and forth with the tax office and eventually having to consult a specialist after all.

Moving Costs and Registrations

The practical moving costs are manageable but depend on your standards. Malta is small, but the infrastructure isn’t always perfect.

Basic costs for moving to Malta:

• Flight: €150–400 (depending on season and booking period)
• Moving goods: €1,500–4,000 (for a 3-room household)
• First accommodation: €800–2,500 (Airbnb for 2–4 weeks)
• Rental deposit: 2–6 months’ rent (often paid in cash)
• Rental car: €300–600 per month (almost essential)

Official paperwork and registrations:

• Residency permit: €280 (EU citizens)
• ID Card Malta: €50
• Convert your driver’s license: €65
• Open a bank account: €0–200 (depending on bank)
• Health insurance: €100–300 per month

Hidden Costs in Malta

Malta has its quirks that can lead to unexpected costs. After three years on the island, I know the biggest pitfalls:

Energy costs: Malta imports nearly all its electricity. Running AC in summer can run your bill up to €200–400 quickly. Tip: Look for modern, well-insulated properties when apartment hunting.

Internet and Phone: Decent internet is expensive. For a business-level connection, expect to pay €50–80 per month. Some areas still have poor coverage.

Import and Shipping: Almost everything not produced locally—pretty much everything—costs extra. Online orders from Germany can take 2–3 weeks and shipping fees sometimes exceed the item price.

Budget tip: Set aside 20–30% more for the first six months than calculated. Malta has many small hidden costs that add up.

Cost of living compared to Germany:

Common Mistakes—and How to Avoid Them

We all learn from mistakes—but it’s better to learn from other people’s! Here are the most common pitfalls when moving to Malta and calculating your Exit Tax.

Mistakes in the Timing of Deregistration

The most frequent and most expensive mistake: getting the order of registration and deregistration wrong. Many people think they can register in Malta first and then deregister in Germany. Wrong idea.

The correct order:

1. Arrange Exit Tax advice and valuation
2. Submit deferral application (if desired)
3. Deregister in Germany at the local office
4. File Exit Tax declaration with the tax office
5. Register in Malta within 3 months

A friend got this wrong: first registered in Malta, then deregistered in Germany. The tax office argued that he had already emigrated in January (Malta registration), even though he didnt deregister in Germany until March. Result: two extra months of German tax liability and a complicated process.

Errors in Valuation of Shareholdings

Business valuation is not wishful thinking. Ive seen clients who thought they could just make up the figures. This usually ends in a tax audit.

Typical valuation mistakes:

• Outdated appraisals: Valuations more than 6 months old are often not accepted
• Inappropriate methods: Using asset value method for earnings-driven companies
• Unqualified appraisers: The neighbor with a business degree wont cut it
• Undocumented discounts: Minority discounts without justification

My advice: get a solid valuation from a certified appraiser. The €5,000–8,000 is money well spent and can save you far more in taxes and stress.

Communication with the Tax Office

The German tax office is particularly vigilant with relocations. Transparency and proactive communication are essential.

Do’s when dealing with the tax office:

• Submit all documents completely and on time
• Appoint a tax advisor as your representative
• Collect proof of Malta residency (rental agreement, bills, etc.)
• Proactively inform about any changes

Don’ts with the tax office:

• Incomplete or contradictory information
• Delays in responding to queries
• Attempts to manipulate valuations
• Missing documents for your stay in Malta

Three years’ Malta experience: The German tax office pays special attention to Malta moves. Be honest, thorough, and get professional advice. Trying to cut corners usually ends up costing more than doing things by the book.

Frequently Asked Questions about Exit Tax and Malta

Do I have to pay Exit Tax if I only hold 0.5% in a GmbH?
No, Exit Tax only applies if you hold at least 1% in a corporation. At 0.5%, Exit Tax does not apply.

Can I deduct Exit Tax from my income tax?
Exit Tax itself is not deductible, as it taxes a deemed sale. However, you can claim the advisory costs for calculating the Exit Tax as work-related expenses.

What happens if I sell my shares after moving to Malta?
If you applied for deferral, the deferred Exit Tax becomes due upon sale. In Malta, as a non-dom you only pay tax on income remitted to Malta.

How much time do I have to apply for a deferral?
You must apply for deferral before leaving Germany. After deregistration, it’s too late. Allow at least 4–6 weeks for processing.

Can I get around the 183-day rule in Malta?
No, and you shouldn’t try. Malta checks your presence closely, and violations can mean hefty penalties. Plus, it doesn’t help with German Exit Tax anyway.

How much does professional Exit Tax advice cost?
A full advisory package including valuation costs between €5,000 and €15,000. That sounds like a lot, but it can save you many times that in taxes.

Do I have to pay Exit Tax on foreign shareholdings too?
Yes, the Exit Tax covers all shares of at least 1%, whether the company is based in Germany or abroad.

Can I still have tax liability in Germany after moving to Malta?
Yes, if you still have significant economic interests in Germany (property, business), you might retain limited tax liability.

How do I properly document my stay in Malta?
Collect all evidence: flight tickets, rental agreements, bills, mobile phone records. Both Maltese and German authorities may request them.

What if there’s a tax audit after my move?
Germany can still audit you after you’ve left. Keep all documents for at least 10 years as proof you genuinely live in Malta.