Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Hidden Tax Trap for SaaS Founders in Germany

vincentschmalbach.com

Post reply on HN
Print view View original

81–90 of 115 posts

Re: The Hidden Tax Trap for SaaS Founders in Germany

#81

Post by lima »

The headline is a bit sensationalized: the article focuses exclusively on small SaaS exits, which are usually done by selling assets, NOT the whole company. In Germany, these sales are treated like any other business income.

If you're aiming for a normal exit - where you actually sell the company - things are much more favorable.

You need to set up a holding company, which is usually a UG. This is easy and cheap: there is a simplified process for it ("Musterprotokoll"), and it requires no upfront capital like a GmbH. As of recently, it can be done online without having to visit a notary in person. The overhead is negligible.

Once the holding sells its subsidiary ("share deal"), in most cases, the effective tax rate at the holding level is only ~5% due to § 8b KStG. This is not bad at all, since you'll want to reinvest most of the money anyways.

There are gotchas in every jurisdiction, and you need to get professional advice by a local accountant. Germany is a fine place to run a business. If you already live here and don't want to move your family for tax reasons, you don't have to.

Re: The Hidden Tax Trap for SaaS Founders in Germany

#82

Post by unmole »

anonzzzies wrote: post #77
unmole wrote: post #60

Earlier quoted context omitted.

> You very quickly get into tax evasion, whether you know this or not I don't understand where you got tax evasion from my comment? US LLC's are pass through entities by default. All income from the LLC directly flows to the GmbH which pays the normal tax rate in Germany. When the time comes to sell, transfer of the LLC is a share deal which avoids the downsides of the asset deal which TFA describes.

> I don't understand where you got tax evasion from my comment? I didn't say you did, I said that many people (as I see from experience every day) think it's fine to just easily and cheaply open a company somewhere (as you did say) else and then follow their tax rules and that's it. And that's not true. You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore'…

> You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore' which I was responding to.

I quoted the part of the article that was describing a dual company structure.

Re: The Hidden Tax Trap for SaaS Founders in Germany

#83

Post by oytis »

impossiblefork wrote: post #56

The Germans aren't wrong to see it as income from work though, because software is an example of crystallised work. This is why it has had unfavourable treatment in Europe. If you allow people to build software and sell it for capital gains rates, then if you're consistent you allow people to build anything and sell them for capital gains rates, which means that the 'real' tax on labour if you structure your work as…

> software is an example of crystallised work.

Yes, but if the software was written by salaried employees then this work has already been taxed.

Say if you buy stocks, then sell them at higher price, one could argue that it's someone's work that made them cost more.

Re: The Hidden Tax Trap for SaaS Founders in Germany

#84

Post by noduerme »

jillesvangurp wrote: post #80

I have shares in a bootstrapped Gmbh via a holding company. Germany is a complex place to do business for non native speakers and it is generally financially risky to do business here. But if you structure it right, the flip side is that Germany has a lot of family owned smaller and larger businesses. The economy kind of runs on companies like that. So, it is definitely possible to be an entrepreneur in this country.…

Interesting post.

>> The whole point of limited liability companies in other countries is to de-risk the process of creating new businesses for individuals so that people might do innovative things that benefit the economy. Germany does the opposite. It actively discourages people from doing that. And a Gmbh actually exposes you to a lot of liability.

Can you elucidate what you think the philosophy or psychology is that drives this kind of anti-risk-taking attitude or, as you said, why "Some Germans get really defensive on this topic"? It sounds cultural rather than logical. [edit: My first guess would be that it's a product of a social welfare state, overly secure in its benefits and redistribution of wealth in the most generic sense; but sometimes I've observed some other types of self-assured blindness to simple reality in Germany that I suspect have something to do with it, and that's what I'm curious about].

Re: The Hidden Tax Trap for SaaS Founders in Germany

#85

Post by lima »

rad_gruchalski wrote: post #72
mr_mitm wrote: post #68

Earlier quoted context omitted.

I don't think working hours are limited for c-level management.

It depends if you're employed as a managing director, or running your own thing.

No. It doesn't apply to either case ("leitende Angestellte" are exempt).

Re: The Hidden Tax Trap for SaaS Founders in Germany

#86

Post by anal_reactor »

brtkdotse wrote: post #19
noduerme wrote: post #8

I 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…

FWIW it’s the same thing if you buy an American stock from a EU country, the dividends are taxed in the US. That why global index funds are probably the best way to invest for non-professionals

I spent some time trying to learn about investing as an average person, and from what I understood, the entire knowledge could be summarized into "pick your favorite global index fund and hold"

Re: The Hidden Tax Trap for SaaS Founders in Germany

#87

Post by bluecalm »

jwr wrote: post #47

Incidentally, in a neighboring EU country (Poland) the tax system has a bizarre nod towards solo entrepreneurs running a SaaS: you can choose simplified revenue-based taxation and fall into the 8.5% bracket. 8.5% tax on revenue is really good. And this is very specific: it applies specifically to SaaS businesses, most revenue-based rates are higher. If you decide to sell your business, assets are taxed at 3%.

Poland still has tax friendly system towards self employed people. Usual deal you get is 19% tax (recently raised to 23.5%) so you avoid double taxation as a company (where you first pay corporate tax and then income tax or capital gain tax as an individual). This makes sense as you don't enjoy privileges of limited liability. Somehow most other countries have it backwards though.

The 8.5% thing you talk about is not really that great (it's revenue based so it's out once you have significant costs/partners you pay). It's done to simplify accounting. It only makes sense for small one person companies and it makes sense to incentivize people to start businesses - a wild concept in Germany (or most of other EU countries).

Re: The Hidden Tax Trap for SaaS Founders in Germany

#88

Post by anonzzzies »

unmole wrote: post #82
anonzzzies wrote: post #77

Earlier quoted context omitted.

> I don't understand where you got tax evasion from my comment? I didn't say you did, I said that many people (as I see from experience every day) think it's fine to just easily and cheaply open a company somewhere (as you did say) else and then follow their tax rules and that's it. And that's not true. You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore'…

> You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore' which I was responding to. I quoted the part of the article that was describing a dual company structure.

Ah, I didn't read that from it, apologies.

Re: The Hidden Tax Trap for SaaS Founders in Germany

#89

Post by csomar »

Arnt wrote: post #78
dkyc wrote: post #17

Earlier quoted context omitted.

You should read the article in full, and/or learn the difference between a share and asset deal. Your link is about the former, the article about the latter.

"You can have the shares for €4m or the assets for €5m". Both sides have agency in a negotiation. AIUI the .de rules are intended for a somewhat different situation, perhaps more common. The article describes a situation where almost all of the exit is profit. I'm happy for you if you're in that situation, but I'd guess that most people have costs. In that case .de lets you set costs from past years against the exit,…

That's not how negotiations work. There is a price that the buyer is willing to pay. He is not going to pay your taxes.

Re: The Hidden Tax Trap for SaaS Founders in Germany

#90

Post by bluecalm »

shubhamjain wrote: post #42

Is there actually any sane country to do SaaS business except the US? It's insane how easy it's to start an LLC in US, set up a bank account, do your taxes, without ever leaving your home. Hell, you can start it as a foreigner, opt for pass-through taxation, and pay taxes at your tax residence. I mean, I get higher taxes, I just don't understand why you want to make it so hard to start and operate a company.

Poland is not terrible. You can do most bureaucracy online. Things that require you to visit a government office can be usually done in a day and there is not much waiting. Taxes are lower than Western Europe still (although pressure mounts to increase them). Courts are slow and incompetent but there is not that much litigation in EU anyway so it's often not a problem.

When it comes to taxes you pay 19% corporate tax (9% for small companies that bring less than 2M EUR revenue a year) and then 19% capital gain tax. If that's a lot or not I will let you judge. There are other low tax options in EU if you are willing to travel.

Post reply on HN