Giving Up Your German Residence: What Happens for Tax Purposes When You Move to Serbia

Anyone moving to Serbia usually thinks about the residence permit, an apartment and a bank account first. For tax purposes, however, the first decision is made in Germany: does the move change anything at all? As long as you keep a residence (Wohnsitz) or your habitual abode (gewöhnlicher Aufenthalt) in Germany, you remain subject to unlimited tax liability (unbeschränkte Steuerpflicht) there on your entire worldwide income, no matter what you have registered in Serbia.

This article covers only the German side: when your residence is genuinely given up for tax purposes, which notifications are required, how the year of departure is taxed and what happens to your German income afterwards. How to become tax resident in Serbia is explained in our article Steuerliche Ansässigkeit in Serbien: Warum Aufenthaltstitel oder Firma allein nicht reichen (in German). Exit taxation on company shareholdings (Wegzugsbesteuerung, § 6 Außensteuergesetz, AStG) is a separate topic, which we cover in detail in Wegzugsbesteuerung vermeiden and Wegzugsbesteuerung bei GmbH-Anteilen (both in German).

This article is not a substitute for tax advice. The provisions mentioned set the framework; how they apply to your case should be checked by a tax adviser with international experience.

Two connecting factors: residence and habitual abode

Under § 1 Abs. 1 EStG (German Income Tax Act), anyone who has a residence or their habitual abode in Germany is subject to unlimited tax liability. One of the two is enough. To genuinely give up your German tax residence, you have to end both.

Residence under § 8 AO

Under § 8 AO (Abgabenordnung, the German Fiscal Code), a person has a residence where they hold a dwelling under circumstances indicating that they will keep and use it. What counts are the actual circumstances, not the registered address. This leads to several situations in which the residence continues despite the move:

• You keep your previous apartment furnished and continue to use it when visiting Germany.
• You have a room in your parents' house that you can use at any time.
• Your family stays in the former family home while you work in Serbia.
• You own a holiday apartment in Germany that you regularly use yourself.

Conversely, terminating the lease, selling the apartment or letting it permanently to third parties points towards giving up the residence. A property of your own that is let on a long-term basis does not create a residence for you, because you cannot use it yourself.

Habitual abode under § 9 AO

A person has their habitual abode where they stay under circumstances showing that they are not staying there merely temporarily. A continuous stay of more than six months is always treated as a habitual abode; short interruptions are disregarded. So anyone who, after the formal move, still spends most of the year in Germany remains subject to unlimited tax liability even without an apartment.

Deregistering is mandatory, but not enough

Under registration law, § 17 Abs. 2 of the Federal Registration Act (Bundesmeldegesetz) requires you to deregister (Abmeldung) within two weeks of moving out if you are not moving into a new apartment in Germany. Deregistration is possible at the earliest one week before you move out. Keep the deregistration certificate (Abmeldebestätigung) safe; you will need it several times for banks, insurers and authorities.

For tax purposes, deregistration is only an indication. If in doubt, the tax office (Finanzamt) will check whether you actually no longer hold an apartment and no longer habitually stay in Germany. If you deregister but keep the apartment, you have gained nothing for tax purposes.

What you should tell the tax office

Do not assume that the registration office will automatically inform your tax office. Notify the tax office of your departure yourself, in writing. The letter should include the following:

Your tax identification number (steuerliche Identifikationsnummer) stays the same. Depending on which German income you have in future, a different tax office may become responsible. For rental income, this is usually the tax office for the district in which the property is located. For recipients of a German pension who live abroad, the Neubrandenburg tax office (Finanzamt Neubrandenburg) has central responsibility.

The year of departure: one tax return for two phases

In the year of the move, you are subject to unlimited tax liability until your departure and, where applicable, to limited tax liability (beschränkte Steuerpflicht) afterwards. Under § 2 Abs. 7 Satz 3 EStG, the law combines both phases in a single assessment: German-source income you earn after your departure is included in the assessment under unlimited tax liability.

For income earned abroad after your departure, such as your salary in Serbia, the progression proviso (Progressionsvorbehalt) under § 32b Abs. 1 Satz 1 Nr. 2 EStG applies. This income is not taxed in Germany, but it raises the tax rate applied to your taxable income for that year. Anyone who earned well in Germany in the year of departure and continues to earn in Serbia afterwards should factor this into their planning.

In practice this means:

• For the year of departure you will, as a rule, file an income tax return, even if as an employee you never had to file one before.
• Have evidence of the departure date and your foreign income ready, for example the deregistration certificate, your lease in Serbia, your employment contract and payslips.
• If you are married and only one partner moves away, the question of joint assessment needs to be examined separately.

After the move: what remains taxable in Germany

Giving up your residence does not end every tax liability. Anyone with certain German-source income within the meaning of § 49 EStG is subject to limited tax liability under § 1 Abs. 4 EStG. The most common cases for people moving to Serbia:

How a German pension is treated under the double taxation agreement when you live in Serbia is explained in In diesen Ländern ist die deutsche Rente steuerfrei (in German).

The basic tax-free allowance no longer applies

One point surprises many people: for taxpayers with limited tax liability, taxable income is increased by the basic tax-free allowance (Grundfreibetrag) under § 50 Abs. 1 Satz 2 EStG. In practice, this means you do not get the basic allowance, with one exception for employment income. You may deduct income-related expenses and business expenses only insofar as they relate to the German income. So anyone who keeps just one let apartment in Germany pays tax even on small rental profits.

Applying to be treated as subject to unlimited tax liability

Under § 1 Abs. 3 EStG, you can apply to be treated like a taxpayer with unlimited tax liability if at least 90 percent of your income is subject to German income tax or if your income not taxable in Germany does not exceed the basic tax-free allowance. You then receive the basic allowance. However, income splitting for married couples (Splittingtarif) under § 1a EStG is available by this route only to nationals of the EU or the EEA who live in an EU or EEA state. Serbia is not one of them, so joint assessment is generally ruled out after a move to Serbia.

Bank and securities account

Inform your German bank about your departure. Tax exemption orders (Freistellungsaufträge) lose their basis once you give up your residence, and the bank has to change your status for the withholding of tax on capital income. Some banks require a certificate of tax residence from your new country of residence for this. If your securities account holds substantial shareholdings, check in advance whether exit taxation applies.

Extended limited tax liability under § 2 AStG

There is a special rule for German nationals who move to a low-tax country. Under § 2 of the Foreign Tax Act (Außensteuergesetz, AStG), an extended limited tax liability (erweiterte beschränkte Steuerpflicht) continues for ten years after the end of the year in which unlimited tax liability ended. It then covers not only German-source income under § 49 EStG, but all income that would not be foreign income under unlimited tax liability. That is a considerably wider scope.

The rule applies only if all of the following conditions are met together:

1. German nationality and prior history: In the last ten years before your departure, you were subject to unlimited tax liability as a German national for a total of at least five years.
2. Low taxation in the new country of residence: Under § 2 Abs. 2 AStG, this is the case if the foreign tax on an income of 77,000 euros is more than one third lower than German income tax. Preferential taxation can also be sufficient.
3. Substantial economic interests in Germany: Under § 2 Abs. 3 AStG, this includes, among other things, cases where your non-foreign income makes up more than 30 percent of your total income or exceeds 62,000 euros, or where the corresponding assets make up more than 30 percent of your total assets or exceed 154,000 euros. Shareholdings in German commercial businesses can also be sufficient.

There is also an exemption threshold: the rule only applies in years in which the income concerned exceeds 16,500 euros in total.

Whether Serbia counts as a low-tax country in a specific case depends on the comparative calculation for your income. Given Serbia's typical tax rates, it is often worth at least checking. Anyone moving to Serbia with substantial assets or ongoing income from Germany should run the numbers on § 2 AStG with a tax adviser before the move. In individual cases, the double taxation agreement can limit the effect.

Checklist for giving up your German residence

• Terminate the lease on your apartment, sell it or let it permanently to third parties, without keeping any option to use it yourself
• Do not keep a room with relatives available for use at any time
• Document the days you spend in Germany after the move
• Deregister within two weeks of moving out
• Inform the tax office in writing and appoint an authorised recipient if needed
• Inform your bank, securities account provider and insurers about your departure
• Plan for a tax return for the year of departure
• Have § 2 AStG and § 6 AStG checked before the move
• At the same time, establish genuine tax residence in Serbia

Sorting out the Serbian side at the same time

Giving up your German residence is only half the job. So that you are not left without a tax residence anywhere, you need a genuine centre of life in Serbia, with an apartment, a residence permit and an everyday life on the ground. Exgentum supports English-speaking newcomers in Belgrade with finding an apartment, the residence permit and a bank account, so that the evidence of your new residence comes together cleanly from the start. The tax planning itself belongs in the hands of a tax adviser; with these documents you will be well prepared for that meeting.

Frequently asked questions

Am I automatically no longer taxable in Germany once I deregister?

No. Deregistration is only an indication. What matters is whether you actually no longer hold an apartment you can use and no longer habitually stay in Germany.

Can I keep my apartment in Germany?

Yes, but if you can use it yourself, your residence will usually continue. If it is let permanently to third parties, it no longer creates a residence, but the rental income remains taxable in Germany.

Do I have to file a tax return in the year of the move?

As a rule, yes. In the year of departure, unlimited and limited tax liability are assessed together, and foreign income after the departure affects the tax rate through the progression proviso.

What is extended limited tax liability?

A rule under § 2 AStG for Germans who move to a low-tax country and keep substantial economic interests in Germany. It applies for up to ten years and covers more income than ordinary limited tax liability.

How often can I travel to Germany after the move?

There is no fixed day limit for visits. However, a continuous stay of more than six months always creates a habitual abode, and an available apartment can amount to a residence even during shorter visits.

Do I get the basic tax-free allowance as a taxpayer with limited tax liability?

In principle no, except for employment income. However, if the conditions of § 1 Abs. 3 EStG are met, you can apply to be treated like a taxpayer with unlimited tax liability.