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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

#351

Post by vixen99 »

saubeidl wrote: post #212
jeofken wrote: post #194

Earlier quoted context omitted.

Norway has a high wealth tax (it’s gonna be 1.1% of total wealth per year in normal cases), high capital gains tax, and an exit tax treating moving abroad as a capital gains event. This means, if you start a not-yet-publicly-listed company, get investment at a high valuation (on paper), you must pay wealth tax as if you had that money liquid in your own name. But you don’t have it liquid, it’s yet just a valuation of…

It's also an attractive destination for people wanting to live in a society that's not completely broken by inequality and are willing to pay their membership dues for living in such a society. Not everyone's top priority is building a big ol' dragon pile of gold.

Well while celebrating, let's remember that the dream leans massively on the US. 74% of Europe's publicly listed companies depend on US-based technology services like Google and Microsoft for their core operations. And can Europe defend itself? No is the response most analysts give. It's massively under-resourced & dependent on the US. However, if Russia invades (as predicted by some), it invades Europe. So in negotiations such as they are, where are the Europeans leaders dominating (or even putting an appearance at) the discussion to try to call a cease fire to the appalling tragedy of Russia's invasion of the country adjacent to European territory? Isn't it kind of embarrassing?

Overstaying a visa is an offence and if you've gone through the efforts of getting one in the first place, you should read the regulations. Most of us do and act accordingly as I know from own situation this summer.

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

#352

Post by carlosjobim »

seabass-labrax wrote: post #342
carlosjobim wrote: post #320

Earlier quoted context omitted.

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 th…

If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount. You'll also probably need to pay interest accumulated during the time the property was mortgaged, which means you can't use it to avoid inflation. What lender do you know of who will voluntarily reduce your mortgage obligation if the property depreciates?

> If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount.

Mistake in logic. The money you received as a loan doesn't depreciate in value if the underlying asset depreciates in value. And vice versa.

As for interest, if your real estate has appreciated by a factor of 9 as in the example we're discussing, then interest rates are of minor concern to get the jackpot payout. As you certainly know, you wouldn't have to take out a loan corresponding to the entire value of your asset, and neither would most banks give it.

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

#353

Post by seabass-labrax »

hiAndrewQuinn wrote: post #165
bmacho wrote: post #136

Earlier quoted context omitted.

Why can't businesses be owned by people that: - enjoy owning and managing a business - do think that owning and managing a business should come with the same compensation as any other dayjob (hairdresser or whatever) While managing a large amount of money naturally lead people to have enough to buy luxury items, IMO, this is just a sad fact of our world, and we should fight against it.

Because it shouldn't come with the same compensation as any other day job. Let's say you can make $80,000 as a hairdresser. You are seriously proposing that someone who takes all of the risk of * Renting their own hair salon, * Building up their own clientele, * Taking out loans to purchase hair dressing equipment, and * The thousand other things the business owner has to do in addition to actually dress hair themsel…

Do they actually walk out with more, though? Looking at the 'businesses for sale' listings here in the UK, I can see most of the hairdressing salons have an asking price of between 2x and 10x the statutory minimum wage. So even if the hairdresser built the business by themselves in only a few years, has never sold any stock, and has no outstanding loans, they'd probably get no more than twice what they'd have earnt as a non-entrepreneurial hairdresser over the same period. Then that will also be taxed at a higher rate.

I'm not saying that being an entrepreneur isn't a good way of making money in certain circumstances, but I think that starting any brick-and-mortar business is barely viable compared to persuing a white-collar career where one's final salary would dwarf the value of even the most successful hairdressing enterprise.

TLDR; the promise of money alone cannot motivate someone to become an entrepreneur.

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

#354

Post by csomar »

bmacho wrote: post #136
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.

Why can't businesses be owned by people that: - enjoy owning and managing a business - do think that owning and managing a business should come with the same compensation as any other dayjob (hairdresser or whatever) While managing a large amount of money naturally lead people to have enough to buy luxury items, IMO, this is just a sad fact of our world, and we should fight against it.

This has been tried in mother Russia and several other countries and it didn’t work because of math. You need to compensate the risk with an upside otherwise nobody will play the game.

It’s like rolling a 50/50 coin where your payout is 0 or 100%. Why would you play if there is only downside?

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

#355

Post by seabass-labrax »

carlosjobim wrote: post #352
seabass-labrax wrote: post #342

Earlier quoted context omitted.

If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount. You'll also probably need to pay interest accumulated during the time the property was mortgaged, which means you can't use it to avoid inflation. What lender do you know of who will voluntarily reduce your mortgage obligation if the property depreciates?

> If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount. Mistake in logic. The money you received as a loan doesn't depreciate in value if the underlying asset depreciates in value. And vice versa. As for interest, if your real estate has appreciated by a factor of 9 as in the example we're discussing, then interest rates are of mino…

OK, 9x the value of your property as liquid wealth is nice, but you'll still need to pay it back eventually, won't you?

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

#356

Post by hiAndrewQuinn »

seabass-labrax wrote: post #353
hiAndrewQuinn wrote: post #165

Earlier quoted context omitted.

Because it shouldn't come with the same compensation as any other day job. Let's say you can make $80,000 as a hairdresser. You are seriously proposing that someone who takes all of the risk of * Renting their own hair salon, * Building up their own clientele, * Taking out loans to purchase hair dressing equipment, and * The thousand other things the business owner has to do in addition to actually dress hair themsel…

Do they actually walk out with more, though? Looking at the 'businesses for sale' listings here in the UK, I can see most of the hairdressing salons have an asking price of between 2x and 10x the statutory minimum wage. So even if the hairdresser built the business by themselves in only a few years, has never sold any stock, and has no outstanding loans, they'd probably get no more than twice what they'd have earnt a…

This is different to OP's question. OP is specifically asking why it can't be so that the entrepreneurial hairdresser is guaranteed, in some moral sense at least, to get no more than once what they'd have earned as a non-entrepreneurial hairdresser.

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

#357

Post by Merovius »

Uhm correct me if I'm wrong, but… you can sell your stake and leave at will, with zero exit tax? So really, the only thing that the exit tax prevents is the company leaving the country. And you know, every time someone brings up taxing the rich, people object that this would cause capital flight. Well, capital flight is exactly what the exit tax prevents. The capital stays in the country.

And likening that to the Berlin wall, where people literally got shot dead, is honestly pretty disgusting.

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

#358

Post by thesuitonym »

Merovius wrote: post #357

Uhm correct me if I'm wrong, but… you can sell your stake and leave at will, with zero exit tax? So really, the only thing that the exit tax prevents is the company leaving the country. And you know, every time someone brings up taxing the rich, people object that this would cause capital flight. Well, capital flight is exactly what the exit tax prevents. The capital stays in the country. And likening that to the Ber…

The rich will do anything to appear to be the victims of the world they created.

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

#359

Post by nolverostae »

BillyTheKing wrote: post #331
nolverostae wrote: post #287

Earlier quoted context omitted.

You definitely need advice from professionals, yes. All included, I'd expect it to cost 5k€-30k€, but not more.

how did you do it? My co-founder is in a similar situation, and his tax-lawyer said the only way was via a trust - they also have a German holding. Do you have to declare that somewhere? or how does this work? Thanks!

I can't give more specific information about my situation, but I would recommend contacting one of the companies that has a public article on the "Wegzugssteuer", for example the one I linked in the first comment. That way you know you get someone that actually knows how to deal with this.

My first tax advisor barely even knew about the Außensteuergesetz and almost got me into larger trouble because of that. I'd guess since this law only affects a tiny portion of the population you really need someone that specializes in it.

If they specialize in it they'll have done this many times before and you can just use their pre-made constructs. Then the main issue is avoiding getting squeezed by them.

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

#360

Post by Detrytus »

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…

> 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.

There's nothing reasonable about it, it's just an extortion. Your gains might never materialize, but your country does not care, they are just punishing you for leaving.

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