Exit Tax in the EU: What You Owe Before Moving to Bulgaria

What Is Exit Tax?

Exit tax — sometimes called "departure tax" or "emigration tax" — is a capital gains tax on unrealized gains. When you move your tax residency from one EU country to another, your home country treats certain assets as if you'd sold them on the day you left. You owe tax on the paper profit, even though you haven't actually sold anything.

The logic is straightforward: your home country invested in you (roads, schools, legal system) while those gains accumulated. They want their share before you leave for a lower-tax jurisdiction — like Bulgaria's 10% flat rate.

The ATAD Framework: Why Every EU Country Has Exit Tax

The Anti-Tax Avoidance Directive (ATAD), specifically Article 5, requires all EU member states to impose exit taxation on unrealized capital gains when a taxpayer transfers their residence abroad. This became mandatory from January 1, 2020.

Key ATAD requirements:

• Deemed disposal: Assets are treated as sold at fair market value on the day of departure
• Covered assets: Shares in companies, business assets, and certain investment holdings
• EU/EEA deferral: Member states must allow taxpayers moving within the EU/EEA to defer exit tax — typically over 5 annual installments
• Third-country moves: No deferral requirement — states can demand immediate payment
• Cancellation: If you return to the taxing country or the asset's value drops, some countries reduce or cancel the exit tax

Country-by-Country Exit Tax Rules

Germany — Wegzugsbesteuerung

Germany's exit tax (§ 6 AStG) is among the most aggressive in the EU. It targets shareholders with 1% or more ownership in any corporation — German or foreign.

• Rate: ~28.5% (26.375% Abgeltungsteuer + Solidaritätszuschlag, potentially + church tax)
• Trigger: Holding ≥1% of a corporation's shares at any point in the past 5 years
• Since Jan 2025: Also applies to investment fund shares with ≥1% ownership or acquisition costs exceeding EUR 500,000
• Deemed sale: Fair market value on departure date minus original acquisition cost = taxable gain
• EU/EEA deferral: Payment can be spread over 7 annual installments, but Germany typically requires security (bank guarantee or similar)
• Return rule: If you return to Germany within 7 years, exit tax can be reversed

France — Exit Tax (Plus-values latentes)

France imposes exit tax on taxpayers who have been French tax residents for at least 6 of the past 10 years.

• Rate: 30% flat (prélèvement forfaitaire unique — 12.8% income tax + 17.2% social contributions)
• Threshold: Portfolio of securities worth ≥EUR 800,000, or shareholding representing ≥50% of a company's profits
• EU/EEA deferral: Automatic — no security required for moves within the EU/EEA
• Waiver provisions: Exit tax is definitively waived if you still hold the assets 2 years after departure (for holdings under 50% of company profits) or 5 years (for holdings ≥50%)
• Reporting: You must file Form 2074-ETD annually until waiver or actual disposal

Netherlands — Aanmerkelijk Belang (Substantial Interest)

The Netherlands charges exit tax on substantial interests — defined as holding ≥5% of a company's shares.

• Rate: Box 2 progressive rates — 24.5% on the first EUR 67,000 of gains, 33% above that (2026 rates)
• Trigger: Owning ≥5% of a BV, NV, or foreign equivalent
• Deemed disposal: Fair market value on departure date minus acquisition cost
• Deferral: The Dutch Tax Authority (Belastingdienst) grants deferral until actual disposal — meaning you only pay when you actually sell the shares
• 10-year clawback: The Netherlands retains the right to tax substantial interest gains for 10 years after departure, regardless of your new country of residence
• Reporting: Annual declaration (conserverende aangifte) required while deferral is active

Spain — Impuesto de Salida

Spain's exit tax applies to long-term residents with significant shareholdings.

• Residency requirement: Spanish tax resident for at least 10 of the past 15 years
• Threshold: Shares/participations with total value exceeding EUR 4 million, or ≥25% stake in a company worth ≥EUR 1 million
• Rate: Progressive savings tax — 19% to 28% depending on gain amount
• EU/EEA deferral: Tax can be spread over 5 annual installments, with option to extend deferral up to 10 years
• Cancellation: Exit tax is extinguished if the taxpayer returns to Spain within 5 years
• Tax haven rule: Spanish nationals moving to listed tax havens remain Spanish taxpayers for the departure year + 4 additional years

Austria — Wegzugsbesteuerung

Austria taxes unrealized gains on business assets and substantial shareholdings upon emigration.

• Rate: 27.5% on capital gains from shares (Kapitalertragsteuer)
• Covered assets: Shares in corporations, business assets, investment fund holdings
• EU/EEA deferral: Installment payment over 5 years for fixed assets (2 years for current assets) — but since 2016, taxpayers can opt for indefinite deferral until actual realization for EU/EEA moves
• Non-EU moves: Immediate payment required
• Reporting: Must notify the Austrian tax office and file a final tax return

Other Notable Countries

Which Assets Are Subject to Exit Tax?

Exit tax doesn't apply to everything you own. Here's what's typically covered — and what's exempt:

Taxable Assets

• Company shares: Ownership stakes in GmbHs, BVs, SAs, SARLs, Ltd companies — the primary target of exit taxation
• Business assets: Assets held in a sole proprietorship or partnership being relocated
• Investment fund shares: Large holdings in funds (Germany's new 2025 rule: ≥1% or EUR 500K+ cost)
• Options and convertibles: Vested stock options and convertible instruments
• Shares in real estate holding companies: If you own shares in a company that primarily holds real estate, those shares may trigger exit tax

Generally Exempt Assets

• Direct real estate: Property you own directly remains taxable in the country where it's located — no exit tax applies
• Bank accounts and cash: No unrealized gains to tax
• Personal property: Cars, art, jewelry (in most jurisdictions)
• Pension rights: Typically covered by separate bilateral agreements, not exit tax
• Cryptocurrency: Most countries don't yet apply exit tax to crypto, but this is an evolving area — Germany and France are considering it

ATAD Deferral: How to Spread the Bill

The most important protection for EU movers is the mandatory deferral provision under ATAD Article 5. When you move from one EU/EEA country to another, your departure country must let you defer the exit tax payment.

How Deferral Works in Practice

1. File a departure tax return — declare the deemed disposal and calculated gain
2. Request deferral — in most countries, it's automatic for EU moves; some require formal application
3. Receive a payment schedule — typically 5 annual installments (Germany: 7; Netherlands: until actual sale)
4. File annual declarations — report that you still hold the assets and haven't returned
5. Pay installments or wait for cancellation — depending on the country's rules

Why Bulgaria Is an Attractive Destination

Bulgaria is a rare EU country that imposes no exit tax — neither on arrival nor on departure. This creates a uniquely favorable position:

• No entry tax: Bulgaria doesn't tax unrealized gains when you become a tax resident. Your cost basis remains your original acquisition cost.
• No exit tax: If you later leave Bulgaria, there's no deemed disposal. You only pay tax when you actually sell assets.
• 10% flat capital gains tax: When you do sell, Bulgaria charges a flat 10% — among the lowest in the EU
• Double taxation treaties: Bulgaria has 70+ treaties that can prevent your former country from taxing the same gains twice

Double Taxation Treaty Protection

Bulgaria's extensive treaty network plays a crucial role in exit tax scenarios. Here's how it works:

• Tax credit method: Most Bulgaria treaties use the credit method — exit tax paid to your former country can be credited against Bulgarian tax on the same gain
• Residency determination: Treaties define which country has the right to tax you during the transition year using tie-breaker rules (permanent home → centre of vital interests → habitual abode → nationality)
• Capital gains article: Article 13 of most treaties assigns taxing rights on share disposals — typically to the country of residence at the time of actual sale
• Mutual agreement procedure: If both countries try to tax the same gain, you can invoke the MAP to resolve the dispute

Key treaties relevant for exit tax situations:

• Bulgaria–Germany: Credit method applies. Exit tax on departure is recognized. Capital gains on shares taxable only in the residence state (with exceptions for real estate-rich companies).
• Bulgaria–France: Similar credit method. French exit tax becomes moot if waiver conditions are met (2–5 year holding).
• Bulgaria–Netherlands: 10-year substantial interest clawback may override treaty provisions — seek specific advice.
• Bulgaria–Spain: Credit method. 5-year return cancellation provision applies.

Strategies to Minimize Exit Tax Exposure

These are legitimate, legal strategies that tax advisors commonly recommend. They require advance planning — ideally 1–2 years before your move.

1. Sell and Rebuy Before Departure

Realize gains while still a tax resident, then repurchase. This locks in the current tax rate and resets your cost basis. Useful when current capital gains rates are lower than exit tax rates, or when you want certainty rather than dealing with deferral paperwork.

2. Reduce Shareholding Below Thresholds

Germany's exit tax only applies to ≥1% holdings. If you can reduce your stake below 1% through a partial sale or share dilution before departure, the exit tax doesn't trigger. Similarly, Spain's EUR 4 million threshold means restructuring holdings below this level can eliminate exposure.

3. Use the French Waiver Window

If leaving France, simply hold your assets for 2–5 years after departure. The exit tax is completely cancelled. This is the simplest strategy available — patience pays off literally.

4. Time Your Departure Strategically

Some countries calculate exit tax based on asset values on the exact departure date. If your shares have temporarily dipped in value, timing your departure during a market downturn can reduce the taxable gain — and therefore the exit tax owed.

5. Leverage Deferral + Treaty Credits

Defer exit tax over 5–7 years (installments). During deferral, establish Bulgarian tax residency. When you eventually sell, use the double taxation treaty to credit the installments already paid against your Bulgarian 10% capital gains tax.

6. Corporate Restructuring

For significant holdings, transferring shares into a holding company structure before departure may provide more favorable exit tax treatment in some jurisdictions. This requires careful structuring and should be done well in advance — rushing it before departure can trigger anti-avoidance rules.

Step-by-Step: Planning Your Exit

Common Mistakes to Avoid

Frequently Asked Questions