The Hidden Tax Trap for SaaS Founders in Germany
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The Hidden Tax Trap for SaaS Founders in Germany
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Re: The Hidden Tax Trap for SaaS Founders in Germany
#2…if you plan to sell your company.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#3…if you plan to sell your company.
That's exactly the problem - you often don't plan to sell from the start. Life changes. Kids are born. Health issues emerge. New opportunities arise.
If you start successful in Germany without the right structure, you're locked in. At least if you plan to sell from day one, you have options (expensive ones). But most bootstrappers just build stuff users want. Then one day they get an interesting acquisition offer...
...and discover they've accidentally built a tax trap that'll cost them millions. No way out at that point.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#4This is a lot of words trying to explain that in Germany the system is designed that poor remain poor. First 40% of gross salary on contributions, then 30% of net salary on rent. Dynasties with their VW-Porsche-VW-Porsche quadruple currywurst burger-sandwich need the society to be poor.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#5There's a reasonable argument to be made whether you should be subject to capital gains in the first place. I sold my last company in the UK, and honestly the tax burden was so ridiculously low I still feel somewhat bad for it. It's crazy.
There is of course a competition problem with the high taxation in Germany; if your expected returns are much lower than in other countries your risk just increased significantly. We already have a situation where on average it's much, much more lucrative to work at bigcorp instead.
My main gripe with the GmbH though is not the amount of taxation. GmbHs are so needlessly complex it blows my mind (I'm currently running one), but that's on the side of regulations. I'd MUCH prefer if Germany worked on getting rid of silly shit like the notary requirement etc., and if taxation and bookkeeping were simplified, before we talk about lowering taxes.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#6[flagged]
Re: The Hidden Tax Trap for SaaS Founders in Germany
#7There's a reasonable argument to be made whether you should be subject to capital gains in the first place. I sold my last company in the UK, and honestly the tax burden was so ridiculously low I still feel somewhat bad for it. It's crazy. There is of course a competition problem with the high taxation in Germany; if your expected returns are much lower than in other countries your risk just increased significantly.…
I'd love to hear more about your UK exit! Most of my knowledge about UK tax rates and processes is theoretical research, so I'd really appreciate hearing a real-world experience. Did you qualify for Business Asset Disposal Relief (the old Entrepreneurs' Relief)? How was the overall process and timeline for you?
Re: The Hidden Tax Trap for SaaS Founders in Germany
#8I made a rather stupid mistake recently, as an American. I put $30k or so of my Roth IRA into BMW stock, since it was paying something close to 8% annual dividends. Once a year. I suppose I should have looked at this more closely. When the dividend was paid, the German government took about 30% of it right off the top in taxes... for a foreign investor. Still not a bad return, but I won't be buying any German stocks going forward.
That's my Yelp review of investing in German businesses, if it helps anyone. I've had more or less the same experience dining in Seattle and accidentally tipping 20% on top of an included 20% tip that was already included but not specified in the bill.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#9> Structure larger exits through international holding companies (complex and expensive)
Setting up an LLC in a low-regulation US state is simple and inexpensive.
Re: The Hidden Tax Trap for SaaS Founders in Germany
#10[flagged]
This isn't about "special treatment for the rich." When international companies buy German software businesses, that's foreign investment flowing into Germany - money that often gets reinvested locally in new startups and jobs. But our system actively discourages these transactions by treating business sales like regular income.