Simple departure from Germany is enough to bring tax residence to an end, although taxation of German-source income may continue for a non-resident. However, if residence has lasted for five years or more, departure to a low-tax jurisdiction may cause the German tax authorities to continue to tax an individual under certain headings as if he continued to be tax-resident; this is especially likely if the individual has economic interests in Germany.

The transfer of German assets by a tax-resident to a low-tax jurisdiction may equally attract the unfavourable notice of the German tax authorities, although in one case such a transfer was held by a court to be acceptable because the resident emigrated to the same low-tax jurisdiction shortly after the transfer.

Once German residence has been terminated, and if non-residence is expected to be permanent, then an ex-German resident is free to invest offshore in order to obtain the best possible returns.

A combination of factors, including a relatively relaxed regulatory regime, the growth of the Euromarkets, and the existence of the Luxembourg stock exchange have meant that a substantial and respected international banking sector has developed, with around 30 of the world's top 50 banks represented. At the end of February 2006, 156 banks were registered in Luxembourg, with total assets of EUR797.5 billion.

There is a wide range of commercial and private banking services available in Luxembourg, including multi-currency lending, custodial and depositary services, equity and financial derivatives issuance and trading, and foreign exchange trading. Withholding tax is not levied on interest payments, and the 39 double tax treaties that Luxembourg has signed with other countries normally provide that withholding tax on dividends is at a lower rate than usual.

As from July, 2005, Luxembourg applies a withholding tax of 15% to the returns on savings paid to citizens of EU Member States, under the EU Savings Tax Directive.

A final withholding tax of 10% on residents' interest income from Luxembourg paying agents (something quite separate from the Savings Tax Directive) introduced in 2005 was struck down by the EU; as of 2007, the 10% final tax applies to all interest income received by Luxembourg residents from EU paying agents.

Residents are liable to tax on their world-wide income, and this is calculated at a progressive rate, rising to a maximum of around 38%. Proposed changes for 2008 include indexation of all existing tax brackets by 6%.

Non-residents (i.e. those whose usual abode is not Luxembourg, or who are not tax domiciled there) are liable to pay tax only on certain types of Luxembourg sourced income. These include: income from a business carried on in Luxembourg, pension income arising there, investment income arising or paid in Luxembourg, and capital gains on the sale of property, or substantial participation in resident companies.

German expatriates who have established non-residence and who don't reside in Luxembourg will therefore be able to earn interest on Luxembourg deposits without paying German or Luxembourg tax. Deposits can usually be made in all main currencies.