Exit Tax for Founders and Shareholders: Which Countries Charge It When You Leave

Two different taxes share one name

The phrase exit tax covers two charges that behave differently, arise on different events and are set by different law. Founders routinely plan for one and are assessed under the other.

The corporate charge is harmonised. Article 5 of Council Directive (EU) 2016/1164, the Anti-Tax Avoidance Directive, requires every member state to tax unrealised gains when a company transfers assets out of its jurisdiction, transfers its tax residence out, or transfers a permanent establishment out. The rule applies in the same shape across the Union, and Cyprus has it as well.

The personal charge is not harmonised. No directive governs what a member state may charge an individual who moves away. The result is that two neighbouring countries can treat an identical founder completely differently, and several charge nothing at all.

Both are set by the country being left. Nothing about the destination changes the calculation. A founder who researches Cyprus thoroughly and Germany not at all has researched the wrong half of the problem.

The personal charge, country by country

Each entry is the position as published by practitioners in that jurisdiction and should be confirmed against the relevant revenue authority before anyone acts on it.

Countries that tax unrealised gains on departure

Germany, section 6 of the Foreign Tax Act. The charge reaches an individual who has been subject to unlimited German tax liability for seven of the previous twelve years and who holds shares within the meaning of section 17 of the Income Tax Act, meaning a holding of at least 1 percent at any point in the preceding five years. Shares are treated as sold at fair market value. Sixty percent of the gain enters the progressive scale under the partial income procedure, so the top rate is 45 percent plus the solidarity surcharge on that portion. Seven equal annual instalments are available on application under section 6(4) and carry no interest. Under the returner rule the charge is cancelled retrospectively, and instalments already paid are refunded, if the person becomes subject to unlimited German tax liability again within seven years without having sold the shares.

Why it is shaped that way. The five year lookback on the 1 percent test exists so that selling down to 0.9 percent shortly before leaving achieves nothing. The returner rule exists because the charge is designed to catch permanent departure rather than secondment.

France, article 167 bis of the General Tax Code. The charge reaches a person who has been French tax resident for six of the ten years before the transfer and who holds securities worth at least 800,000 euro in total, or representing at least 50 percent of a company's profits. For 2026 the combined rate is 31.4 percent, being 12.8 percent income tax plus 18.6 percent social contributions, up from 30 percent before 2026. Deferral is automatic and without security for moves to the EU and EEA and to third countries that have an assistance and recovery convention with France. The charge lapses if the securities are still held after a qualifying period, which is two years in the standard case and five in others.

Why it is shaped that way. The automatic deferral for EU moves is not generosity. It is what the Court of Justice has required of exit charges that would otherwise restrict freedom of establishment.

Spain, article 95 bis of the Personal Income Tax Law. The charge reaches a person who has been Spanish tax resident for ten of the fifteen tax periods before departure, where the market value of shares exceeds 4 million euro, or where the holding exceeds 25 percent of an entity and is worth more than 1 million euro. It applies to equity interests only, being shares, company stakes and fund units. Two deferral regimes exist, one of which is for transfers within the EU and EEA.

Why it is shaped that way. The ten of fifteen test is the longest residence requirement of the group, which means a founder who arrived in Spain recently is outside it entirely.

Netherlands. The charge reaches a substantial interest, being 5 percent or more of the shares, voting rights or profit rights in a Dutch company. Emigration produces a deemed box 2 gain, measured as the difference between acquisition cost and value on the date of emigration, taxed for 2026 at 24.5 percent on the first 68,843 euro and 31 percent above it. What is issued is a protective assessment, the conserverende aanslag. For moves within the EU and EEA, deferral is automatic, interest free and requires no security. Outside the EU and EEA it must be requested and security must always be given for a substantial interest. Since September 2015 the assessment is unlimited in time and passes to heirs on death.

Why it is shaped that way. The Dutch design is an assessment that is raised and then parked rather than collected. The practical consequence is that nothing is paid on leaving, but the liability never expires, which is the opposite of the French and Spanish approach.

Belgium. A charge of 10 percent applies on gains accrued since 1 January 2026 across covered financial assets, including shares, bonds, funds, crypto-assets and unit linked insurance, treated as realised on transfer of residence abroad.

Why it is shaped that way. Because it reaches only growth from a start date in 2026, the exposure on a long held asset is a fraction of the headline. That changes every year the regime runs.

Israel, section 100A of the Income Tax Ordinance. Assets are deemed sold one day before residency ends, at the applicable capital gains rate, with no threshold.

Why it matters. The absence of a threshold is unusual. Most regimes exist to catch substantial holdings; this one catches everything.

South Africa, section 9H of the Income Tax Act. A deemed disposal of worldwide assets arises on the day before residence ceases. South African immovable property is excluded, because it stays within the South African net regardless of where the owner lives.

Australia, CGT event I1. Ceasing Australian residence triggers a deemed disposal of assets that are not taxable Australian property. An election is available to disregard the deemed disposal, in which case the assets remain within the Australian capital gains net until they are actually sold or the person returns.

Why it matters. Australia is the only regime here that lets the taxpayer choose between paying now and staying in the net. The election is a genuine decision rather than a formality.

United States, section 877A. The charge reaches only citizens who renounce and long term residents who end that status, and only where they are covered expatriates. Worldwide property is treated as sold at fair market value, with an exclusion of 910,000 dollars of net deemed gain for 2026. For a founder who is neither a citizen nor a green card holder, it does not arise at all.

Countries that charge nothing on departure, and reach forward instead

Sweden does not tax unrealised gains on leaving. It applies the ten year rule instead: a former resident remains liable to Swedish capital gains tax, at 30 percent, on assets acquired while resident if they are sold within ten years of departure. A 2017 proposal for a true exit tax was dropped.

Finland has no personal exit tax. A Finnish citizen is deemed to remain tax resident for three years after departure unless they can show that substantial ties to Finland have ended.

Lithuania has no exit tax. A departing permanent resident must file an income tax declaration with the State Tax Inspectorate before leaving, and where the year of departure still counts as a full resident year, both a departure declaration and the annual return are due.

United Kingdom has no general charge on changing residence. The risk is the temporary non-residence rule: a person who was UK resident in at least four of the seven tax years before leaving, and who returns within five complete tax years, has gains realised while abroad on assets held before departure brought back into charge in the year of return. Stay away longer than five complete tax years and nothing is pulled back.

Why this group matters more than it looks. A charge you can avoid by staying away is a different planning problem from a charge crystallised on the day you leave. The first is about duration and the second is about timing, and advice built for one does not transfer to the other.

Italy charges businesses rather than passive investors. Article 166 TUIR crystallises unrealised gains on assets and goodwill when a person carrying on a business moves residence abroad, and it reaches companies, partnerships and sole traders. A personal exit tax of 26 percent on holdings of 800,000 euro or more, for those resident six of the previous ten years, appears in the 2027 budget bill. It is a proposal and not law.

The corporate charge, and why forming a company abroad does not avoid it

Article 5 of the Anti-Tax Avoidance Directive has applied since 1 January 2020. It requires a member state to tax the taxpayer on the market value of the transferred assets less their value for tax purposes in four situations, set out at article 5(1):

• assets transferred from a head office to a permanent establishment in another member state or a third country, where the head office state loses the right to tax them;
• assets transferred from a permanent establishment to a head office or another permanent establishment elsewhere, on the same condition;
• transfer of tax residence to another member state or a third country, except for assets that remain effectively connected with a permanent establishment left behind;
• transfer of the business carried on by a permanent establishment out of the state.

Article 5(2) gives a right to pay in instalments over five years where the destination is another member state, or an EEA state that has an agreement on mutual assistance for the recovery of tax claims equivalent to Directive 2010/24/EU. Interest may be charged under article 5(3), and a guarantee may be required only where there is a demonstrable and actual risk of non-recovery.

Article 5(4) ends the deferral immediately if the assets or the business are sold, if they are subsequently transferred to a third country, if the taxpayer's residence moves on to a third country, on bankruptcy or winding up, or if an instalment is missed and not corrected within twelve months.

Article 5(7) carves out asset transfers relating to securities financing, assets posted as collateral, transfers made to meet prudential capital requirements, and liquidity management, provided the assets return within twelve months.

This is the charge most relevant to a founder, and it is the one most often missed, because it is triggered by the thing people do as a solution. Incorporating a company in another country and then selling or contributing software, patents or goodwill to it is a disposal in the origin state. The new company is not the problem. The transfer into it is.

The point almost nobody makes

Where exit tax is charged within the Union, article 5(5) obliges the receiving member state to accept the value established by the departing state as the starting value of the assets for tax purposes, unless that value does not reflect market value. Market value is defined at article 5(6) as the amount for which an asset can be exchanged between willing unrelated buyers and sellers in a direct transaction.

So the charge is not purely a cost. It buys a higher base in the destination. For intangibles in particular, the exit value becomes the amount available to amortise in the new jurisdiction, which for software moving into a regime with an amortisation deduction can recover a substantial part of the charge over the asset's life. Whether it recovers all of it depends on the rate on each side and on how long the asset lasts.

That does not make an exit charge desirable. It does mean the real comparison is not the tax paid against zero, but the tax paid against the deductions it makes available.

Timing changes the number more than structure does

Three features recur across the regimes above and all of them are about time rather than about planning.

Most charges are triggered by a residence test measured in years. Germany at seven of twelve, France at six of ten, Spain at ten of fifteen, the UK at four of seven. Whether a person is inside or outside that window on the day they leave decides whether the charge exists at all.

Several charges reverse on return. Germany within seven years, France on return, Spain within five. A move that proves temporary can undo the assessment entirely.

And the value is fixed on one date. Every regime measures the deemed disposal at market value immediately before departure. For a founder whose company is growing, the number rises every month the move is postponed, which is the opposite of the instinct to wait until things are settled.

What Cyprus does and does not do about any of this

Cyprus does not reduce the charge. It belongs to the country being left and the destination is irrelevant to it. Anyone who says otherwise is describing something else. The same is true of redomiciliation to Cyprus, which moves the company without moving the charge.

Cyprus has its own corporate exit tax, because it is an EU member state and article 5 applies to it in the same way. A company leaving Cyprus faces the same charge in reverse.

What Cyprus does affect is the second half of the arithmetic. Where an exit charge has established a market value, that value is the starting value in Cyprus, and it is the amount a Cyprus company can amortise. Whether that matters depends on what is moving and on which regime applies to it, which for software usually means the Cyprus IP Box, and on whether new equity introduced at the same time supports a notional interest deduction.

What follows you after you have left

The departure charge is one event on one day. Two things carry on afterwards and both are missed more often than the exit tax itself.

Controlled foreign company rules can attribute the profits of the new company back to a person or group in the old country, which turns a completed move into a continuing assessment. They are harmonised across the EU by article 7 of the same directive, so a founder who leaves one member state for another has not escaped them.

Dual residence arises wherever the old country's test and the new country's test are both satisfied in the same year, which is common in the year of the move. Where a treaty applies, the treaty tie-breaker decides which country wins, and the answer turns on facts such as a permanent home and a centre of vital interests rather than on intention.

And the new company has to be real. Economic substance is what distinguishes a company that is genuinely resident where it says it is from one that will be looked through.

If you already know which country you are leaving

The position above is the charge. What happens next is specific to the route, and the corpus carries a playbook for each of the origins where the question comes up most.

For founders leaving Europe there is Moving to Cyprus from Germany, Moving to Cyprus from France, Moving to Cyprus from Spain, Moving to Cyprus from Italy, Moving to Cyprus from the Netherlands, Moving to Cyprus from Sweden, Moving to Cyprus from Lithuania and Moving to Cyprus from the UK.

From further afield there is Moving to Cyprus from the USA, Moving to Cyprus from Australia, Moving to Cyprus from South Africa and Moving to Cyprus from Israel.

Each sets out what ends residence in that country, what Cyprus requires on arrival, and where the two systems collide.