Gena and Exit Tax on Individuals: Where Is the European Court Going?

This article seeks to identify some novel points arising from the pending Gena case (C-430/25) and the Opinion delivered by Advocate General Juliane Kokott on 15 October 2026.

Gena concerns an Italian-American citizen who relocated from Italy to Poland, becoming a Polish tax resident in January 2023, and intends to move from Poland to Germany in 2028, after completing five years of employment in Poland. He holds an investment portfolio acquired before his relocation to Poland, as well as shares arising from employee incentive arrangements.

The problem arises because Poland imposes an exit tax on certain financial assets when individuals who have been resident for at least five of the preceding ten years cease to be Polish tax residents. The tax applies at a rate of 19% to unrealised gains, where the market value of the relevant assets exceeds PLN 4 million (approximately €1 million).

Most previous cases have concerned the typical case of an entrepreneur or controlling shareholder moving to another jurisdiction, whether within or outside the EU. This case demonstrates that exit taxation can also affect an internationally mobile employee holding a private investment portfolio.

Exit taxation of individuals is a well-known restriction on freedom of movement, accepted within the EU under certain conditions, and any such regime must be carefully designed. This case demonstrates we have already moved beyond the largely settled discussion of whether an EU Member State may impose an exit tax (because it can, subject to certain conditions) and explores technicalities of step-up on arrival, unrealised portfolio losses and the permissible period for collecting exit tax before realisation.

The first novel issue: Is there a territorial limitation inherent in exit taxation?

The first issue arises from the absence of a step-up rule upon arrival in Poland and whether Poland can impose exit tax on the entire unrealised appreciation of shares, including gains arising before the taxpayer became resident in Poland.

Imagine the following scenario:

• Gena acquires shares for €1 million while resident in Italy.

• Their value increases to €5 million before he moves to Poland.

• During his Polish residence, their value increases further to €6 million (before his move to Germany).

• Poland seeks to tax €5 million of unrealised gains (resulting in €950,000 of tax).

AG Kokott recommends that the CJEU rules that Article 45 TFEU precludes exit taxation of unrealised appreciation accumulated abroad before the individual became resident in the taxing Member State.

The first novel element of Gena in exit tax case-law is therefore that, if the CJEU follows AG Kokott's Opinion, it may extend the territoriality analysis to the date of entry rather than focusing exclusively on the departure date. In my view, this would be the right decision, for three reasons.

• First, exit taxation constitutes a restriction on freedom of movement and, as such, must be interpreted carefully. The Court has accepted the balanced allocation of taxing powers between Member States as a justification for such restrictions in earlier case law, but this justification must also be carefully scrutinised, particularly where exit taxation produces excessive results.

• Second, if exit tax applies to gains arising outside the jurisdiction of residence (without a corresponding notional tax credit), or to appreciation arising before immigration, it simply goes beyond the balanced allocation of taxing powers.

• Third, to avoid unnecessary, potentially multiple and unwarranted double taxation, exit taxation should be limited to appreciation accumulated within the relevant jurisdiction and linked to the principle of fiscal territoriality.

On this point, Kokott got it right, and let's hope the CJEU agrees.

Importantly, neither the AG nor we are defending a general EU-wide principle of tax-basis step-up upon immigration. Rather, the issue here concerns a limitation on the scope of an exit-tax claim, linked to appreciation accumulated within the relevant jurisdiction. We have argued in another forum that where an individual is subject to exit tax in one EU Member State and subsequently moves to another, a corresponding tax-basis step-up in the destination State should be mandatory. However, this question is not addressed in the present case, perhaps material for Gena 2 (when he arrives to Germany).

The second novel issue: What about my losses?

The second novel issue in Gena concerns another flaw in the design of the Polish exit tax: unrealised gains are included in the exit-tax base, but unrealised losses are excluded.

This is both problematic and discriminatory, given that resident taxpayers may offset realised losses on shares against realised gains on other shares during the same tax period.

Imagine the following scenario:

• The taxpayer holds shares in Company A, acquired for €1 million and now worth €3 million, representing an unrealised gain of €2 million.

• The taxpayer also holds shares in Company B, acquired for €2 million and now worth €1 million, representing an unrealised loss of €1 million.

• The taxpayer's net unrealised gain across the portfolio is therefore €1 million.

• However, under the Polish exit-tax rules, only the €2 million gain on Company A is taken into account, resulting in €380,000 of exit tax, rather than €190,000.

In other words, the taxpayer leaving Poland could face twice the tax that would arise if the entire portfolio were sold while remaining a Polish resident.

AG Kokott recommends that the CJEU find that Article 45 TFEU also precludes an exit-tax calculation that includes only assets showing unrealised gains while excluding assets showing unrealised losses.

The AG's reasoning here is relatively straightforward. Ignoring losses simply increases the restrictive effect of exit taxation. The balanced allocation of taxing powers, when invoked as a justification, must operate coherently. Furthermore, the potential recognition of losses in the destination State upon future realisation does not justify asymmetric tax treatment in the departure State.

Would also add that the US citizenship adds another layer of complexity: as a US citizen, he remains subject to US taxation on worldwide income, potentially creating further overlapping tax claims when the gains are eventually realised.

Again on the issue of losses, Kokott got it right, and let's hope the CJEU agrees.

Asymmetric outcomes arising from exit taxation should be eliminated in Europe, whether they result from the treatment applied by the departure State or from the destination State's failure to recognise the tax imposed upon departure.

The third novel issue: Can exit tax be collected before the gains are actually realised?

The third issue in Gena concerns the timing of payment of exit tax and whether an individual should really be required to pay tax on gains that have not yet been, and perhaps never will be, realised.

This is relevant because Polish exit-tax legislation allows taxpayers to request payment in instalments over a maximum period of five years, but does not provide for deferral until the underlying assets are actually sold.

AG Kokott recommends that the CJEU rule that Article 45 TFEU does not preclude a provision establishing a five-year payment period, even where the taxpayer has not disposed of the investments (paragraph 119).

This is where we have serious difficulty agreeing with Kokott.

Yes, the balanced allocation of taxing powers may justify establishing a tax liability upon departure. But establishing a tax claim and collecting it are two very different things. If the gains are never realised, why should EU law allow a Member State to demand payment simply because five years have passed? Why should changing tax residence suddenly transform a paper gain into a tax bill?

Surely, EU law should impose limits and give greater recognition to the principle of realisation.

The scarecrow of difficulties in the effective collection of taxes should not become a panacea for justifying taxation before realisation, particularly in an EU equipped with extensive, and sometimes draconian, mechanisms for tax information exchange, administrative cooperation and mutual assistance in recovery.

In Wächtler (C-581/17), involving an individual moving from Germany to Switzerland, the Court appeared to favour deferral until actual realisation. However, in cases involving companies, the Court has accepted payment by instalments over a limited period, an approach subsequently reflected in Article 5 of the Anti-Tax Avoidance Directive (ATAD).

Rather surprisingly, AG Kokott argues that there is no fundamental reason to distinguish between individuals and companies when assessing the proportionality of exit-tax collection.

Sorry, but individuals are not companies.

Companies operate within an accounting and taxation framework in which profits, cash flows, financing and capital allocation form part of their ordinary economic activity. They may have access to credit facilities, working capital or shareholder financing.

Individuals are different. Their assets may represent a lifetime of savings, retirement provisions, inherited wealth or minority stakes in private companies. They may generate no income whatsoever. Their owners may have no control over distributions, limited access to financing and no intention of selling.

A tax system that forces an individual to sell an investment merely because they have crossed a border has a serious proportionality problem. And this is not just about liquidity. The comparison with companies does not resolve that problem. If anything, it illustrates why the proportionality assessment should be different.

Intra-EU movements of individuals should be tax-neutral in this respect. Appropriate safeguards against avoidance and mechanisms ensuring effective recovery may possibly justify more restrictive collection rules in certain third-country situations, but that would be the limit of what we would consider acceptable.

If all these cooperation mechanisms are insufficient, perhaps we should ask what they are actually achieving. Or perhaps the real objective is something else: protecting the domestic tax base by making departure more expensive.

Finally, the European experience also demonstrates that compulsory collection before realisation is a legislative choice, not an unavoidable consequence of preserving national taxing rights.

Poland and Germany require individuals to pay exit tax before realising the underlying gains. Norway, an EEA country, has also introduced an exit tax regime under which the liability must be settled within twelve years, regardless of whether the investments have been sold. Yet other countries have chosen different approaches. France and Spain provide mechanisms under which collection can be deferred and the liability may eventually expire without payment. Austria, Denmark and the Netherlands also provide forms of deferral linked to actual realisation or other triggering events.

If other European jurisdictions can preserve their taxing rights without necessarily forcing taxpayers to pay tax on unrealised gains, why should the Court accept compulsory collection within five years as a proportionate solution?

A more proportionate approach would be to allow the departure State to establish and preserve its tax claim for a limited period, while deferring collection until actual realisation. A ten-year period following departure would be reasonable, with disposals or dividends distributed from the relevant assets triggering collection. If no such event occurs within that period, the exit-tax liability should automatically expire.

This would preserve the legitimate interests of the departure State without turning freedom of movement into a taxable event that forces individuals to rearrange their financial lives. And ultimately, freedom of movement should mean the freedom to move and not the obligation to sell.

The bigger picture: Are we moving towards taxation without realisation?

Gena will be an important case because it brings the discussion to the more troubling technical aspects of exit taxation and the design flaws that need to be addressed within the EU.

As noted above, the CJEU should resist the temptation to leave the door open to immediate or instalment-based taxation of unrealised gains, as permitted under the Polish and German regime.

But the importance of Gena should also be assessed against a broader international movement towards taxing wealth independently of the realisation of income or capital gains.

Traditionally, capital gains taxation of individuals has been linked to a realisation event, typically the disposal of an asset. Exit taxes represent an exception, crystallising a potential tax liability into an actual liability, whether immediately payable or deferred.

This approach has been accepted, perhaps in part because such taxes have largely targeted the wealthiest taxpayers. Recent developments suggest an increasing willingness to consider other mechanisms for taxing accumulated wealth without waiting for a disposal or even a distribution of income.

Four developments illustrate this trend.

• First, the international debate surrounding the Zucman proposal for a G20-coordinated minimum annual tax equivalent to 2% of the wealth of billionaires. The proposal is designed as a minimum effective tax, taking account of qualifying taxes already paid, rather than necessarily imposing an additional 2% wealth tax in every jurisdiction. Although it has not been adopted, the proposal has opened up an important international debate on the taxation of ultra-high-net-worth individuals.

• Second, France has brought these ideas into the legislative arena. The proposed Taxe Zucman, establishing a minimum annual tax equivalent to 2% of net wealth exceeding €100 million, was approved by the National Assembly in February 2025 but subsequently rejected by the Senate. More interestingly, the French Finance Act for 2026 introduced a tax targeting certain assets held through family holding companies. The government's original proposal contemplated a 2% annual tax on financial wealth accumulated within such structures, partly addressing the ability of wealthy shareholders to defer personal taxation by retaining profits within companies. The legislation ultimately enacted was considerably narrower, applying a 20% tax to specified non-operating assets rather than ordinary financial portfolios. Nevertheless, the legislative process illustrates a growing interest in taxing wealth through its ownership structures without waiting for distributions or realised gains.

• Third, the debate has reached the European institutions. In 2026, the European Parliament is considering a minimum 2% tax on fortunes exceeding €100 million, potentially as a new EU own resource. The European Commission also published a study examining wealth taxation, capital taxation and exit taxes, including their relationship with international mobility. Neither development represents an EU commitment to introducing a Zucman-style tax, but both demonstrate that the subject is receiving institutional attention.

• Fourth, across the Atlantic, California is taking the debate directly to voters. On 3 November 2026, California voters will decide on Proposition 40, a ballot measure proposing a one-time 5% tax on the net worth of individuals whose wealth exceeds $1 billion and who were California residents on 1 January 2026. The proposed tax would cover assets including shares, business interests, intellectual property and other investments, while generally excluding real estate and retirement accounts. Although fundamentally different from an exit tax, the proposal raises similar questions about the taxation of wealth without realisation, particularly for entrepreneurs whose wealth consists primarily of unrealised appreciation in privately held businesses.

These debates illustrate how far the discussion has moved beyond traditional taxation of realised income and capital gains. The connection with exit taxation of unrealised gains is clear.

In his December 2025 testimony to the European Parliament, Zucman expressly identified exit taxes on unrealised gains and extended residence-based taxation after departure as mechanisms to address the mobility of wealthy taxpayers.

Unfortunately, this discussion is easily caught up in populist rhetoric, with potentially significant consequences.

In my view, there is insufficient discussion of proportionality, particularly when dealing with illiquid assets. We should also protect international mobility as an objective in its own right, continuing to encourage it within Europe while developing appropriate coordination mechanisms.

With the proliferation of measures such as those proposed, the same economic wealth may become subject to successive or overlapping taxation, with limited relief. This could also negatively influence taxpayers' investment decisions and the types of assets they choose to hold, including investments that may not generate the highest immediate returns.

This brings us back to Gena.

The challenge for European tax law should not simply be to ensure that States can preserve their taxing rights. Preserving those rights does not necessarily mean allowing unrealised gains to be taxed.

A fair and proportionate exit-tax regime that respects freedom of movement should not impose tax on gains that an individual has never realised, nor should it force that individual to sell an investment simply because they choose to move from Poland to Germany to work.

Tiago Cassiano Neves& Julija Petkevica Neves

© Kore Partners, 2026

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