7 ms·

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 als

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 year to sign off on having done the management within Germany. You do need a bit more expensive tax advisor, but it's not that difficult. There's a description here: https://www.juhn.com/fachwissen/internationales-steuerrecht/reform-der-wegzugsbesteuerung-5-gestaltungen-vermeidung/ https://www.juhn.com/fachwissen/internationales-steuerrecht/... (3.1.) 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. This is tax you would have had to pay some time in the future anyways, except by moving to a tax-evasion country. The only unreasonable part of the law is how they can assume your valuation based on earnings, but that only applies if you can't provide a valuation based on German standards.

ExpertAdvisor01 1y ago
It is not so easy as you describe.
- nolverostae 1y ago
  You definitely need advice from professionals, yes. All included, I'd expect it to cost 5k€-30k€, but not more.
  - BillyTheKing 1y ago
    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!
    - ExpertAdvisor01 1y ago
      Trusts dont exist in Germany . Did you mean a foundation e.g family foundation ?
    - nolverostae 1y ago
      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.
jillesvangurp 1y ago
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.
- jacquesm 1y ago
  > 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 is a legal minefield, tread with utmost care. The whole proposition is in a way bizarre: if you have this problem you almost certainly can afford proper guidance and if you need to resort to an LLM for that guidance you almost certainly don't need such complex constructs in the first place!
  - 1y ago
throw9349494 1y ago
> 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!!!
- nolverostae 1y ago
  > 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 to the authorities that you don't spend all your time there. There's multiple variants though, this is just one of them. You can also pay someone to manage the shares (and of course contractually bind them to not do anything without permission). Edit: Also, to be clear, you don't need to manage the company from Germany. You only need to manage the holding company from Germany, where the only managerial decision is related to the shares themselves.
  - pc86 1y ago
    Someone should tell the German government about the internet. Who cares where you physically are?
  - Xylakant 1y ago
    If your company bylaws are set up properly, you can do board meetings via video calls just fine. Very few acts require actual presence in the country. What is required is that you can, at any time, enter Germany to perform those acts - which shouldn’t be a problem if you are German Citizen.
jacquesm 1y ago
In Switzerland, I would trust the mechanisms put in place for dealing with 'Treuhandlers' (trustees) to deal with this situation correctly. In Germany I would absolutely not if the stakes got high enough.
deleted 1y ago
[deleted]
pembrook 1y ago
Ah great, not so bad then! So you just need to: - Form a German holding company to manage the business - Deal with any conflicting taxation/regulatory issues when operating a german holding company from your new country of residence (in some countries this is not trivial) - Visit Germany twice per year and potentially more to deal with German authorities that require things be done on paper and in person (hope you didn't move too far away and hopefully you don't have small children!) - Hire an abnormally expensive tax advisor, hope he is good - Sell a large portion of the company to fund a giant exit tax bill (!!!!). For many companies this is likely a 1-2 year minimum process, and that's IF they can find a buyer. Not as many PE funds in Europe. Good luck on valuation when the buyer knows you're in this situation. - Hope the government gives you a reasonable valuation on your company, and hope their decision is similar to that of your buyer (and the timelines for both line up), which I'm sure is a super easy and not at all complicated process. Fun! I can't possibly see what people are complaining about. One of the weirdest things about Europe is the irrational nationalism that arises when you tie a language, ethnic-identity, government and country into one thing. Anecdotal, but it feels like this leads to more of an inability to reflect on and criticize things. Americans have far thicker skin when it comes to criticizing themselves. Can you not see how this incentivizes entrepreneurs to leave or start their companies outside Germany (not sure if you're aware the EU exists). Is this really how you think things should work in a non-authoritarian regime with democratic freedom of movement? Snark aside, this chart makes total sense to me now: https://i.redd.it/fxks3skmvt4e1.png https://i.redd.it/fxks3skmvt4e1.png
- pc86 1y ago
  Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life. Provided you can even get a full-time job since they seem to treat keeping your job as a civil right.
  - distances 1y ago
    > Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life Are you trying to just incite reactions? This is a very unfair take. German salaries are among the highest in Europe, sixth highest according to Wikipedia, and for many Europeans and non-Europeans it still is a land of opportunity. Certainly a better place to be a professional than almost "any other country", as you put it. https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_European_countries_by_...
Detrytus 1y ago
> 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.
pc86 1y ago
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."
- diggan 1y ago
  That's because reasonable people don't just look at two numbers and go "That's crazy", there is context and nuance to be understood, so give reading the entire blog post through instead of just skimming tables, and come back and tell us why it's unfair.
  - pc86 1y ago
    It's a math problem - you don't need a ton of context to understand it (although I did read the entire article). This is simply the German government being petulant and punishing successful people for moving a company somewhere that understands how to create proper incentive structures for businesses to grow. If you as an individual make €100k a year in salary, saved €20k every year, and the German government wanted to charge you €70k just to move out of Germany it'd be grounds for rebellion.
    - diggan 1y ago
      > petulant and punishing successful people What reason could they possibly have for "punishing successful people"? You seem to still miss almost the entire context, and automatically apply some bad faith arguments because of what, you feel like paying taxes is unfair?
      - pc86 1y ago
        Paying taxes is good, lawful, even patriotic. Also good and lawful is moving a company somewhere where you'll pay less in taxes and can grow faster and hire more people (and is at worst patriotically neutral). An exit tax is a country saying "oh no that's bad, so instead of looking at our tax structure and seeing why you're leaving and trying to address that, we're going to charge you >3 years of profit as a punishment." It's simply saying that if our taxes are too high for you we're going to charge you even more to try to stop you from leaving. You can think it's a good thing if you don't understand economics but it's hard to frame it as anything other than Germany punishing corporations for leaving.
philwelch 1y ago
At some point wouldn’t it just be simpler to set up your company in the first place in some other EU country with less onerous laws?
- ExoticPearTree 1y ago
  If you know this in advance, sure. But I guess the author of the article found out about this the hard way. On the other hand, no one expects to pay "an exit tax from a country".
triknomeister 1y ago
Or simply open a business in Luxembourg. Done.
fxtentacle 1y ago
Nowadays, you can do all of the tax sign-offs purely online with Elster.

ExpertAdvisor01 1y ago

It is not so easy as you describe.

nolverostae 1y ago
You definitely need advice from professionals, yes. All included, I'd expect it to cost 5k€-30k€, but not more.
- BillyTheKing 1y ago
  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!
  - ExpertAdvisor01 1y ago
    Trusts dont exist in Germany . Did you mean a foundation e.g family foundation ?
  - nolverostae 1y ago
    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.

jillesvangurp 1y ago

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.

jacquesm 1y ago
> 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 is a legal minefield, tread with utmost care. The whole proposition is in a way bizarre: if you have this problem you almost certainly can afford proper guidance and if you need to resort to an LLM for that guidance you almost certainly don't need such complex constructs in the first place!
- 1y ago

throw9349494 1y ago

> 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!!!

nolverostae 1y ago
> 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 to the authorities that you don't spend all your time there. There's multiple variants though, this is just one of them. You can also pay someone to manage the shares (and of course contractually bind them to not do anything without permission). Edit: Also, to be clear, you don't need to manage the company from Germany. You only need to manage the holding company from Germany, where the only managerial decision is related to the shares themselves.
- pc86 1y ago
  Someone should tell the German government about the internet. Who cares where you physically are?
- Xylakant 1y ago
  If your company bylaws are set up properly, you can do board meetings via video calls just fine. Very few acts require actual presence in the country. What is required is that you can, at any time, enter Germany to perform those acts - which shouldn’t be a problem if you are German Citizen.

jacquesm 1y ago

In Switzerland, I would trust the mechanisms put in place for dealing with 'Treuhandlers' (trustees) to deal with this situation correctly. In Germany I would absolutely not if the stakes got high enough.

deleted 1y ago

[deleted]

pembrook 1y ago

Ah great, not so bad then! So you just need to: - Form a German holding company to manage the business - Deal with any conflicting taxation/regulatory issues when operating a german holding company from your new country of residence (in some countries this is not trivial) - Visit Germany twice per year and potentially more to deal with German authorities that require things be done on paper and in person (hope you didn't move too far away and hopefully you don't have small children!) - Hire an abnormally expensive tax advisor, hope he is good - Sell a large portion of the company to fund a giant exit tax bill (!!!!). For many companies this is likely a 1-2 year minimum process, and that's IF they can find a buyer. Not as many PE funds in Europe. Good luck on valuation when the buyer knows you're in this situation. - Hope the government gives you a reasonable valuation on your company, and hope their decision is similar to that of your buyer (and the timelines for both line up), which I'm sure is a super easy and not at all complicated process. Fun! I can't possibly see what people are complaining about. One of the weirdest things about Europe is the irrational nationalism that arises when you tie a language, ethnic-identity, government and country into one thing. Anecdotal, but it feels like this leads to more of an inability to reflect on and criticize things. Americans have far thicker skin when it comes to criticizing themselves. Can you not see how this incentivizes entrepreneurs to leave or start their companies outside Germany (not sure if you're aware the EU exists). Is this really how you think things should work in a non-authoritarian regime with democratic freedom of movement? Snark aside, this chart makes total sense to me now: https://i.redd.it/fxks3skmvt4e1.png https://i.redd.it/fxks3skmvt4e1.png

pc86 1y ago
Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life. Provided you can even get a full-time job since they seem to treat keeping your job as a civil right.
- distances 1y ago
  > Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life Are you trying to just incite reactions? This is a very unfair take. German salaries are among the highest in Europe, sixth highest according to Wikipedia, and for many Europeans and non-Europeans it still is a land of opportunity. Certainly a better place to be a professional than almost "any other country", as you put it. https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_European_countries_by_...

Detrytus 1y ago

> 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.

pc86 1y ago

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."

diggan 1y ago
That's because reasonable people don't just look at two numbers and go "That's crazy", there is context and nuance to be understood, so give reading the entire blog post through instead of just skimming tables, and come back and tell us why it's unfair.
- pc86 1y ago
  It's a math problem - you don't need a ton of context to understand it (although I did read the entire article). This is simply the German government being petulant and punishing successful people for moving a company somewhere that understands how to create proper incentive structures for businesses to grow. If you as an individual make €100k a year in salary, saved €20k every year, and the German government wanted to charge you €70k just to move out of Germany it'd be grounds for rebellion.
  - diggan 1y ago
    > petulant and punishing successful people What reason could they possibly have for "punishing successful people"? You seem to still miss almost the entire context, and automatically apply some bad faith arguments because of what, you feel like paying taxes is unfair?
    - pc86 1y ago
      Paying taxes is good, lawful, even patriotic. Also good and lawful is moving a company somewhere where you'll pay less in taxes and can grow faster and hire more people (and is at worst patriotically neutral). An exit tax is a country saying "oh no that's bad, so instead of looking at our tax structure and seeing why you're leaving and trying to address that, we're going to charge you >3 years of profit as a punishment." It's simply saying that if our taxes are too high for you we're going to charge you even more to try to stop you from leaving. You can think it's a good thing if you don't understand economics but it's hard to frame it as anything other than Germany punishing corporations for leaving.

philwelch 1y ago

At some point wouldn’t it just be simpler to set up your company in the first place in some other EU country with less onerous laws?

ExoticPearTree 1y ago
If you know this in advance, sure. But I guess the author of the article found out about this the hard way. On the other hand, no one expects to pay "an exit tax from a country".

triknomeister 1y ago

Or simply open a business in Luxembourg. Done.

fxtentacle 1y ago

Nowadays, you can do all of the tax sign-offs purely online with Elster.