The author describes how four classes of people are affected by the tax.
There have been many articles about the struggles of entrepreneurialism in Europe.
Does anyone else see a connection here? One more straw on the camel’s back?
Exit Tax: Leave Germany before your business gets big
311–320 of 567 posts
Re: Exit Tax: Leave Germany before your business gets big
#312It’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.
This would be hilarious. I would support that change for entertainment value alone.
Re: Exit Tax: Leave Germany before your business gets big
#313Earlier quoted context omitted.
This needs to be repeated more often. If I buy a house for $100k, and next year some idiot pays $1M for a very similar house three streets down, did I just magically make $900k? Should I be taxed on that gain immediately? Should I be forced to sell part of my property to cover it? What happens when that sale occurs at a much lower price, due to my need to liquidate, did that lower the prices of all the houses in the…
> did I just magically make $900k? Yes you did, because now you can mortgage your real estate for that value and live in luxury. This is how most people make a good living, not by working or investing.
No, a mortgage is a loan. You don't "make" any money by taking a loan since you obviously have to pay the money back.
Don't worry that if a loan was considered "making money" it would be taxed as income... which would make no sense at all. In fact, disguising transactions as loans while not intending to repay the money is a well-known tax evasion scheme, which tax authorities always keep an eye on.
Re: Exit Tax: Leave Germany before your business gets big
#314I think the numbers in the article are mixed up. Earnings 200k. Wage 120k. So the profit is 80k for the calculation. 80×13,75=1.100k. 60% of it = 660k. Personal tax at 120k income = 45%. More likely less as for health insurance, etc. 660k×45% = 297k exit tax. Which can be paid in 7 yearly rates. So 42k per year. You still have a company that has earnings of 200k.
It also depends on how the company is valued:
If based on balance sheet (retained profits + share capital) e.g. 5×100k retained = 500k value, the exit tax is 18k/year for 7 years.
If simplified earnings method with factor 13.75 is used it much higher valuation, the exit tax is at the 42k/year.
Re: Exit Tax: Leave Germany before your business gets big
#315Earlier 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.
Why do you consider leaving? Where would you rather live?
Lack of confidence in future economic improvement.
A place where I could blend in which rules out the kind of obvious and otherwise excellent choices in Asia.
Re: Exit Tax: Leave Germany before your business gets big
#316Earlier quoted context omitted.
They basically treat you as if you sold your shares or company when leaving the country. If you run a one man company that is currently making a good profit, this can become really expensive.
Exactly. And they, by default, use a very high multiple (13.75) for calculating the value of your shares.
This multiplier would be ridiculous for an LLC you are just shareholder of but in case of one person company which usually derives most of its value from the work of the founder it's just on another level.
One person shops would rarely get 3-5x multiplier if the founder leaves. It's straight up "you belong to us" type of regulation. Next they will make you fight in the arena to win your freedom.
Re: Exit Tax: Leave Germany before your business gets big
#317[flagged]
We detached this comment from https://news.ycombinator.com/item?id= 44829333 and marked it off topic.
Re: Exit Tax: Leave Germany before your business gets big
#318One 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.
Or, alternatively, the bureaucrats in charge would argue that all EU countries need to implement similar exit taxation laws - that's where it seems to be heading lately.
When you start to run out of other people's money.
Re: Exit Tax: Leave Germany before your business gets big
#319Earlier 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.
Don’t forget the energy suicide Germany has committed. Cheap energy was the backbone of Germanys rich industrial economy, and that rug has been (allowed and even encouraged) to be pulled by none other than the country now offering them a “very good price” on LNG…
Did you miss the Russo-Ukrainian war? Or are you suggesting that we (Europeans) should have continued pumping cash into Russia for a bunch of gas?
Re: Exit Tax: Leave Germany before your business gets big
#320Earlier quoted context omitted.
> did I just magically make $900k? Yes you did, because now you can mortgage your real estate for that value and live in luxury. This is how most people make a good living, not by working or investing.
No, a mortgage is a loan. You don't "make" any money by taking a loan since you obviously have to pay the money back. Don't worry that if a loan was considered "making money" it would be taxed as income... which would make no sense at all. In fact, disguising transactions as loans while not intending to repay the money is a well-known tax evasion scheme, which tax authorities always keep an eye on.
You made money before taking the loan, as your property increased in value. Taking a loan is a way of realizing the profit, but you can of course also sell your real estate.
The money is paid back during the course of decades, when that money will be worth 1/4, 1/3 or half to what it is worth now. And your real estate is ripe to be mortgaged again for another jackpot payout.
Hundreds of millions of people all over the world do it, and tax authorities applaud it. Who do you think writes the tax code?