Planning to relocate? 8 Reasons Why a German Tax Advisor is the Wrong Person to Ask
Are you considering leaving Germany and wondering what that means for your tax obligations? And whether your current tax advisor is the right person to help.
Many people rely on their trusted tax firm when planning to emigrate. They hope for clear answers on relocation, residency changes, or new lifestyle models abroad.
But this is often where the problems begin.
In this article, you'll learn why many German tax advisors quickly reach their limits when it comes to relocation and what you should consider instead.
Table of Content:
- A One-Sided Perspective: Focus on German Tax Obligations
- Limited Expertise in International Tax Lax
- Insufficient Knowledge about Shifting Economic Centers
- Lack of Expertise in Tax and Legal Pitfalls after Leaving Germany
- Lack of Strategic Advisory Competence
- Lack of Practical Knowledge About Non-Dom Programs, Residency Systems, Immigration & Tax Planning
- Lack of Risk Awareness in International Tax Scenarios
- Extensive Reporting Obligations for Cross-border Tax Arrangements
- When You Should Involve Your German Tax Advisor
- Why the Real Strategy Should Be Developed Elsewhere
- Conclusion
1. A One-Sided Perspective: Focus on German Tax Obligations
German tax advisors are specifically trained to identify and mitigate tax risks from the perspective of the German tax authorities. Their primary role is to support their clients with tasks such as bookkeeping, annual financial statements, filing tax returns, ensuring tax compliance, and maintaining clear communication with the German tax office (Finanzamt). Naturally, these services are also very well compensated under the German tax advisor fee schedule (Steuerberatervergütungsverordnung, StBVV).
Given this background, it's not surprising that your German tax advisor might not exactly greet your relocation plans with enthusiasm. As a result, advisors often tend to be skeptical or cautious about such projects rather than proactively seeking creative, legally sound solutions to manage or even avoid exit taxes.
And this skepticism makes perfect sense if you consider that once you leave Germany, your tax advisor permanently loses you as a client and, consequently, the steady monthly income they've grown accustomed to. After all, who willingly gives up reliable monthly revenue?
2. Limited Expertise in International Tax Law
International tax law involves complex interactions between Germany's Foreign Tax Act (Außensteuergesetz, AStG), the German Tax Code (Abgabenordnung, AO), domestic laws of other countries, and Double Taxation Agreements (Doppelbesteuerungsabkommen, DBA).
Many German tax advisors primarily focus on national regulations and often lack detailed knowledge about key international taxation principles such as the worldwide income principle, territorial taxation, or participation exemptions (Schachtelprivilegien).
Due to their heavy workload outlined in point 1, many advisors lack the time or incentive to delve deeply into these specialized areas for individual clients. Consequently, this can lead to errors or inadequate advice. Sometimes, there's even no advice at all, leaving clients to fend for themselves when trying to find legally sound solutions.
3. Insufficient Knowledge about Shifting Economic Centers
Emigrants, particularly entrepreneurs, often relocate not just their place of residence but also their core economic activities, such as holding structures, intellectual property (IP) rights, and even corporate management.
A typical German tax advisor frequently lacks the expertise to fully assess the domestic and international tax and legal implications involved. This includes critical aspects like determining the effective place of management, transferring the registered office of corporations, or establishing permanent tax establishments abroad.
4. Lack of Expertise in Tax and Legal Pitfalls after Leaving Germany
Many people assume that relocating to a new place of residence is sufficient. Still, numerous hidden risks remain, which can only be identified by a tax advisor with solid international experience. Some of these potential pitfalls include:
- Continued unlimited tax liability (§ 8 AO) even after giving up German residency.
- "Hidden" management activities from Germany, triggering German tax obligations.
- Substance requirements abroad (Substance-over-Form principle), determining whether foreign companies are genuinely operated abroad.
- Controlled Foreign Corporation (CFC) rules (Hinzurechnungsbesteuerung, §§ 7–14 AStG).
- Exit Taxes, CFC rules, and anti-abuse provisions (also applicable EU-wide).
Due to the nature of their training and workload, many German tax advisors lack the specialized knowledge required to identify these critical issues, let alone provide their clients with practical solutions. In the worst-case scenario, this oversight could mean that you remain subject to German taxation despite emigrating, possibly resulting in double taxation of your income.
5. Lack of Strategic Advisory Competence
As already outlined in point 1, a nationally focused German tax advisor typically concentrates on preparing tax returns and handling domestic tax cases. Often, they essentially function as a "highly qualified accountant," focusing primarily on day-to-day compliance tasks and ensuring adherence to Germany's extensive tax regulations, which is already a considerable workload.
However, this leaves little to no room for proactive planning or strategic advisory services. Yet, when dealing with international arrangements, strategic thinking and foresight beyond German borders become absolutely essential. This is particularly true when it comes to asset protection, tax optimization through holding structures, or designing a lifestyle model that minimizes tax burdens while maximizing legal security.
6. Lack of Practical Knowledge About Non-Dom Programs, Residency Systems, Immigration & Tax Planning
Many traditional German tax advisors have limited or no practical knowledge of specialized programs such as the Non-Dom regimes in Cyprus, Malta, or Ireland or tax-free residency options in places like Paraguay, the UAE, or Georgia. Yet, these programs can offer substantial benefits, but only if implemented and combined correctly.
7. Lack of Risk Awareness in International Tax Scenarios
Tax advisors without international experience often overlook critical pitfalls in cross-border situations. This includes risks such as establishing a "hidden permanent establishment," using foreign trusts, addressing international VAT issues, or interpreting OECD guidelines. Without adequate risk awareness, advisors can unintentionally expose their clients to significant legal and financial hazards.
8. Extensive Reporting Obligations for Cross-border Tax Arrangements
It may not come as a surprise that tax advisors have specific disclosure and reporting obligations. This is especially true when dealing with cross-border tax arrangements.
The European Union introduced Directive 2018/822 (commonly known as EU Directive DAC6) to ensure the early identification and reporting of potentially aggressive tax planning schemes to tax authorities. Germany implemented this directive through Sections 138d to 138k of the German Tax Code (Abgabenordnung, AO).
Who Has to Report – and When
These regulations require intermediaries, such as tax advisors, lawyers, or banks, and in some instances even taxpayers themselves, to report potentially relevant cross-border tax arrangements to the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt). Reporting becomes mandatory when certain legally defined hallmarks indicating aggressive tax planning are met.
The reporting must cover the following key points:
- Scope of arrangements: Only cross-border tax arrangements involving two or more jurisdictions are affected.
- Hallmarks: Defined in the annex to § 138e AO (based on DAC6), including standardized arrangements, tax avoidance using hybrid structures, or concealed beneficial ownership.
- Deadlines: Generally, reporting must occur within 30 days after the earliest triggering event (e.g., the provision or implementation of the arrangement).
- Required information: Among others, details about the parties involved, a clear description of the arrangement, relevant national tax provisions, and the economic rationale behind the arrangement.
The purpose of these regulations is to detect aggressive tax planning at an early stage and close existing legal loopholes. The goal is to make tax avoidance more difficult and to promote greater tax compliance, particularly among large corporations.
Why Emigrants Could Be Affected Too
At first glance, these rules may seem harmless and only relevant to a small group of taxpayers and arrangements. But appearances can be deceiving. In professional tax literature, there is an ongoing debate about whether simply relocating from Germany to a low-tax country may already trigger the reporting obligations under these rules.
In other words, anyone with concrete plans to emigrate could fall within the scope of these regulations, even if they are not aware of it.
My Perspective: Why Emigration Alone Is Not a Reportable Arrangement
In my professional view, these reporting obligations apply only to a limited number of cases. A straightforward move abroad, without complex tax structuring, does not trigger a reporting duty.
The hallmarks listed in § 138e AO are primarily aimed at market-ready tax planning models that are designed to generate tax advantages (often involving formal agreements with compensation structures) and are mainly used by corporations or other legal entities.
Furthermore, the German Federal Ministry of Finance (BMF) addressed this issue in detail in its letter dated March 29, 2021, essentially confirming this legal interpretation. The annex to that letter includes a list of scenarios that, in the BMF's view, do not qualify as tax advantages under § 138d(3) AO and, therefore, do not require reporting.
Examples include:
- Moving residence to claim or avoid cross-border commuter rules under a double tax treaty (DBA),
- Or spending additional (private) time in a foreign country to exceed the 183-day rule under a treaty.
If even these situations are not seen as tax avoidance within the meaning of the law, then by analogy, a classic change of residence, or even relocating without establishing a new tax residence elsewhere (e.g., perpetual travelers or digital nomads), should not fall under the reporting obligation either.
Why Many Tax Advisors Prefer to Stay Silent
To avoid even the appearance of being involved in a potentially reportable tax arrangement, many advisors choose not to discuss topics such as emigration or international structuring during consultations.
If a client actively raises such questions, the reactions from their advisor can be quite telling:
Sometimes, the questions are politely ignored; other times, the answers are vague or evasive, and in some cases, the topic is dismissed outright and firmly shut down.
Why? Because the reporting requirements under §§ 138d to 138k AO are incredibly detailed, gathering all the necessary information can be time-consuming and complex.
Furthermore, failing to submit the report, or submitting it late or incompletely, can be considered a regulatory offense under § 379(2) No. 1d AO, punishable by a fine of up to €25,000.
For many advisors, the risk and effort outweigh the benefit, so the topic is quietly avoided altogether. So, they will think twice before getting themself entangled in all that extra work!
What Happens If a Report Is Filed
Suppose the tax advisor believes a reporting obligation exists and submits the declaration to the Federal Central Tax Office (BZSt). In that case, they are legally required to inform their client about the submission and the scope of the personal data disclosed (§ 138f(4) AO).
The BZSt then reviews the report's contents and forwards the information to the Federal Ministry of Finance, as well as to the relevant local tax offices or customs authorities, for further processing.
At this point, the client is officially on the radar of the tax authorities and should expect follow-up questions.
In practice, the tax office uses the submitted data to initiate further investigations. As a first step, the information is internally distributed to all relevant departments and thoroughly reviewed.
Typically, this data is cross-checked when the next tax return is filed. The taxpayer and their advisor can expect to be contacted with specific questions about the reported arrangement and any related details.
Suppose the case involves other elements, such as a business sale, closure, or relocation. In such cases, the tax office may initiate a field audit, often in the form of an "immediate audit," to thoroughly examine all related issues consistently and without delay.
Based on the audit results, the final tax assessment is issued, and the corresponding tax notice is delivered. Once the tax bill is paid, the process is generally complete, and your dream life abroad can finally begin!
When You Should Involve Your German Tax Advisor
As an entrepreneur, you'll eventually need to involve your German tax advisor because once you emigrate, the key question becomes: What happens to your existing business? Will it remain in Germany? Be closed down? Or fully relocated abroad?
For implementing this transition, whether it involves winding up the business, liquidating it, or restructuring, the German tax advisor remains an important partner. They'll handle the final financial statements, ensure proper deregistration for tax purposes, and make sure everything is wrapped up cleanly with the tax office.
Even after your departure, if a limited or extended tax liability in Germany still applies, your tax advisor will typically continue to handle filings and serve as the primary point of contact with the German authorities.
Why the Real Strategy Should Be Developed Elsewhere
However, it's essential to understand this:
Advice on international structuring, avoiding tax pitfalls, or utilizing foreign tax benefits is not typically part of a German tax advisor's role.
Suppose you want to approach your move wisely and strategically. In that case, it's essential to discuss these aspects in parallel with a globally experienced tax expert.
That way, you can ensure that your German tax advisor handles the local formalities correctly. At the same time, your overall relocation strategy is planned and optimized by someone who understands the international playing field.
The uncertainty many German tax advisors face when dealing with cross-border reporting obligations often leads them to avoid the topic of emigration and international tax planning entirely out of fear of liability, the additional workload, or unclear legal definitions.
For clients, this means that if you bring up these topics, you may receive incomplete, hesitant, or even incorrect advice. To avoid that risk, it's often better to consult a specialized international advisor from the very beginning, especially one based outside Germany, and free from reporting obligations.
Conclusion
A nationally focused tax advisor may provide excellent support within Germany, but when it comes to international matters like exit planning, holding structures, asset protection, or creating a tax-efficient lifestyle, you need someone with specialized expertise, international experience, and a global network.
Choosing the wrong advisor can lead to serious consequences:
Double taxation, retroactive tax issues, hefty back payments, or even criminal charges for tax evasion.
To emigrate successfully and sustainably, the right strategy matters as much as the right destination.
That's why you should discuss your emigration plans with an experienced international tax expert based outside of Germany, someone who understands both German tax law and the complex rules of international taxation.
This is the only way to ensure your emigration is legally sound, stress-free, and free from unexpected reporting obligations.
Planning to relocate to Cyprus and want to avoid unnecessary trouble with the German tax office?
Or does your current setup align with your emigration goals?
Then don't hesitate to get in touch!
I'll review your current situation and work with you to develop a personalized exit strategy for a smooth and compliant relocation.
So you can genuinely enjoy your new freedom abroad without tax surprises from back home.
