What is extended limited tax liability under § 2 AStG?

A German provision aimed at emigrants to low-tax countries. It applies where a German national was subject to unlimited German tax liability in at least five of the ten years before departure, moves to a low-tax country, and retains substantial economic interests in Germany. The consequence is extended taxation of non-foreign income for ten years after the end of the year of departure. The UAE qualify as a low-tax country because they levy no personal income tax.

What counts as substantial economic interests?

Broadly three categories: being an entrepreneur or co-entrepreneur in a German business, or holding at least a quarter of a German corporation; German-source income exceeding 30 per cent of total income or EUR 62,000; or German assets exceeding 30 per cent of total assets or EUR 154,000. Meeting any single threshold is enough.

Is there a double taxation treaty between Germany and the UAE?

No, not any more. Germany let its treaty with the United Arab Emirates lapse at the end of 2021 and did not renew it. There has been no treaty protection and no tie-breaker rule since: conflicts are resolved under domestic law, which makes a clean transfer of residence more important, not less.

Insights

Moving Your Centre of Life to Dubai: What German Tax Offices Check in 2026

Whether Germany keeps taxing you is not decided by the company in Dubai but by two questions: has the German residence under § 8 AO genuinely been given up, and does extended limited tax liability under § 2 AStG apply? Both are judged on actual circumstances, not on a deregistration certificate.

Last updated: July 27, 2026

Two questions decide this, not one

The most common misconception about moving to Dubai runs: company formed, deregistered, done. In reality a German tax office examines two separate questions. First: does unlimited tax liability continue because a residence under § 8 AO or a habitual abode under § 9 AO remains in Germany? Second: if unlimited liability genuinely ends, does extended limited tax liability under § 2 AStG apply?

Both questions are judged on actual circumstances. A deregistration certificate is one document among many, not proof. Making matters harder: Germany let its double taxation treaty with the UAE lapse at the end of 2021. Since then there is no tie-breaker rule to resolve a conflict between two claimed residences cleanly.

Residence under § 8 AO: the dwelling that undoes everything

Under § 8 AO a person has a residence where they keep a dwelling under circumstances suggesting they will retain and use it. What decides the matter is availability at any time, not frequency of use. The old childhood room at the parents' house, the let flat with one room reserved, the holiday home holding personal belongings, all of these are recurring points of dispute.

Habitual abode under § 9 AO attaches to presence instead: a continuous stay of more than six months generally establishes it. Anyone spending a substantial part of the year in Germany after the move should document the days: stays cannot realistically be reconstructed after the fact, and the burden of proof sits with the taxpayer.

§ 2 AStG: a ten-year tail

Extended limited tax liability is a German provision aimed at emigrants to low-tax countries. Three conditions apply cumulatively: German nationality with unlimited tax liability in at least five of the ten years before departure, residence in a low-tax country, and substantial economic interests remaining in Germany. The UAE meet the low-tax criterion because they levy no personal income tax.

The consequence is taxation of non-foreign income going beyond ordinary limited liability, for ten years after the end of the year of departure. The decisive lever is the economic interests test: it is the only one of the three conditions that can actually be shaped.

Category: Business participation
Threshold: Entrepreneur or co-entrepreneur in a German business, or a holding of at least 25 % in a German corporation

Category: German-source income
Threshold: more than 30 % of total income or more than EUR 62,000

Category: German assets
Threshold: more than 30 % of total assets or more than EUR 154,000

Category	Threshold
Business participation	Entrepreneur or co-entrepreneur in a German business, or a holding of at least 25 % in a German corporation
German-source income	more than 30 % of total income or more than EUR 62,000
German assets	more than 30 % of total assets or more than EUR 154,000

Do not confuse it: § 6 AStG is a separate matter

Alongside § 2 AStG sits exit taxation under § 6 AStG. That provision treats shares in corporations held at 1 % or more as disposed of on departure and taxes the unrealised gains, without any sale taking place. Anyone holding a valuable German company stake therefore has a liquidity issue independent of § 2 AStG.

The two provisions operate side by side and are regularly confused in practice. § 6 AStG catches the asset position at the moment of departure; § 2 AStG catches the ongoing income of the following ten years. Planning has to address both, otherwise it solves half the problem.

What a centre of life in Dubai means in practice

A relocated centre of life is not an intention but a set of facts that can be evidenced. In practice: a tenancy contract in your own name over a flat genuinely lived in, an Emirates ID and valid visa, a local bank account with real payment traffic, insurance and phone contract on the ground, the family in the same place, documented days present.

Equally important is what ends in Germany: the dwelling available at any time, German health insurance, club and chamber memberships, the car, ongoing local mandates. Each point on its own is unremarkable. Taken together they determine which state an audit assigns the centre of life to.

Where setups fail

A UAE company without genuine substance and without an actually relocated centre of life produces no tax result. It produces documentation work and exposure. Anyone selling you the transfer of your centre of life as a formality is selling you a risk that only becomes visible years later.

Status and scope

This article reflects the position as of July 2026 and does not replace an assessment of your specific case. Judging residence, § 2 AStG and § 6 AStG is German tax law and belongs with your German tax adviser. Firstgate is responsible for the UAE side (company, licence, substance, visa, Emirates ID, bank account and ongoing bookkeeping) and thereby supplies exactly the evidence that assessment turns on.

Frequently asked questions

Is deregistering with the German registration office enough?: No. Deregistration is a matter of registration law, not tax law. Under § 8 of the German Fiscal Code, a person has a residence where they keep a dwelling under circumstances suggesting they will retain and use it. A dwelling in Germany available at any time can keep unlimited tax liability alive despite deregistration.
What is extended limited tax liability under § 2 AStG?: A German provision aimed at emigrants to low-tax countries. It applies where a German national was subject to unlimited German tax liability in at least five of the ten years before departure, moves to a low-tax country, and retains substantial economic interests in Germany. The consequence is extended taxation of non-foreign income for ten years after the end of the year of departure. The UAE qualify as a low-tax country because they levy no personal income tax.
What counts as substantial economic interests?: Broadly three categories: being an entrepreneur or co-entrepreneur in a German business, or holding at least a quarter of a German corporation; German-source income exceeding 30 per cent of total income or EUR 62,000; or German assets exceeding 30 per cent of total assets or EUR 154,000. Meeting any single threshold is enough.
Is there a double taxation treaty between Germany and the UAE?: No, not any more. Germany let its treaty with the United Arab Emirates lapse at the end of 2021 and did not renew it. There has been no treaty protection and no tie-breaker rule since: conflicts are resolved under domestic law, which makes a clean transfer of residence more important, not less.