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Exit Tax: Leave Germany before your business gets big

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Re: Exit Tax: Leave Germany before your business gets big

#181

Post by kmlx »

oulipo wrote: post #159
WalterBright wrote: post #67

When businesses are fleeing, you're doing something very wrong.

The business owners are doing something very wrong. They are failing to recognize that their business is successful in large part because of the infrastructure in their country, the educated people they can hire, the healthcare, etc So when you get money out of this, you pay your fair share of taxes, like everyone.

> their business is successful in large part because of the infrastructure in their country, the educated people they can hire, the healthcare

Germany has Europe’s lowest share of entrepreneurs to workforce. So i guess the infrastructure, education and healthcare are not really factors.

> So when you get money out of this, you pay your fair share of taxes, like everyone.

this is already happening. people are paying their taxes. but Germany wants more than it’s fair.

cherry on top: Germany has been in recession for… 3 years now?

Re: Exit Tax: Leave Germany before your business gets big

#183

Post by zgk7iqea »

oulipo wrote: post #163
weinzierl wrote: post #155

Earlier quoted context omitted.

As a German I couldn't agree more. I am your age and even I consider leaving. If I was still young I wouldn't be here anymore. I think the combination of capital and skilled labour fleeing is very concerning and a trend that could end up self-reinforcing and hard to stop.

[flagged]

maybe better in terms of overall living standards but not in terms of innovation or the state being friendly to someone running a business

Re: Exit Tax: Leave Germany before your business gets big

#184

Post by Strix97 »

logicchains wrote: post #170
oulipo wrote: post #159

Earlier quoted context omitted.

The business owners are doing something very wrong. They are failing to recognize that their business is successful in large part because of the infrastructure in their country, the educated people they can hire, the healthcare, etc So when you get money out of this, you pay your fair share of taxes, like everyone.

>They are failing to recognize that their business is successful in large part because of the infrastructure in their country, the educated people they can hire, the healthcare, etc Empirically that seems to be false, given the number of successful businesses created in Europe in the past couple decades is way way less than in the US or China, even though Europe has better infrastructure, education and public healthc…

> Empirically that seems to be false

Could you tell me on what data you are basing this argument on? I see this sentiment pop up in every related conversation but haven't seen the source of these claims. Could you help me out?

Re: Exit Tax: Leave Germany before your business gets big

#185

Post by roenxi »

bmacho wrote: post #136
geff82 wrote: post #126

The crazy thing is that as a business owner (GmbH/AG) you can’t even move to another EU country any more since 2022. As the owner of such a company it feels like I have become a slave of the government.

Why can't businesses be owned by people that: - enjoy owning and managing a business - do think that owning and managing a business should come with the same compensation as any other dayjob (hairdresser or whatever) While managing a large amount of money naturally lead people to have enough to buy luxury items, IMO, this is just a sad fact of our world, and we should fight against it.

They can and frequently such people are; but they aren't very obvious because they stop while the business is still small. If we don't harness greed into doing something productive then there isn't enough motivation in the world to power a modern industrial society. People like Bezos would just sit around running a local bakery or something instead.

The way the system works is people who create unfathomable amounts of wealth get to keep unreasonable amounts of it. If that link is broken, they'll stop at creating a reasonable amount of wealth and then everything grinds to a halt. If someone is in a situation where they are doing a good thing they should have every incentive to keep going and not stop.

Re: Exit Tax: Leave Germany before your business gets big

#186

Post by fyrn_ »

DrBazza wrote: post #176
hiAndrewQuinn wrote: post #161

Earlier quoted context omitted.

US-EU transplant here. No, the United States does not have anything even vaguely similar like this. Seriously putting forward the idea of an exit tax on anyone who owns more than 1% of any LLC worldwide would in all likelihood be deeply politically unpopular. It goes against the very name and spirit of a limited liability company, for one. For two (real ballpark number here) about 1 in 10 Americans would actively be…

> You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. That's certainly what I was thinking of, given I have a few US friends here in the UK. Isn't the way to stop that to simply give up dual citizenship?

You won't be double taxed, the US taxes the difference between your local income tax rate and the US federal tax rate. So if you live in London you're not paying any US tax because the UK income tax rate is higher. It helps stop rich people from "totally live in ". If only we had that for companies..

I think where people get confused is that it's implemented as a tax credit which is equal to the income tax you pay locally.

On top of that the first $130k earned is also exempt, so it only applies to high earners as well

Re: Exit Tax: Leave Germany before your business gets big

#187

Post by derriz »

It’s not as crazy as it initially seems.

It’s because of a fundamental difference between how capital gains tax and income tax are collected.

Capital gains are deferred - so as years pass you’re working up a tax liability but most countries recognize that forcing collection every year is not practical given the often illiquid nature of capital gains and the difficulty around valuation.

I’m from a country which has no exit tax on capital gains and notoriously a certain wealthy telecoms magnet - having been resident all his life - moved to Portugal just before realizing billions of capital gain. Thus despite earning multiple billions through businesses activities in his native country, he effectively paid zero tax.

I myself have benefited from this lack of capital gain exit tax as I moved to a country with very low capital gains tax. So despite the fact that my modest equity portfolio earned most of its growth while I was living in Ireland, when I sell, the Irish government will get nothing.

The problem, it seems to me is the method of valuation for the deemed disposal and/or the fact that it can cause a “liquidity squeeze“ for the tax payer.

I don’t see a simple solution - maybe other than getting rid of capital gains taxes completely and collecting more consumption taxes, for example, but I’m sure this would just open up a range of other tax evading loopholes.

Re: Exit Tax: Leave Germany before your business gets big

#188

Post by procaryote »

xenospn wrote: post #139

Doesn’t every country have an exit tax, tho? Some are worse, some are better, but this is always the case.

Lots of countries have some level of exit tax on unrealised capital gains, but the devil is in the details. A painful part in the German case is that they have a fixed company valuation method that might make it untenable to leave the country.

It's one thing to tax people on assets they actually have or that are easily realisable like ETFs, as they then pay a portion of money they have ready access to. It's quite a different thing to invent a value for something and tax on that. The company ownership in question might not be realisable at anything close to that amount, especially for a startup, if you don't leave before making a profit

So don't do startups in Germany. The exit tax is just one of many reasons for that, the whole German system is bureocratic and inflexible compared to nearby countries.

Re: Exit Tax: Leave Germany before your business gets big

#189

Post by tempfile »

> But no, it’s not fine, because the same person was working for a salary of €0 just a few years ago and likely has nowhere close to €700k of random savings stashed away for paying some taxes.

By your own admission, this person earned almost a million euros in the past 3 years.

Re: Exit Tax: Leave Germany before your business gets big

#190

Post by MaKey »

weinzierl wrote: post #155
WalterBright wrote: post #67

When businesses are fleeing, you're doing something very wrong.

As a German I couldn't agree more. I am your age and even I consider leaving. If I was still young I wouldn't be here anymore. I think the combination of capital and skilled labour fleeing is very concerning and a trend that could end up self-reinforcing and hard to stop.

Why do you consider leaving? Where would you rather live?
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