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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

#271

Post by mytailorisrich »

octo888 wrote: post #261
mytailorisrich wrote: post #206

The EU is great, we have free movement, we can move anywhere we want without restrictions... wait a minute? This sort of law is stretching things to the point of utter bad faith.

It's always had restrictions. For example beyond 3 months, you have to demonstrate being economically active or a student or self sufficient etc. Then there are restrictions due to public health, personal conduct, public security

Here we go, the usual blurb. In practice you need to really cause trouble for anything to happen to you but, anyway, this is quite irrelevant to the point here.

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

#272

Post by trinix912 »

logicchains wrote: post #174
oulipo wrote: post #158

[flagged]

>Otherwise you become a shithole country like the USA Better than a country that hasn't seen any growth in living standards (GDP per capita) in over a decade, like most of Western Europe.

> any growth in living standards (GDP per capita)

Higher GDP per capita does not automatically equal higher living standards.

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

#273

Post by spwa4 »

derriz wrote: post #220
tebbers wrote: post #213

Earlier quoted context omitted.

What did the Irish government do to entitle itself to a chunk of the appreciation of your equity portfolio of presumably non-Irish companies? What did they do to contribute to that equity growth?

I don’t understand the question. Governments collect tax in lots of different ways: income taxes, sales/consumption taxes, import taxes, capital gain taxes, property taxes, inheritance taxes, etc, What’s so special about capital gains taxes that requires the government to have had some sort of active involvement to be justified?

Capital gains are theoretical. You do not have that as money, but the state does want it as money. They are not what someone paid for your assets, they are what someone THINKS someone else might pay. Most smaller companies cannot be sold easily, and of course, the government is unwilling to take that as the valuation being zero (because what someone is willing to pay right now is in fact zero). And the government is unwilling to take any risk (they take cash only). So they're taxing money you do not have available to spend, and may not have at all.

Think of it as taking a $10k diamond with you. It's worth something, but ... maybe next year artificial diamonds double the size of your diamond start costing $500, and your diamond's value goes to $550. The difficulty is that the government demands "10%", which is $1000 in taxes on the "value" of your diamond now.

So for a big range of company sizes it's effectively a tax on nonexistent assets. This would not be the case for a huge (let's say revenue of 500k or more) company.

But the government chooses not to tax those big companies.

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

#275

Post by throw9349494 »

kharann wrote: post #239
chaosprint wrote: post #154

Norway also has crazy exit tax and wealth tax. I heard lots of complaints that this system makes it almost impossible to build a decent vc-driven tech startup.

Kinda makes it harder to attract foreign talent to Norwegian startups as it could affect their decision moving to Norway. While I think the number of people affected is exaggerated, the most well-known case would be the Dune Analytics founder who had to pay more in tax than his salary and was forced to either take a loan to pay taxes (no guarantee the company would succeed) or move out of the country.

This, and barnevernet has reputation similar to gestapo in East Europe.

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

#276

Post by mschuster91 »

jillesvangurp wrote: post #225
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…

> 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.).

That's where you hire a professional accountant. Which you should be doing anyway at the point where you raise any sort of external funding that's not family members.

I don't get why people are always complaining about German taxes. As long as you're small, you can just wing it. And when you pass the threshold, professionals are cheap.

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

#277

Post by Wobbles42 »

robocat wrote: post #260
_petronius wrote: post #217

Earlier quoted context omitted.

If you lived in Ireland in that period, you benefitted from Irish government services, schools, police, fire services, etc. You participated in the community (hopefully), used roads, bought things in shops, so and on so forth. Regardless, the idea that the government can only tax you if it directly gave you sufficient benefit, _in your assessment_, is of course nonsense. Taxes are what you owe to the society you live…

> benefitted from Irish government services, schools, police, fire services, etc. You participated in the community (hopefully), used roads That is a terrible basis for argument: we mostly each get similar usage of services (roads, police, yadda yadda) which should be an argument for a fixed amount of tax per person (a poll tax). If you wish to argue that we get what we pay for: then rich people pay wayyyyyy more so…

Without society it's pretty hard to be well off in the first place. The entire concept of property becomes pretty meaningless without some very basic concepts of a legal system and territorial integrity. Without that you can only own what you can physically defend.

Wealthy people and large companies do generally employ security, but that is merely supplemental. They enjoy the backdrop of a society where the vast majority of people at least recognize the basic concept of ownership, and where protection from external state actors is provided. More to the point, they live in a system where most people see negative expected return from just killing them and taking their stuff

Abstractions like insurance further require a system where agreements can be made and mostly enforced, and where the need for the insurance is low enough for the premium to be workable.

The small security team at any given company is there to handle the the exceptions that don't conform to the larger society's rules. It doesn't replace that protection entirely. You'd need a standing army for that, and you'd have to work full time just to maintain its loyalty.

Even with no direct services whatsoever, people benefit from society in more or less direct proportion to their wealth -- and arguably the benefit accrues exponentially as wealth increases, given that this enables the exponential growth of capital.

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

#278

Post by thomas_witt »

croes wrote: post #120

Exit Tax: Leaving the USA before you become too rich https://www.greenbacktaxservices.com/knowledge-center/exit-t...

From a startup founders perspective, it might be worth mentioning that if you own the business personally in the US, you likely qualify for so-called the small business exemption (QSBS) - that means from the price for which you sell your company the first $10M (yes, million!) of capital gains are tax free, and after the latest reform $15M. If you're married: x2.

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

#279

Post by hiAndrewQuinn »

ralferoo wrote: post #264
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…

> For two (real ballpark number here) about 1 in 10 Americans would actively be subject to a German style exit tax like this, concentrated among working adults. I'm sure that a sizeable percentage of Americans own a significant amount of shares via 401k or whatever, but it feels surprising if 1 in 10 own more than 1% of a company, because all of those people holding shares as investments will be buying shares in comp…

It's a surprising number, but a useful one for calibration. Most people assume that the number is closer to 1 in 100 or even 1 in 1000, but that's because they forget the vast, vast numbers of people who just quietly run their own operations in some form. You don't have to be Apple to make enough money to pay the bills on your own, or even reach the high net worth category.

It's worth noting that the numbers don't vary that much between the US and the EU, which actually weakens my claim that such a tax would be politically unpopular if introduced. About 1 in 20 Germans seem themselves to own enough of a business to fall under their own exit tax, checking just now, but I'm not familiar enough with DACH business practices to know if setting up an actual honest-to-goodness LLC for a one man operation is as common there as it is in the United States.

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

#280

Post by jacquesm »

throw9349494 wrote: post #258
jacquesm wrote: post #246

Earlier quoted context omitted.

> this is a topic where LLMs can be helpful. That's probably the very last spot where you want to use an LLM, especially not in Germany. One single mistake can cost you a fortune, and you won't be able to spot the mistake because you're not an expert. LLMs could be used to prime you for conversations with an expert (but be prepared to be corrected on points of law and fact) but they are no substitute. Corporate law i…

Crazy theory: most posts here are from German Tax office. They give a "free" advice, and send a fat tax penalty 5 years latter! Suprise: you never left!

If the German tax office is actually using HN for such schemes I'd have to give them more credit for using technology effectively than I currently do. It would be funny if they did though.
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