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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

#401

Post by saubeidl »

FredPret wrote: post #372
saubeidl wrote: post #212

Earlier quoted context omitted.

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.

In what way does inequality break society? I’ve frequently heard this article of faith bandied about. But if the rich get 10X richer, and the poor get 2X richer, then everybody is better off. The stagnant, ultraconservative, ultracentralized economic systems tankies like to propose always end up leaving everyone 100X poorer. But at least they’re equal, right!? Seems like cutting off your nose to spite your face.

> But if the rich get 10X richer, and the poor get 2X richer, then everybody is better off.

If the rich get 10x richer, prices will rise by more than 2x, leaving everybody but the rich worse off.

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

#402

Post by bluecalm »

BillyTheKing wrote: post #332
johnnyfuego wrote: post #99

For a less emotional explanation of exit tax see https://www.grantthornton.de/en/insights/exit-tax-topic-hub . > The purpose of this rule is to tax the increase in value of these shares that came about in Germany but has not yet been realised before they are able to escape the reach of German taxes by the move abroad. Doesn't sound all that crazy to me. Also, the proposed analogy to the Berlin wall feels quite pathet…

The reasoning might not sound crazy, but the result is that a founder based in Hong Kong, opening a holding in Singapore, and creates a subsidiary in Germany is much much better off than a founder running the same business out of Germany - and that's before considering personal income taxes or similar

Yup. That's why the advice is to leave ASAP and it's a good one.

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

#403

Post by gottorf »

pydry wrote: post #252
bluecalm wrote: post #202

Earlier quoted context omitted.

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 thin…

It is at least not wildly regressive like consumption taxes are. It would be better to tax IP protection, inheritance, resource use and land only but realistically if we get rid of capital gains the tax burden will land squarely on wage earners doing all of the actual work who are already taxed more than the people who own their productive output.

> It is at least not wildly regressive like consumption taxes are.

Why is it just assumed that regressive taxes are bad?

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

#404

Post by fxtentacle »

pc86 wrote: post #375
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…

No reasonable person on the planet can look at that table showing a €700k exit tax on a company making €200k/yr profit and think "yeah that sounds fair."

That’s the penalty tax if you refuse to file the paperwork. So it’s literally the worst case.

Plus the article is wrong about not being allowed to move out of Germany. You still can, without paying the tax, you just need to keep a shell UG/GmbH alive inside Germany.

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

#405

Post by qwertylicious »

bluecalm wrote: post #268
pydry wrote: post #252

Earlier quoted context omitted.

It is at least not wildly regressive like consumption taxes are. It would be better to tax IP protection, inheritance, resource use and land only but realistically if we get rid of capital gains the tax burden will land squarely on wage earners doing all of the actual work who are already taxed more than the people who own their productive output.

There are many ways to make consumption taxes not regressive. You can implement refunds up to certain threshold. You can use the revenue to fund services used by lower income families. You can tax luxury good at higher rates. EU countries already realize it's the case with IT services (everyone wants their share with digital tax) and with big supermarket chains (big issue in Poland). It's just painfully slow for them…

> There are many ways to make consumption taxes not regressive. You can implement refunds up to certain threshold. You can use the revenue to fund services used by lower income families

Every one of those "solutions" is just a patch on the basic problem that consumption taxes are fundamentally regressive.

Go tell someone living paycheque to paycheque that it's okay, you'll get a rebate every quarter for the extra tax they paid, or worse, on their annual tax filing, and tell me how that'll make their household budget actually work.

Honestly, when I read ideas like this, I realize just how massive the disconnect is between the lived experiences of the relatively well off and the working poor...

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

#406

Post by throw9349494 »

nolverostae wrote: post #282
throw9349494 wrote: post #230

Earlier quoted context omitted.

> 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…

> You are signing paper that claims you never left Germany!!! No you aren't. You are signing a paper that says a managerial decision about the shares of the company happened in Germany. Where you live does not matter. You just have to do a board meeting, and be physically present in Germany during the meeting. In fact, you likely want to keep any proof of your travel from a different country, which makes it obvious t…

Do you own and manage company in germany? If yes you are tax resident, if not you pay exit tax. Winwin.

This what ifs do not really work in tax laws. The question is, if your current current structure and tax law interpretation will hold in 8 years. After germany had new election, new socialist goverment changed and it is trying to milk everyone.

Some flight ticket from lufthanza are not going to save you!

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

#407

Post by qwertylicious »

seabass-labrax wrote: post #338
carlosjobim wrote: post #297

Earlier 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.

How does that work? Mortgaging is selling a portion (in an abstract sense) of a house for cash, with an obligation to buy that portion back in installments. So parent has mortgaged their 100k house for a million - now what? How do they get out of their obligation to repay the mortgage - that is, buy the house back again for at least a million - without incurring penalties? If there weren't repercussions for defaultin…

The parent is referring to the "buy, borrow, die" strategy of wealth accumulation. Would that work in your parent's specific circumstance? Maybe? Maybe not? But taking a low interest loan against assets as a method of wealth generation and tax avoidance is both a viable strategy and an extremely popular one.

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

#408

Post by throw9349494 »

csomar wrote: post #346
ivankra wrote: post #284

Earlier quoted context omitted.

> You can not keep any assets like company or house there! Alternatively, simply keep both the house and company in Germany. No exit tax since, thanks to that house, you haven't technically exited, right?

You could technically do that but then you’d have to keep paying taxes to Germany on your income in the other country. And the other country will consider you a resident too and will want a chunk of that…

Double win!

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

#409

Post by crazygringo »

Wobbles42 wrote: post #289
mytailorisrich wrote: post #208

Earlier quoted context omitted.

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.

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…

> 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?

Of course you did! Assuming that "some idiot" is actually representative of the market.

Go sell your house for $1M ASAP, move somewhere else for $100k and keep the $900k profit.

> You simply can't establish value without an actual transaction.

Not perfectly, but you can definitely estimate it pretty decently for tax purposes. And you talk about the highest bidder in a market, but remember it's also the lowest seller. Markets are not generally distorted by "idiots" paying 10x. That's a straw man.

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