Mr. Baumgartner, how did your connection to Switzerland come about?

I have been working regularly in Switzerland since 2003. At that time, I was still working for KPMG in Germany and later in Switzerland in the field of tax amnesties. It was about disclosing untaxed funds, income, and assets – often from inheritances or gifts – and paying back taxes at an attractive rate and in a relatively simple way. This was initially in Luxembourg, but later mainly in Switzerland. There we advised many medium-sized clients. Later, with the tax data affair and the purchase of tax CDs from 2008 onwards, there was a real wave of voluntary disclosures. In 2005 I became self-employed – and since then I have been permanently active in Switzerland.

Currently, business with wealthy clients from Germany is picking up noticeably, you told us recently.

In the past, people primarily wanted to «sleep peacefully.» The risk of discovery had risen enormously, and with the automatic exchange of information it ultimately reached practically 100 percent. Today it’s about something else: wealthy Germans really want to leave the country. For political reasons, because of uncertainty, because of fear of tax increases or a wealth levy. In the past, moving away was more of a thought experiment; today it is being concretely prepared or directly implemented.

How many clients are affected?

This is currently a central area of business. Relocations have increased sharply, as has the structuring of assets abroad. Start-ups or shareholdings are often held directly via Liechtenstein foundations to avoid exit taxation. And yes – we are not talking about isolated cases. Clients want to be prepared in case new taxes actually come in Germany. Creating relocation readiness: that is currently a main concern of our clients.

«It is hardly discussed why people are really leaving.»

What does «relocation readiness» mean in concrete terms?

The core point is exit taxation. As soon as someone holds a significant share – i.e. more than one percent – in a GmbH or AG, Section 6 of the Foreign Tax Act applies. This means that upon relocation, hidden reserves are taxed even though the shareholder retains the shares and no money actually flows to him. For example, if someone holds shares worth one million euros, he has to pay around 270,000 euros in taxes – without necessarily having the liquidity to do so. That hurts. Therefore, we consider with clients: can they afford it? Should they gift the shareholding to children who remain in Germany? Or sell the stake? It is also important not to hold new significant shareholdings directly in the future, but to structure them in good time. Then the client can, if necessary, move away at short notice – within a week, if need be.

Can exit taxation also apply retroactively – for shareholdings that have already been sold?

No, such efforts are not currently apparent. But since January 1, 2022, exit taxation also applies within the EU. In the past, one could move to Austria, for example, without it applying – that has been abolished. Under certain conditions, the tax can be deferred, but those who move away permanently have to pay. I consider this questionable under European law. But no one moves away in the hope of perhaps getting the money back from the ECJ in ten years. Clients want legal certainty – and peace of mind.

Why are Liechtenstein foundations an issue?

It is very difficult to transfer existing shareholdings into a foundation in a tax-neutral way. But if new shareholdings are held via Liechtenstein from the outset, one does not fall under the German Foreign Tax Act in the first place. This allows exit taxation to be avoided. In parallel, we are observing a strong tendency to build an «exit option» – be it in Switzerland or also in Dubai.

«We are observing a strong tendency to build an ‹exit option› – be it in Switzerland or also in Dubai.»

Switzerland has long been the classic destination. Does that still apply?

Yes. The aura remains unbroken: quality of life, political stability, the accessibility of the democratic process. But many clients also want an additional «Plan B.» Surprisingly often, even older clients are considering Dubai alongside Switzerland – in case the political situation in Europe deteriorates.

Do clients also move directly to Dubai?

We see this mainly among younger clients, from around the age of 30. With us, these are not influencers, as you might read in the tabloid press, but entrepreneurs who can run their business from Dubai or build a new one there. Older clients still mostly prefer Switzerland, often because of the cultural proximity.

And what happens to the companies in Germany?

There are several patterns: they are often sold – a classic M&A case. Then the question of residence almost automatically follows. Others pass them on to the next generation and move away themselves. Interestingly, in the past, grandparents often blocked relocation because they wanted to stay with children and grandchildren. Today many families move away together – until recently that was extremely rare.

«Germany would have to give top performers a good feeling again.»

You say the political situation in Germany and Europe is partly responsible for the trend.

The constant debates about tax increases, about a wealth levy or a higher inheritance tax are unsettling. Many no longer want to wait, but to act. They are creating facts.

Switzerland also has a wealth tax. Isn’t that a contradiction?

The overall package counts. Switzerland offers stability, reliable politics, lower income tax rates. Clients factor in that real estate or rents are more expensive. In the overall balance, Switzerland almost always wins.

Which countries are relevant besides Switzerland and Dubai?

Italy is interesting for the very wealthy, because of the flat tax of 200,000 euros. But many doubt the reliability. In the end, the choice is usually Switzerland – Italy-oriented clients move to Ticino.

Portugal and Greece are often mentioned…

For Germans they play a rather subordinate role, unless personal connections already exist.

Where do most relocators come from?

Bavaria and Baden-Württemberg, clearly. Proximity makes the step easier. Culturally it also fits better. North Germans find it more difficult – and, frankly, so do the Swiss with them. But overall, the picture is of forward-looking entrepreneurs who decide with a cool head and a long-term view.

Why is this trend problematic for Germany?

Because the country is losing valuable entrepreneurs and skilled workers. Around 220,000 qualified workers leave Germany every year. Extrapolated, this affects millions of people whose education and employment depend on them. Doctors too – trained at high cost – are leaving in droves for Switzerland. This emigration weakens Germany.

What would Germany have to do to counteract this?

It needs more confidence in the future, more attractive tax conditions, and above all the ability to attract and retain qualified skilled workers. Attitudes towards performance are also an issue. Many young people focus on work-life balance – but entrepreneurial success requires commitment, training, know-how. Germany would have to give top performers a good feeling again.

Do you have the impression that politicians have recognized the problem?

No. It is hardly discussed why people are really leaving. Instead, criticism is directed at those who leave. But it would be much more important to analyze the causes and shape the conditions so that entrepreneurs and top performers stay. Because they remain entrepreneurial – just no longer in Germany.

Markus Baumgartner holds a degree in finance (FH) and has been a tax advisor since 2003. After positions in the Bavarian tax administration as well as as a tax auditor and tax investigator, he joined KPMG in 2003 in the area of tax criminal law. In 2005, together with a partner, he founded his own law firm, which today operates under Baumgartner Partner. With offices in Zurich, Munich, Stuttgart, Nuremberg, and Hamburg, it advises primarily wealthy private individuals and entrepreneurs, including in the areas of tax criminal law and international tax planning.