These types of taxes are common and logic is simple, you have capital gains that accrued during the time you were tax resident in Germany. By rights the taxes on those gains are due to the German state. So you need to do a deemed disposition and pay the relevant taxes.
I had to do the same when moving country and it’s right.
>Other costs (total: 2.6k€):
Notary: Changing company address and CEO: 1.5k€
Notary: Changing company suffix from UG to GmbH: 1.1k€
This is absolutely crazy. For comparison, below are the costs in Switzerland (and you can do all the things yourself by writing a letter signed by the authorized persons, so add whatever your time costs):
It's very good you mention Switzerland, as the contemporary German exit tax legislation traces back to the scandal with Helmut Horten, a department-store magnate who moved to Switzerland in 1968, sold his business stake and paid virtually no tax. The event prompted enactment of the Foreign Tax Act (Außensteuergesetz) in 1972, whose exit-tax provision (§ 6 AStG) is nicknamed lex Horten.
Change or add company address
"Änderung des Rechtsdomizils oder einer zusätzlichen Adresse"
30 CHF
Change CEO
"Eintragung, Änderung oder Löschung von Personenangaben oder der Funktion einer Person"
20 CHF
Changing company suffix
"Umwandlung in eine juristische Person"
420 CHF
Deletion (from the registry) due to leaving the country
"Löschung infolge Wegzugs ins Ausland"
210 CHF
Switzerland uses an exit tax I don't quite understand. The companies "hidden reserves" are valued and taxed about at about 17%. Those include the "goodwill" you have generated over the years, which is similar, but not the same, as the market value.
> GmbH & Co. KG holding: The only solution which is generally accepted by the tax office, involves minimum payments to the STANIC and allows you to keep your companies
I’m confused by that article. So, it seems there is a clear option that doesn’t require you to pay a large exit tax or to sell your shares. I don’t understand all the complaining.
Germany’s tax system has a lot of issues and deserves to be criticized, but for that specific situation it seems there is a clear option that is pretty reasonable?
Those only apply if you renounce your citizenship, not if you simply change your country of residence. However, unlike Germany, the US taxes its citizens regardless of their country of residence so renouncing your citizenship and paying that exit tax is the only way to stop being responsible for paying US taxes.
> The German exit tax is very.. expensive. In simplified terms, I'd have to simulate a sale of all my companies at a high valuation (13.75 * earnings), and pay 30% tax on that.
This is an outrageous valuation and taxation scheme.
I think German politicians either don't understand the magnitude of the issue, or they have been coopted by lobbying somehow. It's such a tough environment for innovation.
Because innovation requires taking risks. In the off chance those risks pay off, you are now massively penalized for your success. In that scenario you're much better off just selling the company or never starting one in the first place. This situation strongly favor incumbents by inhibiting competitors from emerging.
It's not that you can't have an exit tax, it's that it shouldn't be so out of tune with other OECD countries, so bureaucratic and so expensive to even process.
Not at all, you’re better off using a holding, which is a perfectly reasonable solution if you want to live in a different country than where your companies are registered, want to keep your shares, and don’t want to pay an exit tax.
That whole article is really whiny, there is no massive penalization
It depends on the industry, but regular companies are usually valued at 3x to 6x EBITDA for private acquisitions. A small one-person company would probably be valued at much less than that. Most countries with an exit tax would calculate both the valuation and the tax rate much more favorably than Germany here.
These types of taxes are common and logic is simple, you have capital gains that accrued during the time you were tax resident in Germany. By rights the taxes on those gains are due to the German state. So you need to do a deemed disposition and pay the relevant taxes.
I had to do the same when moving country and it’s right.
>Other costs (total: 2.6k€): Notary: Changing company address and CEO: 1.5k€ Notary: Changing company suffix from UG to GmbH: 1.1k€
This is absolutely crazy. For comparison, below are the costs in Switzerland (and you can do all the things yourself by writing a letter signed by the authorized persons, so add whatever your time costs):
https://www.fedlex.admin.ch/eli/cc/2020/180/de
The important sentence in the article is:
" I own a few companies which means I'd be hit by the German exit tax. "
We don't know how many companies does he own.
We can look into exit tax rate, in different countries:
Germany: effective tax rate of up to roughly 28.5%
Japan: CGT rate is 20.315%
Israel: Standard CGT rate is 25%
Austria: Standard CGT rate is 27.5%
https://en.wikipedia.org/wiki/Exit_tax
It's very good you mention Switzerland, as the contemporary German exit tax legislation traces back to the scandal with Helmut Horten, a department-store magnate who moved to Switzerland in 1968, sold his business stake and paid virtually no tax. The event prompted enactment of the Foreign Tax Act (Außensteuergesetz) in 1972, whose exit-tax provision (§ 6 AStG) is nicknamed lex Horten.
"I wanted to move to Thailand to live with my girlfriend. I own a few companies" seems like tiny violin territory...
> GmbH & Co. KG holding: The only solution which is generally accepted by the tax office, involves minimum payments to the STANIC and allows you to keep your companies
I’m confused by that article. So, it seems there is a clear option that doesn’t require you to pay a large exit tax or to sell your shares. I don’t understand all the complaining.
Germany’s tax system has a lot of issues and deserves to be criticized, but for that specific situation it seems there is a clear option that is pretty reasonable?
Very reasonable.
US Exit Tax for comparison:
https://www.irs.gov/individuals/international-taxpayers/expa...
https://americansoverseas.org/en/knowledge-centre/exit-tax-u...
Those only apply if you renounce your citizenship, not if you simply change your country of residence. However, unlike Germany, the US taxes its citizens regardless of their country of residence so renouncing your citizenship and paying that exit tax is the only way to stop being responsible for paying US taxes.
Seems like the guy is wondering why they can't avoid taxes more easily. I'm not sympathetic
> The German exit tax is very.. expensive. In simplified terms, I'd have to simulate a sale of all my companies at a high valuation (13.75 * earnings), and pay 30% tax on that.
This is an outrageous valuation and taxation scheme.
I think German politicians either don't understand the magnitude of the issue, or they have been coopted by lobbying somehow. It's such a tough environment for innovation.
How is an exit tax a tough environment for innovation? You can continue to innovate while registered for taxes within the country.
Because innovation requires taking risks. In the off chance those risks pay off, you are now massively penalized for your success. In that scenario you're much better off just selling the company or never starting one in the first place. This situation strongly favor incumbents by inhibiting competitors from emerging.
It's not that you can't have an exit tax, it's that it shouldn't be so out of tune with other OECD countries, so bureaucratic and so expensive to even process.
Not at all, you’re better off using a holding, which is a perfectly reasonable solution if you want to live in a different country than where your companies are registered, want to keep your shares, and don’t want to pay an exit tax.
That whole article is really whiny, there is no massive penalization
What do you think is a reasonable price/earnings ratio?
It depends on the industry, but regular companies are usually valued at 3x to 6x EBITDA for private acquisitions. A small one-person company would probably be valued at much less than that. Most countries with an exit tax would calculate both the valuation and the tax rate much more favorably than Germany here.