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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

#201

Post by nolverostae »

I was someone who almost got hit by this tax. You don't need any offshore shenanigans to get around it.

If you just want to move out of the country you can also just keep the ownership of the company within the country. You do this by putting your shares into a holding that stays in Germany even when you move out. That holding needs to be managed within Germany, so you need to assign a friend or be in Germany twice a year to sign off on having done the management within Germany.

You do need a bit more expensive tax advisor, but it's not that difficult. There's a description here: https://www.juhn.com/fachwissen/internationales-steuerrecht/... (3.1.)

Of course, if you want to move the company out of the country, you'll need to pay taxes on any value increase the company had. As others have described this is pretty reasonable though - you get taxed exactly as if gains were realized. This is tax you would have had to pay some time in the future anyways, except by moving to a tax-evasion country.

The only unreasonable part of the law is how they can assume your valuation based on earnings, but that only applies if you can't provide a valuation based on German standards.

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

#202

Post by bluecalm »

derriz wrote: post #187

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…

Capital gain tax is stupid anyway. It's one of the first tax that should be removed.

You can tax business at home by land/revenue/resources usage/ip protection taxes. As it is owners in different jurisdictions pay a different (or sometimes no) tax on selling shares. Selling itself is something you want to encourage, not discourage. It's a pointless tax that penalizes exactly the things you want to encourage.

You think that someone moving to Portugal to avoid it is unfair but then a share holder living in 0 cap gain jurisdiction in the first place would pay 0 anyway.

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

#204

Post by tdullien »

derriz wrote: post #187

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…

The obvious solution is for the state to accept illiquid securities as payment for tax.

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

#207

Post by jeofken »

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.

The EU forces every member state to implement an exit tax to trap entrepreneurs in a disadvantageous situation (Anti-Tax Avoidance Directive).

Some countries such as Sweden implements this only minimally - making capital gains of Swedish companies you hold realised within 10 years of moving abroad are taxed, so just don’t sell in 10 years but take out credit with those assets as collateral.

Of course outside the EU, such as Switzerland and the UK, these governments are not bound by EU rules and don’t impose exit taxes.

Which is why so many European millionaires are doing their best to live in these countries

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

#208

Post by mytailorisrich »

derriz wrote: post #187

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…

Capital gain is the profit made on the sale of a capital asset.

There is no gain or loss until the asset is sold. Taxation is not deferred, it applies when the gain is made, i.e. upon sale.

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

#209

Post by rusk »

derriz wrote: post #187

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…

> a certain wealthy telecoms magnet

It’s okay to name him here you know. [redacted] can’t get you on HN

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

#210

Post by potatototoo99 »

fyrn_ wrote: post #186
DrBazza wrote: post #176

Earlier quoted context omitted.

> 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 lo…

Unless you move to a country without a tax treaty to prevent double taxation with the US.
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