Exit Tax: Leave Germany before your business gets big

While rather sarcastic, your comment does hit an interesting point: How much does the infrastructure and society of any given state contribute to the "building" of a company?

I'd argue that, for software companies, not very much; at least if you contrast it with a hardware company. If you're, say, forging steel, you're using roads, trains, a lot of electricity, you've got an industrial plant, worker unions, public accident insurance, etc., etc. - a significant chunk of state-associated infrastructure is a part of your business, and was a part of your business when you built it.

But for software companies? I mean, you need a stable internet connection, good mobile phone coverage (tricky in Germany sometimes), rule of law, efficient bureaucracy (e.g. when hiring people), good banks which don't lose your money, electricity, etc. - none of these "infrastructure factors" feel as big as the ones for a hardware business.

On the contrary, for a software business, one could argue that Germany is actively hostile to you: Founding a company takes weeks / months and is expensive (notary), most processes are still paper-based, hiring people (especially internationally) is a huge pain, mobile internet is spotty, residential internet has outages. Charging customer credit cards via Stripe exposes you to a rabbit hole of VAT bureaucracy - all companies I've met so far rolled their own, broken software stack to somehow match up their Stripe + VAT charges with their internal bookkeeping software (e.g. Datev). A huge mess. It doesn't end there.

But I may be wrong.

Yup, this is possible. It would have to be at some fair market value, and you'd (obviously) have to tax that in Germany. And depending on how much you trust your buddy, you might or might not have to draft up some complicated legal framework that you indeed have the right to buy back your company at some stage :)

Also:

- A printer (the most important equipment of any German startup founder)

- Envelopes for letters

- A stamp with your company name (some companies and agencies you deal with require you to stamp things, because a stamp obviously proves, beyond any doubt, that you are acting on behalf of your company, because obviously no one would be able to create a similar stamp with your company's name on it, right)

- A virtual office address at a coworking space (because you're receiving physical mail, and also there are weird tax reasons not to register your company at your home address)

- A mail-scanning service (because you don't want to walk to the coworking space every few days to pick up your physical mail)

- A mail-forwarding service (so that the mail gets forwarded from your virtual office address, which now has exactly no purpose at all, to your mail-scanning service)

Good points!

1. Yeah, valid - I was assuming the default case of "you founded your company in Germany and are moving away at some stage". In that case, you could deduct the initial share capital (often €25k) from the valuation, as that was your "purchase price". In most cases, that doesn't lead to a significantly different outcome.

But yeah, if you actually bought shares of an existing company at a certain (higher) price, than of course the "taxable delta" might change your calculation.

In that respect, I was wrong as I assumed everything would get taxed. This is only roughly the case when you founded the company yourself in Germany, as mentioned above. Thanks for the correction!

2. True! As mentioned in my post, you can also pay someone to assess the value of your shares, which would most likely result in a valuation lower than 13.75x. You will have the additional costs of getting that assessment though, and you'll have to convince the authorities that your assessment is closer to the truth than the default valuation which is based on 13.75x.

I would assume that logic is applied.

Exit taxes are generally applied as if the taxpayer sold all capital assets on the day of leaving.

At least in the US taxation regime (I'm unfamiliar with others), family cars don't qualify for a capital loss, and rarely appreciate. Clothing would be similar.

But it doesn't seem unreasonable that a country should want to be paid tax on unrealized gains as you're leaving. It would probably be more fair to wait until the gains were realized and then apportion the gains among the countries of residence, but if you're leaving, it's going to be hard to compel your participation later, so it makes more sense to do it as you're leaving.