Germany to Cyprus: The Case for Principals and Entrepreneurs

Henley & Partners' 2025 private wealth migration report projected Germany's first net outflow of millionaires, around 400 in a single year, placing it alongside France and Spain as EU economies losing wealthy residents for the first time. The 2026 edition recorded a 16% rise in enquiries from German nationals between the last quarter of 2025 and the first quarter of 2026.

This brief is written for two groups. Principals: individuals whose wealth sits in investment portfolios, pensions, property, and family assets rather than in a single operating company. And entrepreneurs deciding where their next company should be built. Founders already holding a valuable GmbH face a different set of questions, principally the exit tax on their shares, covered in our founder brief.

For both groups, the immigration side is trivial. Germans are EU citizens with a treaty right to live in Cyprus. Everything that matters happens in the tax code.

In Germany, dividends, interest, and capital gains are taxed at the flat Abgeltungsteuer of 25% plus solidarity surcharge: 26.375%, rising to roughly 28% for church members. The saver's allowance shelters only €1,000 per person. Accumulating funds are taxed annually through the Vorabpauschale, even when nothing is distributed.

In Cyprus, a German national who becomes tax resident is automatically Non-Domiciled for 17 years, because domicile follows birth rather than residence. A Non-Dom pays 0% on worldwide dividends and interest. Gains on the disposal of shares, bonds, and units in funds, including UCITS and ETFs, are exempt from Cyprus tax for every resident, domiciled or not. The only charge that survives is the 2.65% General Healthcare System contribution, capped at €180,000 of income.

Over ten years, before any compounding, the difference on this portfolio exceeds €350,000, and it grows further whenever gains are realised. In Germany every rebalancing is a taxable event. In Cyprus it is not.

Cyprus taxes foreign pensions at a flat 5% on amounts above €5,000 a year, a threshold raised from €3,420 by the 2026 reform, with an annual option to use the normal scale instead. It is often quoted as if it applied to every German pension. It does not.

• Statutory pension (Deutsche Rentenversicherung). Under Article 17(2) of the Germany-Cyprus double tax treaty of 18 February 2011, pensions paid under German statutory social insurance may be taxed in Germany. As a non-resident, the pensioner is taxed at the basic tariff without the basic allowance (§50(1) EStG), unless they successfully apply to be treated as fully taxable, which requires almost all of their income to be German.
• Occupational and private pensions. Betriebsrente, Riester, Rürup, and private pension insurance are taxed in Cyprus as the state of residence, and qualify for the 5% flat rate. A €30,000 private pension costs €1,250 a year in Cyprus tax.

German real estate never leaves the German tax net. Rental income from a German property remains taxable in Germany under limited tax liability, again without the basic allowance, and the treaty gives Germany the first right to tax it.

Two rules work in the owner's favour. First, the ten year rule survives the move: a property held for at least ten years can be sold free of German income tax, wherever the owner lives. Second, property is not subject to the German exit tax, which applies to shareholdings and fund units only.

One rule does not. German real estate always remains within the scope of German inheritance tax, regardless of the owner's residence. For principals with substantial German property, this is the asset that keeps the estate connected to Germany.

A retained German home carries a further risk. If it remains available for the owner's use, it can keep unlimited German tax liability alive entirely, regardless of how many days are spent in Cyprus. Let or sold, it is an asset. Kept empty for visits, it can undo the move.

Cyprus abolished inheritance tax in 2000 and has no gift or wealth tax. Germany taxes inheritances at 7% to 50%, with a child's allowance of €400,000 and a spouse's of €500,000. For many principals, succession is the largest single tax their family will face, and the one that takes longest to leave behind.

• The five year rule. German citizens remain subject to extended unlimited inheritance tax liability on their worldwide assets for five years after leaving Germany (§2 ErbStG).
• The ten year extension. Where the emigrant falls under extended limited income tax liability, broadly a move to a low-taxed jurisdiction while keeping substantial economic interests in Germany, §4 AStG can extend German inheritance taxation of certain assets to ten years.
• The heir's residence. If the heir lives in Germany, the entire inheritance is taxable in Germany, wherever the deceased lived. Children who stay in Germany keep the estate German.
• No treaty. Germany has inheritance tax treaties with only six countries: Denmark, France, Greece, Sweden, Switzerland, and the United States. Cyprus is not one of them.

For an entrepreneur starting a new venture, the choice between a German GmbH and a Cyprus private company is made before any value exists, which is also the moment when no exit tax applies. The differences begin on day one.

• Formation. A GmbH needs €25,000 of share capital, at least €12,500 paid in before registration, a notarial deed, and typically two to four weeks for the commercial register. A Cyprus company has no minimum capital in practice (€1,000 is customary), needs no notary, and registers in 7 to 10 working days, with an express option. The €350 annual company levy was abolished in 2024.
• Profits. Cyprus taxes profits at 15% flat. A GmbH pays roughly 30% once corporate tax, solidarity surcharge, and municipal trade tax are combined. Qualifying IP income in Cyprus is taxed at an effective 3%; Germany has no equivalent regime.
• Employing people. Employer social charges in Cyprus total about 15.4% on top of salary, against about 21% in Germany.
• Paying out. Cyprus levies no withholding tax on dividends paid to non-resident shareholders. Germany withholds 26.375%, reduced by treaty.
• Holding and exit. A Cyprus company receiving dividends or selling shares in a subsidiary is fully exempt, with no minimum holding. The German holding GmbH, the standard German planning tool, exempts 95% (about 1.5% effective) and only for stakes of 10% or more.

The trade-offs. Every Cyprus company must be audited, while small GmbHs are exempt; since 2022 very small Cyprus companies can use a lighter review instead, and for financial years starting from 6 February 2026 the threshold is €300,000 of turnover and €500,000 of assets. Bank account opening takes four to eight weeks rather than days.

Under §6 AStG, emigration is treated as a sale of qualifying holdings where the individual was subject to unlimited German tax liability for at least 7 of the last 12 years. For principals, three categories matter:

• Shareholdings of 1% or more in any corporation, listed or private, German or foreign, taxed at roughly 28.5% on the unrealised gain.
• Fund and ETF holdings, since 1 January 2025, where the investor held at least 1% of a fund in the previous five years, or had acquisition costs of at least €500,000 in a single fund. The threshold applies per fund, not per portfolio.
• Not property. Real estate, whether German or foreign, is outside the exit tax.

Since 2022 there is no indefinite deferral for moves within the EU. The tax can instead be paid in seven interest-free annual instalments on application, normally against security, and it is cancelled if German residency is re-established within seven years, extendable to twelve. For a diversified private portfolio held below the fund threshold, the exit tax is often not a factor at all. For a principal with a concentrated fund position, the structure of the holding before departure matters.

• End German residency properly. File the Abmeldung, and make sure no German dwelling remains available for your use. Church tax ends with German residency.
• Register in Cyprus. EU citizens staying beyond three months obtain the Registration Certificate (form MEU1), known as the Yellow Slip: proof of address, health cover, and evidence of employment or sufficient resources. There is no investment threshold and no quota.
• Establish Cyprus tax residency. Either 183 days in Cyprus, or the 60-day rule: at least 60 days in Cyprus, no more than 183 days in any other single country, a permanent home in Cyprus, and a Cyprus business tie such as a directorship in a Cyprus tax resident company.
• Healthcare. Pensioners insured in the German statutory system should request the S1 form from their Krankenkasse before leaving, which gives access to Cyprus's GESY on local terms. Principals with private insurance need a separate arrangement.
• Banking. Start early. Account opening for relocating principals typically takes four to eight weeks.

None of this replaces advice on the specific facts: the pension split, the succession timeline, and the exit tax position all depend on the individual and the family.