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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

#221

Post by hiAndrewQuinn »

jwr wrote: post #195
profstasiak wrote: post #138

Isn't USA even worse? If you move as US citizen to EU, you would need to pay bot h local EU tax and USA tax right? (I am not a USA citizen, this is legit question)

The US does not have an exit tax for businesses, but has an absolutely horrible tax system in which expats are treated badly. The reporting requirements for expats are insane: all bank/brokerage/whatever accounts with max levels during the year, FATCA and FBAR forms, and the cherry on top: Form 8858 ("Foreign Disregarded Entities", whatever that is) which is needed for your self-employment and for each of your rental…

I can confirm this from experience. The instant your situation becomes more complicated than "I work one full time job and have no investments to my name whatsoever" you are in for a brutal time without an accountant by your side.

On the other hand, if you do have an accountant by your side, you potentially expose yourself to some of the most powerful labor arbitrage on the planet as a tech worker. Making $100k remotely from the US might sound like a bad deal until you live in a country where the average wage is $20,000. Like all things US tax wise, you are disproportionately rewarded for being clever and reading a lot.

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

#223

Post by ExpertAdvisor01 »

nolverostae wrote: post #201

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…

It is not so easy as you describe.

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

#224

Post by garyclarke27 »

One of the basic principals of the EU is freedom of movement between countries. One could argue that imposing such an onerous tax on moving to another EU country breaks this principal, so maybe worth a legal challenge - for someone with a lot to loose.

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

#225

Post by jillesvangurp »

nolverostae wrote: post #201

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…

Exactly, you need to get proper advice on how to structure your business in Germany. Basically, putting your shares in holding companies is both common and not dodgy. Corporate taxes are more friendly than personal income taxes. You can do constructions with salaries, dividend, etc.

Doing this is standard practice if you are founding a company. You need to plan for your startup to be actually successful and being on the receiving end of a big exit. You can't just wing it and hope for the best.

Germany has a large amount of wealthy small investors, business owners, family owned businesses, etc. And many of those might retire in places like Spain, Italy, etc. There are ways. You just need to understand the system.

That's not to say that Germany is not a huge PITA when it comes to managing all these constructions, dealing with the bureaucracy, and the maze of silly government agencies that refuse to share even the most basic information with each other so you are stuck in ground hog day providing the same information over and over again (who are you, where do you live, what is your company registration, etc.). But once you know the how this backwards and dysfunctional system works, you can get it to work for you. Because painful as it is, the system does work more or less as advertised. But you do need to familiarize yourself.

BTW. this is a topic where LLMs can be helpful. You can skip a lot of the traditional advisers and other middle men, if you are a bit smart on that front. Using an accountant is actually worth the money for liability reasons. So don't skimp on that. But otherwise, knowing what you are getting into in terms of bureaucratic process can save a lot of time.

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

#226

Post by ExpertAdvisor01 »

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.

You couldn't move it anyways , if you manage and control the company even before 2022.

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

#227

Post by bluecalm »

csomar wrote: post #103
merek wrote: post #61

There's a note at the end > You could, of course, sell or wind down your company, which would solve all problems outlined here. But this is not an option for most entrepreneurs. For a software business, you could presumably: - Incorporate a company in your country of choice - Transfer subscribers from German company to new foreign company (depending on payments provider, this can be a massive effort, for example, not…

This is fraud and you'll end up in jail. Your company is not "you". You are a shareholder but as a CEO, you should do what's best for the "company" and what you described is criminal activity to bankrupt the company.

I guess if you have a limited liability company but in some countries at least you don't have such duty when running a one person or a small partnership shop.

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

#228

Post by ExpertAdvisor01 »

weinzierl wrote: post #145

"not. As soon as your net worth goes beyond ~€2m, you can afford fancy tax advisors which set up a trust in Liechtenstein for you." Is it really that complicated to go that route? This is an honest question, I have little knowledge about these things, but from the outset: How hard could it be to set up a trust, especially in Liechtenstein, where presumably there are already thousands of them and this kind of business…

There are no trusts in Liechtenstein. They don't have the concept of trusts as they are civil law countries. What they have are foundations e.g family foundations etc..

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

#229

Post by ExpertAdvisor01 »

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]

I would rather live/work in the US than Germany . I lived almost my whole life in Germany

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

#230

Post by throw9349494 »

nolverostae wrote: post #201

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…

> be in Germany twice a year to sign off on having done the management within Germany.

Pretty stupid. You are signing paper that claims you never left Germany!!!

You are opening up yourself to personal German tax residency, with all pleasures it brings. Payable 10 years back!

And do not believe that 185 days bs. Correctly losing tax residency in state like Germany, Denmark, Norway or Australia is very difficult. You can not keep any assets like company or house there!

Edit: why downvotes? Many states only require 90 days or less to become tax resident. Australia is fine with a house. Norway will tax your income for 3 years after leaving!

Claiming you manage holding company within Germany, is a huge red flag!!!

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