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COMMENT PAGE FOR:
URI Exit Tax: Leave Germany before your business gets big
cobbzilla wrote 1 hour 5 min ago:
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 camelâs
back?
tomschwiha wrote 1 hour 9 min ago:
I think the numbers in the article are mixed up.
Earnings 200k. Wage 120k. So the profit is 80k for the calculation.
80Ã13,75=1.100k. 60% of it = 660k.
Personal tax at 120k income = 45%. More likely less as for health
insurance, etc.
660kÃ45% = 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.
BillyTheKing wrote 34 min ago:
This means the person has to move to a country with 0% income tax for
this to make any economic sense, so that's either Monaco or the UAE
then. Very difficult for me to understand why someone is supposed to
pay this tax in the first place, the business paid a whole bunch of
other taxes in its lifetime.
I would understand if they'd tax the sale of the business.
tomschwiha wrote 58 min ago:
It also depends on how the company is valued:
If based on balance sheet (retained profits + share capital) e.g.
5Ã100k 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.
exe34 wrote 1 hour 35 min ago:
Or you could pay your fair share to contribute back to the country that
supported you initially by providing education, labour, infrastructure,
etc.
The moment we talk about piracy it's all about how poor billionaires
will have to sleep in their cars if you make a digital copy of
something you would not have otherwise bought, but when it comes to
supporting the society that created you and your wealth, suddenly it's
all about finding ways to weasel out of paying.
nlitened wrote 27 min ago:
> fair share
Pretty sure âfairâ means both sides agree that itâs fair. You
canât just say âI think itâs fair that I take a half of what
you madeâ.
You could say that people know what the conditions are before
starting the business, so they implicitly agree that itâs fair if
they start.
But this article exactly explains what to expect because people
donât know it beforehand, and thus they now can make better
informed decisions.
the_wolo wrote 1 hour 50 min ago:
⦠or you just pay the frickin tax for once instead of leeching on
society without giving back
sliq wrote 2 hours 13 min ago:
Sidefact: Bigger corps work around this by building holding structures
etc, which is a legal soft-tax-evasion way to do this. But all the
smaller businesses get hit hard, so as usual the party is paid by the
lower end of the income bracket.
KaiserPro wrote 2 hours 55 min ago:
This is one of those cases where you really need to hire a specialist,
rather than listen to the internet.
Sure, you can't port your company out of germany, but there is nothing
stopping you re-structuring so that you have an umbrella company based
in the country of choice.
ralferoo wrote 2 hours 18 min ago:
Agree about a specialist, but probably moving an existing company
into an umbrella structure is likely to be considered similarly to a
sale for tax purposes.
In the UK, you have to specifically request HMRC to authorise any
such plans if you want to avoid paying tax on it, and even then I
believe it's only (relatively) simple if you're doing a straight
share swap - so the existing company becomes fully owned by a newly
created group company and the existing shareholders get the same
allocation of shares in the new company. Anything else needs HMRC to
assess the values of both companies and decide whether a taxable
event has occurred, and what the nominal value to be taxed is. I'm
pretty sure if you were trying to move an existing company into an
offshore parent company, it'd be treated as a sale.
garyclarke27 wrote 3 hours 31 min ago:
One 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.
oezi wrote 3 hours 8 min ago:
This is why this doesn't apply if you move within the EU.
Yoplaid wrote 2 hours 58 min ago:
It does apply
oezi wrote 1 hour 26 min ago:
Depends on what you mean by apply. The taxation is deferred
without interest until you leave the EU.
ivankra wrote 3 hours 18 min ago:
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.
FirmwareBurner wrote 44 min ago:
When you start to run out of other people's money.
ExpertAdvisor01 wrote 3 hours 34 min ago:
Exit taxation on corporate level is in every EU country , because of
the atad directives .
mytailorisrich wrote 4 hours 5 min ago:
The EU is great, we have free movement, we can move anywhere we want
without restrictions... wait a minute?
This sort of law is stretching things to the point of utter bad faith.
octo888 wrote 2 hours 35 min ago:
It's always had restrictions. For example beyond 3 months, you have
to demonstrate being economically active or a student or self
sufficient etc.
Then there are restrictions due to public health, personal conduct,
public security
mytailorisrich wrote 2 hours 17 min ago:
Here we go, the usual blurb. In practice you need to really cause
trouble for anything to happen to you but, anyway, this is quite
irrelevant to the point here.
nolverostae wrote 4 hours 13 min ago:
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: [1] (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.
URI [1]: https://www.juhn.com/fachwissen/internationales-steuerrecht/re...
pembrook wrote 16 min 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:
URI [1]: https://i.redd.it/fxks3skmvt4e1.png
jacquesm wrote 3 hours 3 min 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.
throw9349494 wrote 3 hours 28 min 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!!!
ivankra wrote 1 hour 53 min ago:
> 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?
csomar wrote 10 min ago:
You could technically do that but then youâd 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 thatâ¦
nolverostae wrote 1 hour 55 min 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.
jillesvangurp wrote 3 hours 31 min 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.
mschuster91 wrote 2 hours 5 min ago:
> 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.).
That's where you hire a professional accountant. Which you should
be doing anyway at the point where you raise any sort of external
funding that's not family members.
I don't get why people are always complaining about German taxes.
As long as you're small, you can just wing it. And when you pass
the threshold, professionals are cheap.
jillesvangurp wrote 37 min ago:
I'm not complaining about the taxes but the bureaucracy. And the
taxes definitely require an accountant here because of the
complexity of the tax law and all the intentional loopholes in
there for people that can afford an accountant. Accountant
lobbies are fierce in this country and they like being necessary.
So a lot of sane things that other countries are doing to keep
things simple haven't really happened here. I never lived in the
US but from what I know of it, it's actually one of the countries
that is worse on this front. So, if you move here from there, it
might be an upgrade.
Anyway, I call the German attitude to this topic Stockholm
syndrome. The thing is, I've lived in four countries in the EU so
I know how things can be different, more efficient, etc. When I
say Germany is a PITA, that is relative to the Netherlands,
Sweden, and Finland and based on my experience with those
countries. Which isn't even that recent. Those countries were
miles ahead of how things are in Germany today decades ago. And I
wouldn't exactly refer to Finland and Sweden as tax havens.
Taxes are quite high here. Fun fact: when I moved to Germany from
Finland, it was an internal transfer for Nokia. My salary was
compensated up because of the higher tax and insurance cost in
Germany. From Finland! Of course, the cost of living is quite a
bit lower here. So this was a nice thing for me. But it's not a
cheap country.
jacquesm wrote 3 hours 0 min 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!
graemep wrote 1 hour 58 min ago:
I would say not with tax law anywhere. It is very complex and has
all sorts of interactions between things - e.g. double tax
treaties.
That said, a lot more people would probably use complex
constructs if they were not so expensive to set up because of the
advice needed. I just do not think LLMs help.
jillesvangurp wrote 2 hours 29 min ago:
I'm not saying use it blindly. But it helps going into
discussions with experts, advisers, etc. with some preparation
and knowledge. Worst case you are wrong and they'll correct you
and best case you pre-empt some actual problems. And it's not
like advisers, accountants, etc. don't make mistakes, overlook
stuff, or sometimes work against your interests. It helps being a
bit hands on. And LLMs make that a lot easier.
Also LLMs are great for picking apart complex bureaucratic
procedures, figuring out what next needs to be done, what the
meaning is of some 10 page pile of crap the tax office dumped in
your mail box, etc. Especially if you are not a native German
speaker. You can ask your critical questions, get it to explain
stuff you don't understand, etc. In the end, you are responsible
for your actions. Limited liability in Germany isn't that
limited. So, spending some time on figuring out whether you are
doing it right is hard work. LLMs help.
But yeah, don't vibe run your private finances and sources of
income.
throw9349494 wrote 2 hours 39 min ago:
Crazy theory: most posts here are from German Tax office. They
give a "free" advice, and send a fat tax penalty 5 years latter!
Suprise: you never left!
jacquesm wrote 1 hour 59 min ago:
If the German tax office is actually using HN for such schemes
I'd have to give them more credit for using technology
effectively than I currently do. It would be funny if they did
though.
ExpertAdvisor01 wrote 3 hours 32 min ago:
It is not so easy as you describe.
nolverostae wrote 1 hour 51 min ago:
You definitely need advice from professionals, yes. All included,
I'd expect it to cost 5kâ¬-30kâ¬, but not more.
BillyTheKing wrote 32 min 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 wrote 20 min ago:
Trusts dont exist in Germany .
Did you mean a foundation e.g family foundation ?
bluecalm wrote 4 hours 15 min ago:
EU countries really like turning the screw on small business owners.
They come up with all those requirements, taxes and limitations and
then when they notice the world is getting ahead their idea to fix it
is to raise taxes even more and create "business incubators" where
government officials redistribute part of it to their buddies.
tempfile wrote 4 hours 39 min ago:
> But no, itâs not fine, because the same person was working for a
salary of â¬0 just a few years ago and likely has nowhere close to
â¬700k of random savings stashed away for paying some taxes.
By your own admission, this person earned almost a million euros in the
past 3 years.
derriz wrote 4 hours 42 min ago:
Itâs not as crazy as it initially seems.
Itâs because of a fundamental difference between how capital gains
tax and income tax are collected.
Capital gains are deferred - so as years pass youâre 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.
Iâm from a country which has no exit tax on capital gains and
notoriously a certain wealthy telecoms magnet - having been resident
all his life - moved to Portugal just before realizing billions of
capital gain. Thus despite earning multiple billions through
businesses activities in his native country, he effectively paid zero
tax.
I myself have benefited from this lack of capital gain exit tax as I
moved to a country with very low capital gains tax. So despite the
fact that my modest equity portfolio earned most of its growth while I
was living in Ireland, when I sell, the Irish government will get
nothing.
The problem, it seems to me is the method of valuation for the deemed
disposal and/or the fact that it can cause a âliquidity squeezeâ
for the tax payer.
I donât see a simple solution - maybe other than getting rid of
capital gains taxes completely and collecting more consumption taxes,
for example, but Iâm sure this would just open up a range of other
tax evading loopholes.
cess11 wrote 3 hours 51 min ago:
Where I live we have the option to put capital holdings in flat-rate
taxed accounts, based on the size of the investment. I thought this
was common elsewhere too.
tebbers wrote 3 hours 54 min ago:
What did the Irish government do to entitle itself to a chunk of the
appreciation of your equity portfolio of presumably non-Irish
companies? What did they do to contribute to that equity growth?
derriz wrote 3 hours 43 min ago:
I donât understand the question.
Governments collect tax in lots of different ways: income taxes,
sales/consumption taxes, import taxes, capital gain taxes, property
taxes, inheritance taxes, etc,
Whatâs so special about capital gains taxes that requires the
government to have had some sort of active involvement to be
justified?
spwa4 wrote 2 hours 14 min ago:
Capital gains are theoretical. You do not have that as money, but
the state does want it as money. They are not what someone paid
for your assets, they are what someone THINKS someone else might
pay. Most smaller companies cannot be sold easily, and of course,
the government is unwilling to take that as the valuation being
zero (because what someone is willing to pay right now is in fact
zero). And the government is unwilling to take any risk (they
take cash only). So they're taxing money you do not have
available to spend, and may not have at all.
Think of it as taking a $10k diamond with you. It's worth
something, but ... maybe next year artificial diamonds double the
size of your diamond start costing $500, and your diamond's value
goes to $550. The difficulty is that the government demands
"10%", which is $1000 in taxes on the "value" of your diamond
now.
So for a big range of company sizes it's effectively a tax on
nonexistent assets. This would not be the case for a huge (let's
say revenue of 500k or more) company.
But the government chooses not to tax those big companies.
Wobbles42 wrote 1 hour 14 min ago:
Perhaps the simple solution is to give those small business
owners the option of selling their business to the government
at whatever price the government feels it is worth.
Any claim of valuation is really only meaningful as a purchase
offer.
_petronius wrote 3 hours 47 min ago:
If you lived in Ireland in that period, you benefitted from Irish
government services, schools, police, fire services, etc. You
participated in the community (hopefully), used roads, bought
things in shops, so and on so forth.
Regardless, the idea that the government can only tax you if it
directly gave you sufficient benefit, _in your assessment_, is of
course nonsense. Taxes are what you owe to the society you live in,
not about what society owes to you.
If you are lucky enough to be internationally mobile, this does not
exempt you from contributing to the communities you spend time in
as you travel around the world. You cannot expect to arrive in a
country, earn money from it, and depart again without paying your
fair share of taxes.
If you do not like how a country has structured its tax law and
what priorities it has as a society, you are of course always free
to not move there in the first place.
robocat wrote 2 hours 36 min ago:
> benefitted from Irish government services, schools, police,
fire services, etc. You participated in the community
(hopefully), used roads
That is a terrible basis for argument: we mostly each get similar
usage of services (roads, police, yadda yadda) which should be an
argument for a fixed amount of tax per person (a poll tax).
If you wish to argue that we get what we pay for: then rich
people pay wayyyyyy more so they should get more government
services???
The wealthy surely don't get better policing: instead the wealthy
pay heaps for their own insurance and security systems.
Be careful making any argument based on services received for
money spent because the well off pay a lot and don't receive a
lot for it.
Wobbles42 wrote 2 hours 1 min ago:
Without society it's pretty hard to be well off in the first
place. The entire concept of property becomes pretty
meaningless without some very basic concepts of a legal system
and territorial integrity. Without that you can only own what
you can physically defend.
Wealthy people and large companies do generally employ
security, but that is merely supplemental. They enjoy the
backdrop of a society where the vast majority of people at
least recognize the basic concept of ownership, and where
protection from external state actors is provided. More to the
point, they live in a system where most people see negative
expected return from just killing them and taking their stuff
Abstractions like insurance further require a system where
agreements can be made and mostly enforced, and where the need
for the insurance is low enough for the premium to be workable.
The small security team at any given company is there to handle
the the exceptions that don't conform to the larger society's
rules. It doesn't replace that protection entirely. You'd
need a standing army for that, and you'd have to work full time
just to maintain its loyalty.
Even with no direct services whatsoever, people benefit from
society in more or less direct proportion to their wealth --
and arguably the benefit accrues exponentially as wealth
increases, given that this enables the exponential growth of
capital.
robocat wrote 1 hour 17 min ago:
> Without society it's pretty hard to be well off in the
first place.
What a pointless argument - you could just as easily chose
cause and effect in the other direction: without businesses
then society has nothing. Zero businesses, zero tax income.
My main point is that society needs to encourage business
owners. If marginal tax is too high, then owners have no
incentivise to earn themselves an extra dollar. When owners
earn less then society gets less.
There's a balance to incentives.
I'm not working currently because my taxation rate is too
high. I'm fine with that since I value my time highly.
However financially my country could be getting more from me
by lowering my taxes enough to encourage me to work. But
voters don't care about what is sensible - they care about
optics - and politicians care about voters more than they
care about the economy.
dandellion wrote 3 hours 48 min ago:
I mean, other than give access the infrastructure, the people and
the rule of law... what did the romans ever do for us?
rusk wrote 4 hours 2 min ago:
> a certain wealthy telecoms magnet
Itâs okay to name him here you know. [redacted] canât get you on
HN
mytailorisrich wrote 4 hours 2 min ago:
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.
Wobbles42 wrote 1 hour 49 min ago:
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
neighborhood back to normal? Does only the first person to
actually pay the tax owe the tax?
That's the reasoning we're applying if we tax unrealized gains on
stocks (or any other asset). We take what the highest bidder is
willing to pay for some tiny percentage of an asset, and assume
that means everyone else could get the same price, yielding these
theoretical valuations that have no bearing on reality.
Property taxes have a similar problem but that is a whole other can
of worms. I'd love to live in a world where the local tax assessor
is obligated to purchase your property on demand for 80% of what
they say it is worth -- surely they would jump at the chance to
realize an instant profit, right?
You simply can't establish value without an actual transaction.
Without a buyer and a seller you are just making up numbers.
carlosjobim wrote 22 min ago:
> That's the reasoning we're applying if we tax unrealized gains
on stocks (or any other asset). We take what the highest bidder
is willing to pay for some tiny percentage of an asset, and
assume that means everyone else could get the same price,
yielding these theoretical valuations that have no bearing on
reality.
We take what the highest bidder is willing to pay, as well as
what the lowest seller is willing to sell for. So it's a
completely fair way of fixing the value. If you think the price
is too high, then why aren't other sellers rushing to sell for
the same? If you think the price is too low, then why aren't
other buyers rushing to buy?
jen20 wrote 33 min ago:
> Should I be taxed on that gain immediately? Should I be forced
to sell part of my property to cover it?
In much of the US, you made a loss, since your property taxes
will go up the next year.
> I'd love to live in a world where the local tax assessor is
obligated to purchase your property on demand for 80% of what
they say it is worth -- surely they would jump at the chance to
realize an instant profit, right?
Absolutely.
carlosjobim wrote 1 hour 34 min ago:
> 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.
seabass-labrax wrote 24 min ago:
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 defaulting on mortgage
payments, anyone could just trick lenders into buying their
house immediately.
mytailorisrich wrote 1 hour 1 min ago:
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.
carlosjobim wrote 42 min ago:
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?
seabass-labrax wrote 17 min ago:
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?
carlosjobim wrote 1 min ago:
> 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.
mytailorisrich wrote 39 min ago:
> 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.
That's incorrect on both counts. You did not make money and
the loan is not a way to realize the profit since you have
to pay it back, as explained before.
I think this illustrates that finance and accounting are
very poorly understood topic and are easily used for
sensationalism.
carlosjobim wrote 25 min ago:
There's nothing sensational about it, and I'm
disappointed that you cannot see this thing for what it
is. Ask people among your relatives who own real estate
and you will realize that a lot of them mortgaged their
real estate to pay for new cars, vacations, investment in
a business, kid's education.
The money is paid back over a long period of time, while
the currency depreciates in value and the real estate
appreciates in value. The amount of people who have made
a fortune through real estate appreciation probably
outnumber by a factor of 10 to 1 the amount of people who
made a fortune by business or a working career.
If I purchase shares in a company and then sit and do
nothing, and the valuation increases by 10 times, then
have I made money or not? I can sell the shares or I can
mortgage the shares by borrowing against their value.
Should that value increase be taxed?
If I purchase real estate and then sit and do nothing,
and the valuation increases by 10 times, then have I made
money or not? I can sell the real estate or I can
mortgage it and borrow against its value. Should that
value increase be taxed?
mytailorisrich wrote 6 min ago:
> I can sell the real estate or I can mortgage it and
borrow against its value
You make money if you sell. You don't if you use the
asset as security for a loan.
This has been explained several times.
A loan is a loan, whether it is a secured loan or not.
A mortgage is a secured loan whose security is real
property.
You are effectively claiming that getting a loan is
making money. Obviously you do not see that this is
clearly not the case when thinking about it through a
mortgage, but would you make the same claim with credit
cards or a personal loan to buy a car, or a secured
loan against, say, your car? My guess is that you
wouldn't although it is the same thing as getting a
mortgage.
Wobbles42 wrote 1 hour 5 min ago:
That is a good point -- though perhaps a better solution there
would be to simply make the use of an asset as collateral into
a taxable event, and treat money borrowed against it in excess
of the original value as capital gains.
I know this is a very common technique that people use to
effectively liquidate assets without incurring taxes, but I
think it can (and should be!) solved without penalizing people
who simply hold an asset.
tdullien wrote 4 hours 7 min ago:
The obvious solution is for the state to accept illiquid securities
as payment for tax.
Wobbles42 wrote 1 hour 3 min ago:
This would be hilarious. I would support that change for
entertainment value alone.
bluecalm wrote 4 hours 11 min ago:
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 think that someone moving to Portugal to avoid it is unfair but
then a share holder living in 0 cap gain jurisdiction in the first
place would pay 0 anyway.
pydry wrote 2 hours 55 min ago:
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.
bluecalm wrote 2 hours 25 min ago:
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 to connect the dots and introduce a general
solution.
cdeez wrote 4 hours 18 min ago:
Australia has a "good" system for this (or fair system) - when you
leave the country you either choose to pay CGT based on the value at
that date, or Australia has a claim on the assets when you eventually
sell.
Source -> [1] If you cease to be an Australian resident while
overseas, we deem some of your assets â generally those not taxable
Australian property â to have been disposed of for CGT purposes.
This may mean you become liable to pay CGT.
You can choose not to have this deemed disposal apply. But if you do
eventually dispose of the assets, we consider the whole period of
ownership â including any period when you're not an Australian
resident â when we calculate a capital gain or loss for CGT
purposes.
URI [1]: https://www.ato.gov.au/individuals-and-families/coming-to-au...
csomar wrote 6 min ago:
How will you reconcile with your new jurisdiction though? What if
you move to 4-5 countries during that timeâ¦
digianarchist wrote 4 hours 15 min ago:
Canada does this too. Donât most countries?
graemep wrote 1 hour 54 min ago:
I do not think so. It varies a lot. The last time I looked at UK
law you were liable for CGT for a long time after you left the
country just to stop people leaving for a short time to evade
CGT, but it was not the case a few decades ago.
With all countries you need to check the provisions of double tax
treaties. There is likely to be somewhere that has no or low CGT
that has a double tax treaty with where-ever you are that lets
you dodge this sort of provision (at least partly).
Then there are things like using trusts (another thing you could
get away with in the UK that got cracked down on in recent
decades).
zarzavat wrote 39 min ago:
I believe in the UK it works like this: if you leave the
country you are not liable for CGT even if you realise gains,
unless you return within 5 years then you have to pay tax on
any gains you realised while you were away. With some caveats.
dismalaf wrote 4 hours 24 min ago:
Well if you force collection on gains every year, what happens if the
value of the asset goes down? Will the government pay you back?
Opens up a huge can of worms...
blitzar wrote 25 min ago:
You get a credit against future gains. Same as when you sell an
asset at a loss, the tax man doesnt pay you tax - your losses are
available to offset future losses.
saubeidl wrote 4 hours 46 min ago:
Or... just don't leave the country? You only pay an exit tax if you,
y'know, exit.
procaryote wrote 4 hours 9 min ago:
URI [1]: https://en.wikipedia.org/wiki/Serfdom
saubeidl wrote 4 hours 7 min ago:
URI [1]: https://en.wikipedia.org/wiki/Rule_of_law
oulipo wrote 5 hours 14 min ago:
Or, you know, just pay your normal taxes like every citizen?
The social contract works because we say that everybody should pay his
or her taxes in accordance with their means, so if everybody who gets
money suddenly flees, it doesn't work.
That's why you should just appreciate what you have: good
infrastructure, good education, democracy, AND PAY YOUR TAX
Otherwise you become a shithole country like the USA
logicchains wrote 4 hours 53 min ago:
>Otherwise you become a shithole country like the USA
Better than a country that hasn't seen any growth in living standards
(GDP per capita) in over a decade, like most of Western Europe.
trinix912 wrote 2 hours 16 min ago:
> any growth in living standards (GDP per capita)
Higher GDP per capita does not automatically equal higher living
standards.
chaosprint wrote 5 hours 18 min ago:
Norway also has crazy exit tax and wealth tax. I heard lots of
complaints that this system makes it almost impossible to build a
decent vc-driven tech startup.
kharann wrote 3 hours 17 min ago:
Kinda makes it harder to attract foreign talent to Norwegian startups
as it could affect their decision moving to Norway. While I think the
number of people affected is exaggerated, the most well-known case
would be the Dune Analytics founder who had to pay more in tax than
his salary and was forced to either take a loan to pay taxes (no
guarantee the company would succeed) or move out of the country.
throw9349494 wrote 2 hours 5 min ago:
This, and barnevernet has reputation similar to gestapo in East
Europe.
eqvinox wrote 1 hour 17 min ago:
You might've mixed up your analogy there, Gestapo was a German
3rd Reich thing⦠NKVD would be the Soviet one.
tmtvl wrote 7 min ago:
Or the Stasi (Staatssicherheit) for the DDR.
jeofken wrote 4 hours 22 min ago:
Norway has a high wealth tax (itâs 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 donât have
it liquid, itâs yet just a valuation of a VC, so you are screwed.
This means any Norwegian trying to start eg a fast growing software
biz must relocate to Sweden if they want to be close to home, or
Switzerland more realistically, as swedens top income tax bracket is
>50%.
Scandinavia is attractive as a destination if you are poor and
especially from the 3rd world and could benefit from free government
services and welfare, but for anyone entrepreneurial or already
wealthy, there are many better alternatives.
trinix912 wrote 3 hours 3 min ago:
> This means any Norwegian trying to start eg a fast growing
software biz must relocate to Sweden if they want to be close to
home, or Switzerland more realistically, as swedens top income tax
bracket is >50%.
There's nothing stopping them from doing that in Norway, they just
have to pay their dues. Which are nowhere near the rate of those in
a real communist system that people are so quick to label it as.
I find it very selfish to think that we should optimize everything
to squeeze out the remaining 1.1% of the wealth, given that
Scandinavia wouldn't have such a high living standard had it not
been for the welfare system.
Wobbles42 wrote 1 hour 27 min ago:
What is stopping it is the fact that the "wealth" they are being
taxed on doesn't actually exist, so by starting a company and
getting investment you create tax liability that is impossible to
pay.
Early stage companies have a high valuation on paper as an
artifact of selling small amounts of equity for relatively large
sums of money. This leaves you with purely theoretical wealth in
the form of equity which you have not yet sold, and potentially
can't sell.
As a concrete example, let's say your tax rate is 15%. If you
start a business, and give an investor a 10% stake in that
business in exchange for $1M, your remaining 90% stake in the
company is now worth $9M. Congratulations, you're wealthy! Now
you need to "pay your dues" of 15% of that $9M... good luck with
that. You are now bankrupt and deeply in dept to the government.
robocat wrote 1 hour 42 min ago:
> I find it very selfish to think that we should optimize
everything to squeeze out the remaining 1.1% of the wealth, given
that Scandinavia wouldn't have such a high living standard had it
not been for the welfare system.
1.1% is deceiving. 1.1% is actually over 20% tax on savings
(assuming a common drawdown of wealth at 4% per year). Plus
savings are usually money that has already been taxed. If you can
invest at a higher return then the numbers improve but the risk
increases (and governments don't share the risk or otherwise
ameliorate it) and the taxes remain if you win.
1.1% sounds small. Any analytical person analysing the rewards
versus the risks of founding a company will decide that it isn't
worth it. Even if you win, you lose.
Here in New Zealand no founder can plan for a decade timeframe
because there's a high chance a new government will screw you if
you make any winnings. Currently our taxation system encourages
entrepreneurship a little (no CGT).
A taxation system needs to be designed to incentivise individuals
to create businesses. The government wins through income taxes
and sales taxes - it doesn't need to kill the golden goose by
overtaxation.
Most people have a selection bias: they see the winners and think
those "greedy bastards" should pay more. Few people weigh up the
invisible costs of the people that tried and failed. Very few
people consider the benefits accrued to society from businesses
(consumer surplus, tax income through other taxes, etcetera).
saubeidl wrote 3 hours 55 min ago:
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.
vixen99 wrote 3 min ago:
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.
enricozb wrote 5 hours 1 min ago:
However it also prevents hoarding wealth, which in turn prevents
special interest groups and some forms of election manipulation.
Balancing taxes for fairness and innovation is quite tricky...
procaryote wrote 4 hours 26 min ago:
An exit tax in itself does nothing to prevent hoarding of wealth.
It might enable you to deploy other taxes that would make rational
people leave the country, but it's a bit of a "lock the doors and
rob people" strategy.
If you have good advisors as a wealthy person you know this and
leave as soon as an exit tax is on the table. If you start new
businesses you start them outside of the country
If you're a regular non-wealthy person who happens to become
successful you're stuck paying high taxes of course, but you'll
probably learn and structure your next venture better.
swexbe wrote 3 hours 56 min ago:
Most businesses are not as portable as a tech startup.
logicchains wrote 4 hours 50 min ago:
>However it also prevents hoarding wealth
Hoarding wealth isn't a problem if no wealth creation happens in
the first place.
weinzierl wrote 5 hours 25 min ago:
"not. As soon as your net worth goes beyond ~â¬2m, you can afford
fancy tax advisors which set up a trust in Liechtenstein for you."
Is it really that complicated to go that route? This is an honest
question, I have little knowledge about these things, but from the
outset: How hard could it be to set up a trust, especially in
Liechtenstein, where presumably there are already thousands of them and
this kind of business is basically an economic sector of its own.
ExpertAdvisor01 wrote 3 hours 30 min ago:
There are no trusts in Liechtenstein.
They don't have the concept of trusts as they are civil law
countries.
What they have are foundations e.g family foundations etc..
traceroute66 wrote 4 hours 51 min ago:
> How hard could it be to set up a trust
I have little knowledge of these things either, I've only heard
second hand because aspects of historical tech $work used to put me
in close proximity to professionals who deal with these things.
Eventually you get a noob level understanding once you've been in the
same room long enough.
TL;DR A trust is not a "simple" legal form like a company is.
You have to consider the three-way "internal" relationship (settlor
<-> trustee <-> beneficiaries). Which can be legally structured as
you wish (blank sheet when writing the trust deeds). And then for
"external" relationships (trust <-> third party), the in-country law
will apply and so you need to know how that fits in.
Then you need to know what type of trust you want. Do you want a
Fixed Interest Trust ? A Discretionary Trust ? A Charitable Trust ?
A Special Purpose Trust ? Something else ?
Then you have things like professional relationships. Your trust
will, for example, almost certainly need an in-country bank account.
Your professional advisor will almost certainly know some bankers.
So sometimes its easier just to hire an advisor, work through the
prep, then fly in for the day for a nice lunch with your advisor to
sign a few papers.
cc62cf4a4f20 wrote 5 hours 34 min ago:
I'm unsure how strange this is. As a Canadian, when I left the country
I had to undergo what's termed a deemed disposition - i.e., pretend you
sold all your assets and then pay the relevant taxes on the net gains
you've enjoyed to that point. This includes proposing a value for any
companies that are not publicly traded. See:
URI [1]: https://www.canada.ca/en/revenue-agency/services/tax/internati...
somedude895 wrote 2 hours 56 min ago:
So if all your money is tied up in your company you have to sell part
of your business in order to be allowed to leave the country and by
the way thanks for creating all those jobs? Sounds slightly CCP to
me.
csomar wrote 4 min ago:
China doesnât have an exit tax.
LadyCailin wrote 2 hours 17 min ago:
I know of at least 4 countries that have exit taxes, and while the
US doesnât have an exit tax if you simply move abroad (it does if
you renounce citizenship) it has other very punitive taxes for
expats. So, it isnât a unique thing to Germany or, assuming
youâre correct, China.
knorker wrote 16 min ago:
It should be added that the US taxes you worldwide even after you
leave, so I would file the US as even worse in this regard.
In that they tax you when you stop being tax "resident", just
like the others.
piker wrote 35 min ago:
It's not that it has punitive taxes for expats, it's just that as
a US citizen, the US doesn't care where you live -- you're
subject to US tax. It has rules for everyone that prohibit
deferring income taxes which implicate non-US tax-opaque
entities, but that's not so much of a capital gains concern as a
timing issue.
It's much simpler in many ways, although it creates its own
issues with juggling tax treaties and realization timing.
Forcing you to pay a tax on unrealized gains is anathema to the
US system, and would definitely burden founders to the extent
they'd be well advised not to form in that jurisdiction in the
first place.
xenospn wrote 5 hours 35 min ago:
Doesnât every country have an exit tax, tho? Some are worse, some are
better, but this is always the case.
jeofken wrote 4 hours 4 min ago:
The EU forces every member state to implement an exit tax to trap
entrepreneurs in a disadvantageous situation (Anti-Tax Avoidance
Directive).
Some countries such as Sweden implements this only minimally - making
capital gains of Swedish companies you hold realised within 10 years
of moving abroad are taxed, so just donât sell in 10 years but take
out credit with those assets as collateral.
Of course outside the EU, such as Switzerland and the UK, these
governments are not bound by EU rules and donât impose exit taxes.
Which is why so many European millionaires are doing their best to
live in these countries
ExpertAdvisor01 wrote 3 hours 22 min ago:
Eu ATAD only do exit tax on corp level.
Germany does it on personal level
saubeidl wrote 3 hours 48 min ago:
The reframing of anti tax avoidance to be a "trap", a
"disadvantageous situation" is egregious.
Like maybe just pay your dues? Contribute back to the society that
enabled you to become rich in the first place instead of
parasitically extracting value?
mytailorisrich wrote 3 hours 4 min ago:
Tax avoidance is legal. Everyone has the right to minimise their
taxes lawfully, arguably this is only paying your dues but not
more...
bluecalm wrote 3 hours 26 min ago:
If duties are unreasonably bothersome then it's a trap.
saubeidl wrote 3 hours 21 min ago:
Who are you to decide what is reasonable and what is
unreasonable over the democratically elected lawmakers? This is
a deeply anti-democratic attitude.
bluecalm wrote 2 hours 43 min ago:
Democracy in most EU countries is messed up. People don't get
to vote on stuff. There are usually 2-3 major parties that
campaign on this or other hot issue. There is nothing that
can be done about most issues even if vast majority of
citizens support them.
Parliamentary indirect democracy is an illusion. It's just a
capture by the political class. Will of the people has very
little to do with what is done. I would love to live in
actual democracy where we get to vote on stuff and popular
policies are implemented while unpopular get struck down.
It's even worse than American system where at least you can
vote for your representative who has some independence. Here
they are just a party official and if they don't vote along
the party lines the party will run someone else next time
around. Their loyalty is not to the electorate.
FirmwareBurner wrote 38 min ago:
Thank you. Couldn't have said it better myself.
procaryote wrote 4 hours 41 min ago:
Lots of countries have some level of exit tax on unrealised capital
gains, but the devil is in the details. A painful part in the German
case is that they have a fixed company valuation method that might
make it untenable to leave the country.
It's one thing to tax people on assets they actually have or that are
easily realisable like ETFs, as they then pay a portion of money they
have ready access to. It's quite a different thing to invent a value
for something and tax on that. The company ownership in question
might not be realisable at anything close to that amount, especially
for a startup, if you don't leave before making a profit
So don't do startups in Germany. The exit tax is just one of many
reasons for that, the whole German system is bureocratic and
inflexible compared to nearby countries.
laurencerowe wrote 5 hours 22 min ago:
The UK doesnât.
profstasiak wrote 5 hours 36 min ago:
Isn't USA even worse? If you move as US citizen to EU, you would need
to pay bot h local EU tax and USA tax right? (I am not a USA citizen,
this is legit question)
jwr wrote 4 hours 19 min ago:
The US does not have an exit tax for businesses, but has an
absolutely horrible tax system in which expats are treated badly.
The reporting requirements for expats are insane: all
bank/brokerage/whatever accounts with max levels during the year,
FATCA and FBAR forms, and the cherry on top: Form 8858 ("Foreign
Disregarded Entities", whatever that is) which is needed for your
self-employment and for each of your rental properties. If you think
this is easy, look it up â [1] It's pretty much impossible to file
your taxes yourself, you will never get it right. You have to pay
specialized accountants, some of which will charge you >$1500 to
prepare a yearly return with self-employment and rental.
Then come the actual taxes to pay, which are the least of all
problems.
Expats are treated this way because they have no lobbying power.
URI [1]: https://www.irs.gov/forms-pubs/about-form-8858
CalRobert wrote 2 hours 26 min ago:
Not to mention pfic rules making simple index investing impossible.
ivankra wrote 2 hours 52 min ago:
US totally does: [1] - long-term (8y+) green card holders may need
to pay up.
One big difference is that the clock only start ticking after you
get green card, whereas with Germany any residence year counts. Oh,
and citizens of course aren't affected - since US continues to tax
them wherever, but Germany like almost all other countries
practices residence-based taxation.
URI [1]: https://www.irs.gov/individuals/international-taxpayers/ex...
graemep wrote 1 hour 51 min ago:
It is very close to being all other countries. AFAIK the only
other country that taxes non resident citizens is Eritrea - and
the US has said its unfair they do it!
hiAndrewQuinn wrote 3 hours 39 min ago:
I can confirm this from experience. The instant your situation
becomes more complicated than "I work one full time job and have no
investments to my name whatsoever" you are in for a brutal time
without an accountant by your side.
On the other hand, if you do have an accountant by your side, you
potentially expose yourself to some of the most powerful labor
arbitrage on the planet as a tech worker. Making $100k remotely
from the US might sound like a bad deal until you live in a country
where the average wage is $20,000. Like all things US tax wise, you
are disproportionately rewarded for being clever and reading a lot.
hiAndrewQuinn wrote 5 hours 12 min ago:
US-EU transplant here. No, the United States does not have anything
even vaguely similar like this. Seriously putting forward the idea of
an exit tax on anyone who owns more than 1% of any LLC worldwide
would in all likelihood be deeply politically unpopular. It goes
against the very name and spirit of a limited liability company, for
one. For two (real ballpark number here) about 1 in 10 Americans
would actively be subject to a German style exit tax like this,
concentrated among working adults.
You're probably instead thinking of income tax, which the US does
levy worldwide contrary to virtually every other nation on Earth and
is, I can tell you from personal experience, not fun. There is a a
much narrower exit tax for US citizens who wish to actually give up
their citizenship outright (not just move out) but that generally
only comes into play for anyone with $2 million or more in net worth,
and exists probably to discourage tax evasion, to my understanding.
There is truly nothing remotely like the "you have to pay us if you
own 1% of any LLC anywhere and move out" approach Germany has.
ralferoo wrote 2 hours 33 min ago:
> For two (real ballpark number here) about 1 in 10 Americans would
actively be subject to a German style exit tax like this,
concentrated among working adults.
I'm sure that a sizeable percentage of Americans own a significant
amount of shares via 401k or whatever, but it feels surprising if 1
in 10 own more than 1% of a company, because all of those people
holding shares as investments will be buying shares in companies
with thousands or millions of other investors.
But maybe it's true - I just googled about the US has 340m people
and 32.5m companies - so the majority of them must be small
(population/number of companies). And while a lot of companies will
be owned by the same people or just administrative divisions of a
group of companies, most companies have multiple directors so maybe
on average it does balance out to 1 in 10 owning a decent chunk of
a company. It just feels like a surprising fact.
This site [1] has some interesting stats on size of businesses,
although it's interesting that in 2019 these figures say there were
less than 8m businesses, which disagrees with what google told me.
Also says over half of US companies have 0-4 employees.
URI [1]: https://paradoxesinc.com/resources/us-business-patterns/
hiAndrewQuinn wrote 1 hour 59 min ago:
It's a surprising number, but a useful one for calibration. Most
people assume that the number is closer to 1 in 100 or even 1 in
1000, but that's because they forget the vast, vast numbers of
people who just quietly run their own operations in some form.
You don't have to be Apple to make enough money to pay the bills
on your own, or even reach the high net worth category.
It's worth noting that the numbers don't vary that much between
the US and the EU, which actually weakens my claim that such a
tax would be politically unpopular if introduced. About 1 in 20
Germans seem themselves to own enough of a business to fall under
their own exit tax, checking just now, but I'm not familiar
enough with DACH business practices to know if setting up an
actual honest-to-goodness LLC for a one man operation is as
common there as it is in the United States.
throw9349494 wrote 2 hours 34 min ago:
State of California has exit tax.
mijoharas wrote 2 hours 38 min ago:
> There is truly nothing remotely like the "you have to pay us if
you own 1% of any LLC anywhere and move out" approach Germany has.
To be clear, this is if you move _your company_ out of Germany
(which I don't think the article makes very clear). In those terms
it seems to make a little more sense. As outlined in this
comment.[0]
The double income taxation of their expats that America, Eritrea,
and Myanmar do is a bit different, but I think they have double
taxation agreements with most countries. So in actuality most
Americans don't have to fully pay the double tax (depending on
where they live, and how much they earn) though they still have to
file and everything.
[0]
URI [1]: https://news.ycombinator.com/item?id=44834878
digianarchist wrote 4 hours 17 min ago:
Exit tax applies to some Green Card holders too.
DrBazza wrote 4 hours 51 min ago:
> You're probably instead thinking of income tax, which the US does
levy worldwide contrary to virtually every other nation on Earth
and is, I can tell you from personal experience, not fun.
That's certainly what I was thinking of, given I have a few US
friends here in the UK. Isn't the way to stop that to simply give
up dual citizenship?
hiAndrewQuinn wrote 3 hours 46 min ago:
From one perspective, yes, you can get around this by simply
giving up dual citizenship.
From the perspective of one's whole life, once that US
citizenship is gone, it's gone. You can't reinstate it like you
can with many other nations. And losing first-class access to the
world's greatest economy is a very heavy price to pay. It only
makes sense if you are absolutely sure you, and by extension your
children and their grandchildren and their grandgrandchildren
(because they only get US citizenship at birth if you yourself
are a US citizen at their birth), will never want to have
anything to do with the US again.
Ultimately I decided against it. The idea that I have a country I
can always move to and conservatively 3-5x my take home pay
compared to even one of the best paying countries in Europe is
one hell of a liberating feeling. Don't discount that kind of
optionality lightly.
fyrn_ wrote 4 hours 42 min ago:
You won't be double taxed, the US taxes the difference between
your local income tax rate and the US federal tax rate. So if you
live in London you're not paying any US tax because the UK income
tax rate is higher. It helps stop rich people from "totally live
in ". If only we had that for companies..
I think where people get confused is that it's implemented as a
tax credit which is equal to the income tax you pay locally.
On top of that the first $130k earned is also exempt, so it only
applies to high earners as well
roshin wrote 1 hour 34 min ago:
Another issue is if another country has some tax free benefits
(like Roth IRA) America taxes the extra.
potatototoo99 wrote 3 hours 56 min ago:
Unless you move to a country without a tax treaty to prevent
double taxation with the US.
hiAndrewQuinn wrote 3 hours 43 min ago:
Not "unless". You have to actively review the tax treaty to
see whether it actually gives you things superior to the US's
own Foreign Earned Income Exemption. Those documents aren't
the hardest things in the world to read, but they're not
light reading either.
dustincoates wrote 5 hours 15 min ago:
Not in most cases. According to this estimate, who comes from an
organization that is against US citizens abroad having to file[0],
77% have AGI "well below" the cutoff where you would have to pay
taxes. For those that are above that threshold, you can deduct the
taxes you pay in your home country agains what you would have been
charged in the US. For almost everyone in the EU, that is a higher
rate than the US taxes, so you don't pay anything on that European
income.
_However_, you do still have to pay taxes on your US income if you're
abroad. So if you are making money from freelancing with US companies
(and, I assume, they aren't paying a European business you have set
up), then you'll pay US taxes there, but due to tax treaties you are
generally not double taxed.
You do, also, have to file every year.
0:
URI [1]: https://www.taxfairnessabroad.org/blog/americans-abroad-by-t...
laurencerowe wrote 5 hours 23 min ago:
Double taxation treaties negate this somewhat, but there are a bunch
of edge cases.
notTooFarGone wrote 5 hours 17 min ago:
You have to file your taxes every year in the US either way.
You can't even renounce your citizenship without paying a lump sum.
laurencerowe wrote 5 hours 0 min ago:
It would be a bureaucratic pain but if I were to move back to
Europe (having become a US citizen) I donât expect I would end
up paying any tax to the US after applying the foreign tax
credit.
But there could be a whole lot of complexity around stuff like
ETFs and mutual funds and whether they were recognized by both
countries.
emsy wrote 5 hours 58 min ago:
Ah yes, the Reichsfluchtsteuer.
URI [1]: https://en.wikipedia.org/wiki/Reich_Flight_Tax
geff82 wrote 6 hours 4 min ago:
The crazy thing is that as a business owner (GmbH/AG) you canât 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.
forty wrote 37 min ago:
You should probably look up what the word "slave" is about, and
you'll probably realize that it refers to a situation very different
from yours.
ExpertAdvisor01 wrote 3 hours 31 min ago:
You couldn't move it anyways , if you manage and control the company
even before 2022.
anonzzzies wrote 5 hours 40 min ago:
Why is that? It has been the case for a very long time for taxation;
the decision gravity has to be in the where the company is. But
curious if this is something else as 2022 is too recent for this.
bmacho wrote 5 hours 44 min ago:
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.
procaryote wrote 4 hours 24 min ago:
The thing you're describing is an underpaid CEO position without
equity. If you're competent enough to get the job in competition
with people who want to get paid, I'm sure you can.
roenxi wrote 4 hours 43 min ago:
They can and frequently such people are; but they aren't very
obvious because they stop while the business is still small. If we
don't harness greed into doing something productive then there
isn't enough motivation in the world to power a modern industrial
society. People like Bezos would just sit around running a local
bakery or something instead.
The way the system works is people who create unfathomable amounts
of wealth get to keep unreasonable amounts of it. If that link is
broken, they'll stop at creating a reasonable amount of wealth and
then everything grinds to a halt. If someone is in a situation
where they are doing a good thing they should have every incentive
to keep going and not stop.
throwmeaway222 wrote 4 hours 56 min ago:
communism, and with this sentiment, no one will want to run a
business. the country will wither and die
kriops wrote 4 hours 59 min ago:
Risk. There is nothing to fight against, but "we" might consider
educating ourselves so that we understand why the calculation that
happens through the price mechanism benefits all, and moreso than
any alternative.
hiAndrewQuinn wrote 5 hours 6 min ago:
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 themselves,
should walk away with the same amount we the person who just gets
hired to dress hair.
No one would ever start a legal business under such a regime. It's
all downside! Which is why you never see people actually owning and
running businesses (successful ones at least, and most unsuccessful
ones too) with the mindset you describe.
rs_rs_rs_rs_rs wrote 5 hours 8 min ago:
>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.
Ironically some of the biggest european companies are related to
luxury items.
lazide wrote 5 hours 23 min ago:
Huh?
Why take all that risk, for no additional reward?
If the business fails, is the govât going to keep paying them
like a hairdresser or whatever?
Shorel wrote 5 hours 12 min ago:
That's not that bad an idea, with some caveats.
An incentive for entrepreneurs?
It can help kickstart a stagnant economy.
agent327 wrote 1 hour 37 min ago:
Yeah, that exists. It's called "not having oppressive tax
rules".
lazide wrote 1 hour 21 min ago:
The State relies on oppressive taxes to fund everything.
lazide wrote 5 hours 5 min ago:
Why not just be a hairdresser? Way less stress.
The economy is stagnant for a reason. At some point, the juice
isnât worth the squeeze.
agent327 wrote 1 hour 38 min ago:
Who would employ you, if nobody was motivated to start the
salon?
lazide wrote 1 hour 22 min ago:
In this scenario, âthe doleâ eh?
malthaus wrote 6 hours 17 min ago:
you could have shortened your advice to: "leave germany"
kanbara wrote 6 hours 13 min ago:
not sure how useful this is. germany is a great place to live, safe,
with great infrastructure and access to europe, good food, lots of
personal freedoms, orderly society, few overtouristicâed cities,
and a thoughtful populace for the most part.
ExpertAdvisor01 wrote 3 hours 25 min ago:
No it's not .
If you are young you are a slave for the elderly.
Personal freedom is also very questionable.
Good Food haha
octo888 wrote 2 hours 41 min ago:
We feel exactly the same in the UK. Except personal freedom isn't
questionable, it's in the gutter
ExpertAdvisor01 wrote 16 min ago:
Social Contributions + taxes are rising and benefits get worse
and worse ...
Pretty sad what happened/happens to Europe
xenospn wrote 5 hours 52 min ago:
Also: absolutely beautiful, with great people.
croes wrote 6 hours 33 min ago:
Exit Tax: Leaving the USA before you become too rich
URI [1]: https://www.greenbacktaxservices.com/knowledge-center/exit-tax...
thomas_witt wrote 2 hours 0 min ago:
From a startup founders perspective, it might be worth mentioning
that if you own the business personally in the US, you likely qualify
for so-called the small business exemption (QSBS) - that means from
the price for which you sell your company the first $10M (yes,
million!) of capital gains are tax free, and after the latest reform
$15M. If you're married: x2.
tonyhart7 wrote 6 hours 3 min ago:
Yeah but most people want to do business in US, its all the money
goes
Shorel wrote 5 hours 11 min ago:
Not worth the hassle anymore.
woodpanel wrote 6 hours 36 min ago:
> People say Germany is a good country for being an employee, and this
is also true for exit tax.
Which proves again that regulatory environment is downstream from
culture: In a country like Germany, with Europeâs lowest share of
entrepreneurs/workforce, there is very little political emphasis on
creating comfortable environments for the out-group.
Most Germans canât relate to these people at all, and every awareness
campaign have to incorporate teaching the target audience (in order to
make them understand the problem in the first place). A meticulous,
tenacious, undertaking one can imagine that immediately gets stomped
once the political gravy train comes around full steam with
anti-capitalist or otherwise hyperbolic rhetoric.
(I havenât looked but would bet that adherents to this rhetoric are
already at it even in the comments here, pointing out how deserved the
exit tax is etc)
johnnyfuego wrote 8 hours 21 min ago:
For a less emotional explanation of exit tax see [1] .
> 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 pathetic for
those that have actually lived behind it.
URI [1]: https://www.grantthornton.de/en/insights/exit-tax-topic-hub
BillyTheKing wrote 28 min ago:
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
rvz wrote 8 hours 57 min ago:
I wasn't joking at all when I previously said in [0], moves like this
is how to lose and now this is another reason why tech founders do not
start companies in Europe and when a company gets too big, especially
in Germany.
Just don't be surprised to see a decline in tax revenue when countries
like Germany chase the wealth creators out of the country with high
taxes + exit taxes.
[0]
URI [1]: https://news.ycombinator.com/item?id=44134832
croes wrote 6 hours 41 min ago:
Wealth creators?
I would attribute that term to the workers who work 1.3 billion hours
overtime, most of them unpaid [1] And then the company owner whine
when they habe to pay their share?
URI [1]: https://dailywrap.net/en-gb/unprecedented-unpaid-overtime-re...
bluecalm wrote 42 min ago:
If it was just about workers then we would have comparable tech
industry to USA. Yet we don't and that's because hostile culture
and regulations.
Abusing workers and but paying overtime is bad and it's a
completely separate issue. It's also not a big issue in tech.
Blackarea wrote 9 hours 3 min ago:
Berlin wall of tax? Seriously? Nobody gets shot trying to cross the
border here and it's clear that the ones who can afford a decent
financial advisory will get around most of the regulations anyways.
I don't see how this business economist whining belongs on hn.
jmyeet wrote 9 hours 7 min ago:
The developed world is increasingly facing a funding crisis brought on
by this propaganda that if we tax corporations and the very wealthy
then they'll leave.
One of the most farcical examples of this is the decades-long race to
the bottom on business taxes and incentives between Kansas City,
Missouri and Kansas City, Kansas. For the non-Americans out there, this
is basically one city but it sits at the border of two states. So the
two states are constantly torching money to lure businesses that play
this system and simply go back and forth.
I believe this situation will come to an end and there are several
reasons for this:
1. For the EU in particular, reliance on US tech giants is increasingly
becoming a security issue. The Eu will increasingly wants homegrown
alternatives so the option of leaving will simply not exist because you
could leave but then you lose the EU as a customer;
2. For a long time multinational companies used transfer pricing to
avoid paying taxes. What's transfer pricing? Let's say you buy a sofa
in China for @200, ship it to the US for another $200 and then sell it
for $1000. You've made a gross profit of $600. What if instead you have
a subsidiary in Vanuatu, which has no corporate income tax (AFAIK), and
it buys the sofas for $400 and sell them to the US company for $950?
Well, you've booked $550 in profit where there's no tax and only $50
profit where there is.
That's technically illegal. It's often-called transfer pricing
manipulation.
So what do tech giants like Google do? They sell their IP to an Irish
subsidiary. There's a nominal process to make sure this is done for a
"fair" value (according to the IRS). Then they pay royalties to their
own Irish subsidiary to shift profits to a lower tax regime.
Previously, this created a problem because they couldn't repatriate the
money without paying (then) 30%+ corporate taxes but this all changed
in 2017 with a tax holiday and a change to how this kind of income was
treated. The net result was way lower than 30% net tax however, even
with Biden's 15% minimum tax (which was a good thing) that came later.
What's the difference between this kind of profit-shifting with IP and
transfer pricing manipulation? Absolutely nothing, except one is
illegal and one isn't.
3. Revenue will increasigly have to be taxed in the source country. For
example, Google I believe books all UK ad contracts through Ireland
such that the UK subsidiary has essentially zero income to tax. I
believe governments will increasingly crack down on this such that if
something is sold in the UK, it's taxed by the UK; and
4. While individuals may be able to notionally "leave", assets
generally can't. Land can't be moved overseas. Natural resources that
are mined or fished or logged can't be moved overseas. So it's really
an empty threat.
I'm really sick of this "the businesses will leave" propaganda.
GardenLetter27 wrote 3 hours 3 min ago:
Why are taxes so high though? Like in Sweden I'd pay literally 80%
tax on extra sole trader income - 30% employer tax, 30% income tax,
20% high income tax.
But there is no Swedish moon base, or ultra high speed rail, etc. -
where does it all go? We have higher taxes but less infrastructure
investment than a century ago.
jmyeet wrote 1 hour 23 min ago:
Because we don't tax the people with all the money. It's why
someone making $100,000 a year loses probably half of it or more to
federal, state and local income taxes, property taxes, sales taxes,
etc and Warren Buffett pays 3%.
There is a persistent idea that we cannot or should not tax wealth
because it's "unfair". We certainly can. We do it all the time.
Property taxes, depending on your jurisdiction, are either taxed
based on assessed value or whatever the assessment method is
correlates strongly to property value.
I can't speak to the specifics of Sweden and its tax base but in
general a key problem in the developed world is the skyrocketing
cost of housing. Why is this a problem? Because it's an input into
the cost of everything. It makes your labor more expensive, which
in turns makes what they do more expensive. I have heard getting an
apartment in Sweden is rather difficult. Stories of having to
register at birth and waiting 20+ years. I could be wrong.
But everywhere in the developed world has high housing costs (in
terms of real income) because we constrain supply, subsidize demand
(particularly to the very rich) and allow people to hoard housing.
ahoka wrote 1 hour 42 min ago:
Well, Sweden has the largest wealth inequality in Europe, so I
guess it goes to the friends' pockets.
ExpertAdvisor01 wrote 3 hours 24 min ago:
It is not 2005 anymore .
Stop spreading bs .
There are many mechanisms against profit shifting and transfer
pricing .
BEPS 1.0 and 2.0 and many more.
procaryote wrote 4 hours 13 min ago:
If "businesses will leave" was propaganda, you wouldn't need an exit
tax, would you?
If there is an exit tax because companies would leave otherwise, why
would someone rational start a new company in the country rather than
leave first?
jmyeet wrote 1 hour 10 min ago:
Governments have extraordinary powers to bring individuals and
corporations to heel if necessary. Governments can:
- Charge exit taxes on people who "leave". As someone else pointed
out, the US already does this with citizens who renounce
citizenship (and it applies to long term permanent residents too);
- A lot of assets simply can't leave. Physical assets, land, etc;
- Assets and corporations can be nationalized;
- You can use tariffs and other legislative methods to punish those
companies that "leave";
- You can also just deny access to a market for pretty much any
reason you want. For example, Huawei is heavily restricted in use
in American telecoms infrastructure for "national security"
reasons; and
- You can generally impose cvarious levels of capital controls to
limit the inflows and outflows of capital in pretty much any way
you want. China does this heavily.
China is often criticized because the companies are an extension of
the state. That's true. They are. But what we have instead is
governments that are extensions of corporations. Can we really say
that's working out better?
The US economy is rapidly becoming Russia. Russia has autocratic
rule with oligarchs who pay fealty to Putin. In return they can do
whatever they want. Do you really think we're different at this
point?
Compare that to China. China isn't afraid to "disappear" their
billionaires for awhile to bring them into line aka Jack Ma [1].
Exactly where he went and why and what happened is still unclear.
China continues to crack down on tax evasion by so called "yin and
yang" contracts (eg [2]). And China executed two for a scandal
involing tainted baby formula [3].
What do we get? A world where governments can't punish companies
for offshoring because that violates "free trade". Companies can
take governments to a WTO court. And have.
[1] [2]
URI [1]: https://www.bbc.com/news/technology-56448688
URI [2]: https://www.globaltimes.cn/page/202403/1309137.shtml
URI [3]: https://www.theguardian.com/world/2009/nov/24/china-execut...
tomcam wrote 5 hours 28 min ago:
Clear explanation, thanks. Seems that many companies have moved from
California to Texas or Tennessee. Am I wrong?
jmyeet wrote 1 hour 34 min ago:
You're not wrong. The reasons why come down to really one or more
of these factors:
1. To lower labor costs. For example, the Big 3 auto makers are
unionized. Tesla's manufacturing isn't. Guess who earns more? [1];
2. Deregulation. Some things (eg polluting) are way easier to get
away with in Texas than, say, California;
3. To shift the tax burden from the owners to the workers. Texas
famously has no state income tax. It does have sky high property
taxes though. Property taxes are a super regressive tax;
4. For the politics of the owners; and
5. Other miscellaneous reasons. For example, Texas is about the
absolute worst place to get divorced for a spouse who is a parent
and isn't the primary income earner. Why? Texas courts won't let
you move out of state with the children [2] and child support will
be severely capped [3], even if, say, the other parent is a
billionaire.
[1] [2]
URI [1]: https://www.businessinsider.com/tesla-pay-vs-ford-gm-uaw-u...
URI [2]: https://www.thetxattorneys.com/child-custody/relocation
URI [3]: https://ondafamilylaw.com/what-is-the-maximum-child-suppor...
refurb wrote 6 hours 43 min ago:
> I'm really sick of this "the businesses will leave" propaganda.
I don't think anything you've said convinces me it's propaganda.
Businesses are profit-seeking ventures. They will optimize their
operations to maximize profits.
So I'm not sure why you'd call it "propaganda" to say that companies
will leave. I think the evidence is that they will.
Of course, taxes are not the only variable in a profit-maximizing
formula. US companies aren't going to flee in mass if Somalia
decides to have zero corporate taxes. But you can't ignore that
companies will optimize their operations and structure if they can
lower taxes.
croes wrote 6 hours 31 min ago:
The US have something similar just for citizens and greencard
holders [1] So should greencard holders flee the US before they
become too rich
URI [1]: https://www.greenbacktaxservices.com/knowledge-center/exit...
lotsofpulp wrote 9 hours 0 min ago:
>3. Revenue will increasigly have to be taxed in the source country.
For example, Google I believe books all UK ad contracts through
Ireland such that the UK subsidiary has essentially zero income to
tax. I believe governments will increasingly crack down on this such
that if something is sold in the UK, it's taxed by the UK;
Wasnât this only a thing while the UK was in the EU, because the EU
expressly allowed it?
cojo wrote 9 hours 16 min ago:
Oli (Oliver? Not sure which you prefer, which I realize now I should
have asked a long time ago in our first call) -
Just wanted to reiterate that I really appreciate what you have done
with both OpenRegulatory and Formwork, as it was a big unlock for one
of the companies I helped a few years ago as we navigated our way into
the QMS / FDA / med. reg. world.
While reading this as a many-times-over-founder myself, I deeply felt
multiple emotions which this would bring upon me if I were in your
shoes after all the work I know youâve put in.
I hope you are able to navigate this to a happy / successful outcome
for yourself and any others involved for the relevant compan(y/ies)!
I am grateful for what you have contributed over the years on the
software and documentation fronts with OpenRegulatory and Formwork
both.
WalterBright wrote 10 hours 40 min ago:
When businesses are fleeing, you're doing something very wrong.
oulipo wrote 5 hours 13 min ago:
The business owners are doing something very wrong. They are failing
to recognize that their business is successful in large part because
of the infrastructure in their country, the educated people they can
hire, the healthcare, etc
So when you get money out of this, you pay your fair share of taxes,
like everyone.
kmlx wrote 4 hours 46 min ago:
> their business is successful in large part because of the
infrastructure in their country, the educated people they can hire,
the healthcare
Germany has Europeâs lowest share of entrepreneurs to workforce.
So i guess the infrastructure, education and healthcare are not
really factors.
> So when you get money out of this, you pay your fair share of
taxes, like everyone.
this is already happening. people are paying their taxes. but
Germany wants more than itâs fair.
cherry on top: Germany has been in recession for⦠3 years now?
tcfhgj wrote 3 hours 3 min ago:
> cherry on top: Germany has been in recession for⦠3 years
now?
no?
u_sama wrote 20 min ago:
Idk what world you live in, but Germany has clearly been in
recession, unemplyment rose over the last few years and the
rest of the Eurozone is in a similar condition
logicchains wrote 4 hours 59 min ago:
>They are failing to recognize that their business is successful in
large part because of the infrastructure in their country, the
educated people they can hire, the healthcare, etc
Empirically that seems to be false, given the number of successful
businesses created in Europe in the past couple decades is way way
less than in the US or China, even though Europe has better
infrastructure, education and public healthcare.
Strix97 wrote 4 hours 45 min ago:
> Empirically that seems to be false
Could you tell me on what data you are basing this argument on? I
see this sentiment pop up in every related conversation but
haven't seen the source of these claims. Could you help me out?
logicchains wrote 2 hours 31 min ago:
Here's some articles on Europe falling behind the US and China
in business creation: [1] , [2] , [3] , [4] .
URI [1]: https://www.economist.com/briefing/2021/06/05/once-a-c...
URI [2]: https://www.weforum.org/stories/2019/03/europe-is-no-l...
URI [3]: https://www.wsj.com/tech/europe-big-tech-ai-1f3f862c
URI [4]: https://skaleegenkapital.com/2025/03/11/a-decade-of-st...
weinzierl wrote 5 hours 17 min ago:
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.
cpursley wrote 3 hours 0 min ago:
Donât 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 âvery good
priceâ on LNGâ¦
trallnag wrote 42 min ago:
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?
MaKey wrote 4 hours 32 min ago:
Why do you consider leaving? Where would you rather live?
weinzierl wrote 54 min ago:
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.
littlestymaar wrote 6 hours 49 min ago:
Yes, it means you have opened the capital, goods and service market
way too much and businesses are now abusing that to avoid their basis
civil duties.
WalterBright wrote 6 hours 28 min ago:
The best civic thing a business can do is provide a valuable
service and thereby make money. Just look at all the wonderful
things we have as a result - airplanes, internet phones, air
conditioning, cars, agriculture, movies, AI - the list is endless.
probably_wrong wrote 5 hours 52 min ago:
The Internet evolved from Arpanet, a network established by
DARPA. Given that was created by a government agency, and
therefore funded by the same taxes companies are trying to avoid,
I'd argue that it's a great example for why companies should
indeed follow their civic duties and pay their taxes.
It's also worth pointing out that many of those "wonderful
things" had to be regulated by governments due to how bad their
business practices and environmental effects are when pursuing
making money. Sure, we have cars, but that's coming from the same
industry that brought us leaded fuel and global warming.
gopher_space wrote 5 hours 25 min ago:
Iâm pretty sure he was being sarcastic. Nobodyâs that
jejune.
littlestymaar wrote 5 hours 23 min ago:
I'm afraid he's not (that was pretty much Milton Friedman's
position as well as all of his UChicago fellow, which is the
reason why we're back to the gilded age with robber barons
all around)
libraryatnight wrote 7 hours 27 min ago:
Or they're doing it right and someone else is doing it wrong, often
the wrong thing appeals to business as the wrong thing is quicker and
higher profits. Not saying that's the case with Germany, but it sure
doesn't feel like you're default doing something 'wrong' if you're
scaring people who already seem to hate paying their taxes.
v5v3 wrote 8 hours 20 min ago:
Not necessarily.
As USA is the main destination for IPO, wouldn't many German
companies naturally leave?
Also once you are successful you can afford to pay the costs to
arrange the companies affairs in a tax efficient manner e.g. utilise
low tax regions with the EU such as Luxembourg and wider world.
ExpertAdvisor01 wrote 3 hours 27 min ago:
Keyword: BEPS.
Won't work as easily as you describe it.
WalterBright wrote 7 hours 48 min ago:
> As USA is the main destination for IPO
Why do you think that might be? Perhaps the Germans could make
their IPOs more business friendly, so they have no reason to flee.
pyrale wrote 5 hours 28 min ago:
> Why do you think that might be?
This kind of rethorical question is annoying. If you have an
opinion, state it.
> Perhaps the Germans could make their IPOs more business
friendly
The main reason companies tend to get listed in the US (or, in
the case of many large existing companies, to get listed there on
top of their existing listing in their home country) is that the
US stock market is the largest in the world, and listing there
means easier access to more would-be buyers, and therefore better
market capitalization.
I suspect your advice to German policymakers wasn't "somehow make
Frankfurt the largest trading place in the world", but that's
litterally what it would take.
v5v3 wrote 6 hours 54 min ago:
Germany is a smaller country with 70 million people or so. USA
has multiples of that at 300million people or so.
Many companies will float in New York but also have secondary
listings in their home country.
If they created a single EU wide stock market it would compete
much better.
WalterBright wrote 6 hours 26 min ago:
Germany has been an enormous economic powerhouse in the past.
It can be so again.
tonyhart7 wrote 6 hours 0 min ago:
why you acting like its not true now??? it still economic
powerhouse (at least best on continent)
FirmwareBurner wrote 42 min ago:
All major German companies have been bleeding money and
announcing layoffs like crazy in last years.
elephant81 wrote 10 hours 56 min ago:
I dont see how you couldn't structure this with an offshore licensing
deal. Ie Irish company picks up 99% of billing, German company sends
Irish company license fees etc and reduce profit of German company to
zero for three years.
cm2187 wrote 9 hours 25 min ago:
IANAL, but it seems it also applies to foreign companies. Who owns
the irish company? Also tax authorities tend to look very carefully
at these transfer pricing arrangements as you are also potentially
dodging the corporate tax rate.
merek wrote 11 hours 4 min ago:
There's a note at the end
> You could, of course, sell or wind down your company, which would
solve all problems outlined here. But this is not an option for most
entrepreneurs.
For a software business, you could presumably:
- Incorporate a company in your country of choice
- Transfer subscribers from German company to new foreign company
(depending on payments provider, this can be a massive effort, for
example, not a simple form field in Stripe).
- If new company incorporated in a country you want to live in, use it
to obtain an investor Visa
- German company now has 0 in revenue, wind it down and leave.
csomar wrote 8 hours 6 min ago:
This is fraud and you'll end up in jail. Your company is not "you".
You are a shareholder but as a CEO, you should do what's best for the
"company" and what you described is criminal activity to bankrupt the
company.
bluecalm wrote 3 hours 31 min ago:
I guess if you have a limited liability company but in some
countries at least you don't have such duty when running a one
person or a small partnership shop.
merek wrote 5 hours 48 min ago:
It's not bankruptcy if the company has no liabilities. You're
allowed to wind down a profitable company because you can't be
bothered running it any more.
A question of legality might come from German authorities
determining if this is solely to avoid tax, which is open-ended. It
might be hard for them to make this argument if you can prove you
transferred operations to country X to maximize company's growth,
access local talent, closer proximity to customers etc.
Regardless, anther commenter pointed out that the exit tax applies
to all companies that you own regardless of location. In that case,
the approach isn't feasible.
Also it goes without saying, seek your own legal advice rather than
trusting random comments on the internet.
csomar wrote 5 hours 27 min ago:
> You're allowed to wind down a profitable company
I can't speak for all jurisdiction but on one that I worked in,
this is not legal. This might be more defensible if the company
really is just you but not if it has employees and can operate
with a different CEO than you.
kmlx wrote 4 hours 58 min ago:
> > You're allowed to wind down a profitable company
> I can't speak for all jurisdiction but on one that I worked
in, this is not legal.
which jurisdiction doesnât allow you to shut down your own
company?
f33d5173 wrote 8 hours 31 min ago:
It applies to any company you own, regardless of where the company is
incorporated
FooBarWidget wrote 9 hours 48 min ago:
> German company now has 0 in revenue, wind it down and leave.
You forgot about employees. If German employment law is anything like
the Dutch one, then it means you can't wind down the company while
you have employees. They may refuse to leave. Firing them may be
subject to government approval, who may also refuse.
em-bee wrote 9 hours 28 min ago:
a quick check says it isn't. you only have to consider the notice
period which depends on how long people have been working there.
which means you can't wind down in a hurry but there is no right to
refuse to leave nor any refusal from government.
tastyfreeze wrote 9 hours 39 min ago:
Dumb American here but that sounds like a few steps too far in
employee protections. A business can't even die without government
approval?
wizzwizz4 wrote 1 hour 53 min ago:
It's sensible, to prevent⦠well, exactly this kind of
situation: taking away people's livelihoods as part of a tax
dodge is an abuse of power. The power of being an employer comes
with responsibility.
If the company's dissolving for legitimate reasons (e.g. there's
no longer a market for the services), then that's one thing â
but "I've had the company send all its customers to a competitor,
also owned by me" is an extremely obvious loophole to work around
employee protections, and it's correct that it should be closed.
1718627440 wrote 5 hours 24 min ago:
It's because the government essentially takes over the employees,
buy paying non-employment money. You deciding that some people
don't work for you anymore creates costs for those people and
also for the community.
da_chicken wrote 9 hours 16 min ago:
It's not dumb. You're not allowed to close a business in the US
until you check a lot of boxes, too. You have to show you don't
have outstanding debts and so on. The banks won't let you do that
because it's an easy way to escape debt. That's exactly why
bankruptcy is an extended legal process.
If an employee is guaranteed X months salary upon notice of
layoff in the contract, that's debt you have to resolve before
you legally close. If you have a 5 year lease agreement for the
property, that's also debt you have to resolve. It's exactly the
same idea.
refurb wrote 6 hours 47 min ago:
You're confusing "winding a business down" with "bankruptcy" in
the US.
As long as you follow the law, there is no government
"approval" of a dissolution. You notify shareholders and
creditors, then resolve any outstanding payments, then
dissolve.
devoutsalsa wrote 10 hours 16 min ago:
Better do it properly. Western countries have tax departments that
can make your life a living hell if you do it wrong. If you have
enough resources to be subject to an exit tax, I highly recommend
paying for proper tax advice.
fersarr wrote 15 hours 14 min ago:
Does this apply to non-resident owners/founders (big shareholders that
don't live in Germany) of German companies when they sell their shares?
neves wrote 15 hours 30 min ago:
Germany waives its taxes to encourage small businesses, and when they
grow, they go elsewhere.
It seems that capitalists should never be encouraged. They lack any
sense of morality.
ExpertAdvisor01 wrote 3 hours 23 min ago:
What?
Germany doesn't waive any taxes for small businesses
tcfhgj wrote 2 hours 54 min ago:
yes, they do
URI [1]: https://finanzamt-bw.fv-bwl.de/,Lde/Startseite/Service/Was...
ExpertAdvisor01 wrote 25 min ago:
This is only an exemption from VAT.
This means you also loose the ability to claim back VAT.
If you engage in b2b it is a net loss
johannesberlin wrote 6 hours 49 min ago:
As someone running a business in germany, they do everything but
encourage small businesses. It is extremely painful to run a business
in this country, it has archaic systems and the only reason Iâm
successful is because of surrounding european countries like
Netherlands who handle 90% of my products with efficiency.
I do not rely on most suppliers here as they are far behind in their
systems (relying on phone calls, hidden prices and slow response
times).
The other half of my business is successful is because of America, I
use suppliers there to ship directly to my customers for
environmental reasons.
Trust me when I say, I run a business despite being here and
thereâs nothing that they do to âencourage usâ. Iâm just
stubborn.
dismalaf wrote 16 hours 44 min ago:
Canada also has an exit tax. For individuals as well as businesses.
refurb wrote 6 hours 39 min ago:
It's an exit taxes, but as far as I'm aware, it simply taxes you on
all assets as if you disposed of them the day you leave.
That doesn't seem particularly unfair. If you can image a scenario
where someone buy Apple at $1, and it's now worth $1,000. They just
leave Canada, pay no tax, then sell in a low tax jurisdiction.
However, it can be a massive pain in the ass for illiquid assets or
assets you don't intend to sell at that point in time. A good
example might be a pension. Getting hit with a tens of thousand
dollar tax bill for a pension you won't receive for another 2 decades
is painful.
tomcam wrote 5 hours 25 min ago:
> it simply taxes you on all assets as if you disposed of them the
day you leave.
Same thing in the U.S. but I think the first $800 or so is exempt.
jorams wrote 5 hours 54 min ago:
> as far as I'm aware, it simply taxes you on all assets as if you
disposed of them the day you leave.
That is also what Germany does. The 13.75 multiplier is the
fallback number used if there is no valuation for the company. It's
such an irrelevant number that tax advisers writing about the topic
don't even bring it up. Get a valuation.
Joel_Mckay wrote 8 hours 20 min ago:
They do tax on residency rather than citizenship. If you are a
structured embezzler in another country, than expect the CRA auditors
after 184 days in Canada.
Also, Canadian laws don't stop at the border as a citizen... so
breaking laws in other places still puts you in legal peril for
extradition.
Notably, corporate tax rates are often much lower in Canada, and
export free trade is available with most trading partners. Note the
US taxes on citizenship regardless of where you live (or if you hold
multiple citizenship), and failure to file your IRS statement was an
$8k fine last I heard. The fine often stays even if you owe the IRS
$0, and temporarily live in another region.
The TLDR version: talk with corporate tax accountants in each region
before filing, and do not assume the late tax filing fines will
magically not apply to your situation. AMCHAM will usually help guide
investors on their filing obligations for type C corporations in the
US. =3
dismalaf wrote 8 hours 13 min ago:
Departure tax for individuals: [1] Departure tax for corporations:
URI [1]: https://www.canada.ca/en/revenue-agency/services/tax/inter...
URI [2]: https://www.canada.ca/en/revenue-agency/services/tax/inter...
Joel_Mckay wrote 8 hours 4 min ago:
That is nuts, I always assumed that would fall under the capital
gains taxes in the investors T5 filing at the end of the year.
(could be dramatically lower rate if you get stuck with cash at
the end of the year)
Now I know why the brand trademarks are usually held by an
independent entity, and licensed to a domestic number company.
I guess that is why we pay the corporate accountants. lol =3
lostmsu wrote 15 hours 36 min ago:
At least Canada steps us cost basis upon becoming resident AFAIU.
42lux wrote 17 hours 12 min ago:
[flagged]
tomhow wrote 48 min ago:
We detached this comment from [1] 44829333 and marked it off topic.
URI [1]: https://news.ycombinator.com/item?id=
_zoltan_ wrote 10 hours 17 min ago:
I don't know why you need to mix that in here. It's irrelevant.
slater wrote 10 hours 14 min ago:
Looking at their older posts, many of which are greyed out, best
strat is "FAMO" - flag and move on.
kleiba wrote 17 hours 15 min ago:
I find this website to be a much clearer resource on the issue:
URI [1]: https://www.winheller.com/en/tax-law-tax-advisory/internationa...
olieidel wrote 16 hours 59 min ago:
True! The purpose of my post was more to zoom in on the very specific
case of people with small businesses, and not explain exit tax in
general.
I wrote up another post with more generic notes on the exit tax [1]
which might be a better post to compare to your link.
The minor benefit of my post is that I don't have an incentive to
sell you expensive tax advice, chuckle..
URI [1]: https://eidel.io/notes-and-hacks-on-germanys-exit-tax/
psychoslave wrote 17 hours 21 min ago:
[flagged]
tomhow wrote 10 hours 15 min ago:
This comment breaches the guidelines and is not conducive to the kind
of discussion we're trying to cultivate on HN. It's an important and
difficult topic, and thus care needs to be taken to avoid getting
activated, then commenting in ways that activate charged reactions in
those who see things differently, as this is what takes threads into
flamewar hell.
Please take a moment to read the guidelines and make an effort to
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Edit out swipes.
Comments should get more thoughtful and substantive, not less, as a
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Eschew flamebait. Avoid generic tangents. Omit internet tropes.
Please don't use Hacker News for political or ideological battle. It
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URI [1]: https://news.ycombinator.com/newsguidelines.html
typewithrhythm wrote 10 hours 29 min ago:
The idea that a company is "siphoning out" value is fundamentally
flawed. The company is creating value, and society enables it.
This enablement is ongoing, and should be paid for with ongoing tax.
If the actual value creator decides that they can get a better deal
somewhere else, then barriers to exit come in because the government
is trying to get more out of a company than it provided. (Since if
there are superior places to operate, the worth of what the state you
are leaving provides must be overvalued, otherwise you wouldn't
leave).
bravesoul2 wrote 10 hours 34 min ago:
In the article it shows that very rich owners can evade the tax
(probably they've already planned and left!), while middle class
people the tax wipes out their business and probably send them
bankrupt. It's more like handcuffs than socialism.
I am sure they could achieve the same goals of fair tax but learn
some game theory before doing so.
grassen wrote 10 hours 55 min ago:
[flagged]
tomhow wrote 10 hours 19 min ago:
This comment is in breach of several guidelines. I understand these
are important topics and it's fine to raise these points, but HN
can only be a good place for discussing difficult topics like these
if people make the effort to avoid inflammatory rhetoric.
Please take a moment to read the guidelines and make an effort to
observe them in future, particularly these ones:
Be kind. Don't be snarky. Converse curiously; don't cross-examine.
Edit out swipes.
Comments should get more thoughtful and substantive, not less, as a
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When disagreeing, please reply to the argument instead of calling
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+ 1 is 2, not 3."
Please don't fulminate. Please don't sneer, including at the rest
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Please respond to the strongest plausible interpretation of what
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Eschew flamebait. Avoid generic tangents. Omit internet tropes.
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Please don't use Hacker News for political or ideological battle.
It tramples curiosity.
URI [1]: https://news.ycombinator.com/newsguidelines.html
toofy wrote 14 hours 49 min ago:
yep, thereâs a reason these people start their businesses in stable
economied countries, yet certain groups of them do everything to
pretend they owe nothing back.
iâd love to see a comprehensive study on how much corporate tax
avoidance costs a country vs food stamps so we can get an accurate
view on who leeches/gains more. my suspicion is corporate wage
theft/tax avoidance/evasion/subsidies are significantly higher,
particularly if we add in executives and major stock holders.
dash2 wrote 14 hours 55 min ago:
Man soll den Flüchtlingen aus Deutschland keine Träne nachweinen,
eh?
dzhiurgis wrote 15 hours 8 min ago:
> State that let you build
Excuse me, why I need state permission for building business?
tticvs wrote 15 hours 25 min ago:
You'd have a point if Germany did anything to actually support
businesses scaling instead of trying to kneecap them at every turn
msukkarieh wrote 15 hours 28 min ago:
I think most people would be okay with an exit tax if it's
reasonable. Requiring the owner of a business generating â¬20k in
profit to then pay â¬70k in taxes is not reasonable.
Canada also has an unreasonable exit tax. Canadian founders are taxed
on 50% of the FMV of their shares on departure. So if you own half of
a company that is worth $50m, your taxable income for the year of
departure is increased by $12.5m.
olieidel wrote 15 hours 12 min ago:
Agreed. As mentioned in another comment, I think it'd be fair to
levy the exit tax when you actually sell your company in the
future. Like, if I ever sell my business, I'd be happy to pay my
fair share of German taxes on said business, even if I'd no longer
be a tax resident of Germany.
The current implementation which essentially simulates a "virtual"
sale of your business once you leave the country is pretty
terrible, as most normal humans don't have that sort of cash on
hand because, well, they actually didn't sell their business at
that point in time.
Interesting pointer on Canada - thanks!
wagwang wrote 15 hours 30 min ago:
Yes globalism is bad :) outside of certain forms of trade. Next up,
remittances.
bigstrat2003 wrote 15 hours 50 min ago:
Presumably you paid for that infrastructure in the form of taxes
while you did business in the country. Why, then, should the state
have additional claims on the money you made? Were the taxes they
collected already not enough?
elpocko wrote 15 hours 25 min ago:
In Germany only 40+% of your income goes to taxes and social
security. Plus another meager ~20% on most things you buy. Plus a
small tax on many things that are supposedly bad for you, like ~70%
on cigarettes. Death is taxed at a discount, only 15-40% depending
on how rich you were.
"Free" healthcare though. It's a bargain!
WalterBright wrote 10 hours 49 min ago:
"Free" healthcare always turns out to be the most expensive
healthcare.
stouset wrote 10 hours 27 min ago:
This take is wildly out of sync with the reality that the U.S.,
as one of the few developed nations without free healthcare,
pays more for their healthcare than all of them while having
worse than average outcomes.
The worst healthcare is in reality American healthcare. We pay
through the nose for the privilege of getting terrible results.
_zoltan_ wrote 10 hours 18 min ago:
Switzerland has almost the same system as the US, and it
works - when my wife needed an MRI, she got referred at
around 11am by a specialist, for a call around 1pm to see if
she's available that afternoon. She wasn't so they agreed on
the next day.
Is it expensive? Yes. Does it work? Absolutely.
WalterBright wrote 7 hours 52 min ago:
I received a CAT scan a couple years ago, about 4 hours
after I wandered into urgent care. Before they stuffed me
through the toroid, I asked the operator to set the dials
to 1988 so I could advise my former self to buy MSFT with
everything I had.
The bill was quite a whopper, though Obamacare paid most of
it. Of course, my Obamacare premiums are about 4x what they
were before Obamacare.
vjvjvjvjghv wrote 10 hours 29 min ago:
I call BS on this statement. And German healthcare isnât even
free.
WalterBright wrote 7 hours 50 min ago:
Of course. And historically, US health care costs rose at
about the rate of inflation until the late 1960s, where the
curve tilted strongly upwards at a much higher rate, and
continues today.
What happened in the late 1960s? The advent of "free"
healthcare!
vjvjvjvjghv wrote 6 hours 0 min ago:
Which free health care caused US healthcare to get so
expensive?
nbadg wrote 15 hours 36 min ago:
That's not what the exit tax is, though. The German exit tax is
effectively just a way to give the existing capital gains tax a way
to tax unrealized gains when you leave the country, to prevent you
from dodging taxes on capital gains by simply leaving the country.
In other words, it's not an additional claim. It's simply an
enforcement mechanism for the money you already hypothetically owe.
pfannkuchen wrote 10 hours 1 min ago:
Donât you have to pay capital gains on sale to USA government
even if you leave? I thought it was based on where the shares
were assigned.
olieidel wrote 15 hours 15 min ago:
Yes, that's true, but the implementation is.. not very elegant.
In theory, the exit tax should ensure that Germany gets the taxes
of the sale of your company. So, if you ever sold your company
once you're no longer in Germany, Germany wouldn't get those
taxes, so it charges you immediately once you leave Germany in a
sort-of "virtual" sale.
This, of course, sucks tremendously because you actually haven't
sold your company, and "normal" people don't have this sort of
cash on hand.
Other countries have "smarter" exit tax implementations and only
charge you when you actually sell your company in the future. I
think that's pretty fair. It also doesn't hinder people from
leaving the country.
nbadg wrote 1 hour 8 min ago:
As an immigrant to Germany, I've often made the observation
that Germany frequently has a really severe implementation
problem. So I'm generally very sympathetic to that idea.
That being said, I'm not entirely sure that's the case here,
and this is often also brought up in the context of
strengthening the inheritance tax in Germany. In both the
inheritance tax and the exit tax, the inherent applicability
conditions are such that the end result is that there simply
aren't that many people in a situation where it actually has a
measurable impact. For the exit tax, you'd need to find people
who 1. want to leave Germany, 2. already started a company
here, 3. that company grew large enough that the Wegzugssteuer
would really be a burden, and 4. that don't have enough
liquidity, or cannot raise enough liquidity by selling some of
their ownership, to cover the tax. That ends up being a really
small number of people, which always eases questions about the
reasonability (Angemessenheit) of the law. And in the context
of inheritance tax, there's the added point that there's a
floor to its application.
As another commenter mentioned, even for those situations where
the exit tax actually is burdensome, just as with inheritance
tax, there are two really simple solutions: first, create a
floor for the minimum valuation by which the exit tax is
actually assessed, and second, allow you to "sell" shares to
the German government as a means of paying the tax, turning the
Finanzamt into a silent shareholder in the company. I think
both of these would be substantial improvements to both the
German exit tax and inheritance tax.
mitthrowaway2 wrote 10 hours 31 min ago:
Another reasonable implementation would be for the government
to accept payment in the form of shares of your company.
Personally I think this is how all taxation of illiquid assets
should be done, but I suppose it could get complicated.
hasnd wrote 15 hours 56 min ago:
You talk as if society and the infrastructure society paid for
somehow belonged to the state.
olieidel wrote 17 hours 3 min ago:
While rather sarcastic, your comment does hit an interesting point:
How much does the infrastructure and society of any given state
contribute to the "building" of a company?
I'd argue that, for software companies, not very much; at least if
you contrast it with a hardware company. If you're, say, forging
steel, you're using roads, trains, a lot of electricity, you've got
an industrial plant, worker unions, public accident insurance, etc.,
etc. - a significant chunk of state-associated infrastructure is a
part of your business, and was a part of your business when you built
it.
But for software companies? I mean, you need a stable internet
connection, good mobile phone coverage (tricky in Germany sometimes),
rule of law, efficient bureaucracy (e.g. when hiring people), good
banks which don't lose your money, electricity, etc. - none of these
"infrastructure factors" feel as big as the ones for a hardware
business.
On the contrary, for a software business, one could argue that
Germany is actively hostile to you: Founding a company takes weeks /
months and is expensive (notary), most processes are still
paper-based, hiring people (especially internationally) is a huge
pain, mobile internet is spotty, residential internet has outages.
Charging customer credit cards via Stripe exposes you to a rabbit
hole of VAT bureaucracy - all companies I've met so far rolled their
own, broken software stack to somehow match up their Stripe + VAT
charges with their internal bookkeeping software (e.g. Datev). A huge
mess. It doesn't end there.
But I may be wrong.
jacob_a_dev wrote 14 hours 22 min ago:
1. Attract software companies
While minimal infrastructure investments would need to be made to
entice software companies, their is a political price to pay by
allowing young business people into your country who likely will
out-earn the average resident (many historical examples of this).
This makes the majority of people unhappy, but brings in
educated-non-criminal customers and tax dollars. Lets say Germany
does (1) great, they attract 1000 smart europeans to found
companies, and 10 years later 1 of those companies becomes a
megacorp.
2. Keep software companies happy
10 years has passed, new politicians are in charge. Pursuing #1 is
a separate strategy to #2. I would hope i live in a country that
wants to (1) attract young talent and (2) keep talent happy, but of
course thats not necessarily true. The new politicians in charge
need to appease the majority of people again as its election
season!
I think Germany / USA can't really have an honest conversation
about this as Germany + USA already have highly progressive tax
systems. A significant % of USA and Germany residents don't pay any
reasonable amount of tax, and are drains on the tax system. I
assume these %s are likely projected to grow in the future rather
than decline.
If the price of bread happens to rise? Then our politicians and
voters will support squeezing more tax out of productive sects of
society for the short term gains. Then those productive and mobile
members of society will slowly move elsewhere.
cherryteastain wrote 14 hours 30 min ago:
> I'd argue that, for software companies, not very much
If you build any successful business, including a software
business, in a lawless and corrupt country you will have local
mafias try to extort you for money the moment they hear about it.
In especially corrupt countries, corrupt cops/prosecutors etc will
be in on it so there will be nothing to protect you. Blackouts will
be common due to a poor power grid. Likewise, internet access will
be unreliable, slow and expensive due to poor infrastructure.
A country like Germany is absolute godsend compared to, say,
Nigeria or Cambodia.
abtinf wrote 10 hours 59 min ago:
> If you build any successful business ⦠you will have local
mafias try to extort you for money the moment they hear about it.
Precisely how is this different from mixed economies, like the US
or Germany?
neves wrote 15 hours 29 min ago:
It looks like education is cheap.
mensetmanusman wrote 16 hours 15 min ago:
You need peace, law enforcement, trust in others to lower stress
and increase creativity, good teachers and education.
Someone growing up in a society is strongly an outcome of that
society.
caseysoftware wrote 15 hours 31 min ago:
> You need peace, law enforcement, trust in others to lower
stress and increase creativity, good teachers and education.
This is a great point.
The flip side is that if a government fails to deliver those,
they have failed their side of the social contract. Then ideally,
the citizens they've failed should be able to opt out..
olieidel wrote 15 hours 52 min ago:
What about a software company founded in Germany by someone who
grew up in another country, and accordingly got their education
elsewhere?
What if that company is a remote company which hires people all
over the world, and none of those people benefited from the
{education|peace|law enforcement|trust} in Germany?
I do agree with you, in principle, that a company is somewhat
coupled to the country it was founded in. The exact nature of
that coupling, however, is not that simple, I would say.
Reality is complicated, I suppose :)
EndsOfnversion wrote 15 hours 38 min ago:
Lets drop you into the mid Cretaceous period and see how far
your education takes you.
Without the contributions of millions of others on a daily
basis youâd have nothing.
FredPret wrote 11 hours 19 min ago:
In business, you pay for those contributions.
Milton Friedman describes how a pencil is made with the
self-coordinated efforts of millions of people around the
globe:
URI [1]: https://www.youtube.com/watch?v=67tHtpac5ws
EndsOfnversion wrote 4 hours 50 min ago:
Dinosaurs donât take credit cards
opo wrote 9 hours 28 min ago:
For those unaware, the original essay "I, Pencil" was
written by Leonard Read:
URI [1]: https://fee.org/ebooks/i-pencil/
carstenhag wrote 16 hours 17 min ago:
"If you comply here, you will be compliant in almost all EU
countries or even around the world" situation, many qualified
students, international talent pool due to attractive cities,
quality of life, startup grants/funding, hotspot for B2B fairs...
ghufran_syed wrote 17 hours 9 min ago:
Perhaps you would apply the same logic to a family car, or the
clothing you bought? Should they tax the value of your medical degree
when you leave the country?
neves wrote 15 hours 27 min ago:
Yes.
Remember that in Germany you don't pay for University degrees. High
education isn't just for a wealthy minority.
pigeonhole123 wrote 8 hours 27 min ago:
That doesn't make the degree worthless, surely
toast0 wrote 16 hours 23 min ago:
I would assume that logic is applied.
Exit taxes are generally applied as if the taxpayer sold all
capital assets on the day of leaving.
At least in the US taxation regime (I'm unfamiliar with others),
family cars don't qualify for a capital loss, and rarely
appreciate. Clothing would be similar.
But it doesn't seem unreasonable that a country should want to be
paid tax on unrealized gains as you're leaving. It would probably
be more fair to wait until the gains were realized and then
apportion the gains among the countries of residence, but if you're
leaving, it's going to be hard to compel your participation later,
so it makes more sense to do it as you're leaving.
wmf wrote 17 hours 11 min ago:
In many cases people want to move precisely because Germany doesn't
provide as good infrastructure for startups as other countries.
Also, the "you can't leave because you owe society" argument, while
not necessarily wrong, is strongly associated with the abuses of
Communism.
eqvinox wrote 17 hours 29 min ago:
> And then your exit tax is calculated by taking the average of the
past 3 years of earnings of that company, multiplied by 13.75 (which is
crazy), and then taking 60% of that which is taxed at your personal
income tax rate (likely 42%; Teileinkünfteverfahren)
This does not match the results from 5 minutes of googling, not for
individuals at least. What is being taxed is the shares you're
holding, as if you're selling them, which results in a tax on their
increase in value compared to when you've bought them. [disclaimer: I
just did a quick search on this, I'm not a tax consultant or lawyer.]
I haven't looked for the regulations on companies moving their
headquarters away from Germany. It's possible those rules are the
above, and the author confused them with the rules for individuals.
Either way, if the author believes they're right, they should dig up
some citations. There are none in that article. Is this based on
advice they've received? Did they do their own research? Are they a
tax consultant or lawyer? 13.75 is a very "spottable" number, how
about a link to the law that has that number?
olieidel wrote 17 hours 9 min ago:
Author here. Sure, here are the sources:
- First off, your assumption is wrong that only the increase in value
gets taxed. No, the entire value of your holding gets taxed, see §
6 Abs. 1 Satz 1 AuÃensteuergesetz (AStG) [1].
- The factor 13.75 originates from the calculation method called
"vereinfachtes Ertragswertverfahren" (~ simplified earnings-based
method), which itself is defined in Bewertungsgesetz (BewG), § 11
Wertpapiere und Anteile [2] - Factor 13.75 is defined in
Bewertungsgesetz (BewG), § 203 Kapitalisierungsfaktor [3] - The tax
rate of 42% is the marginal tax rate in Germany (at least below
â¬250k income, beyond that it's 45%) - so the assumption here is
that, in the year in which you leave Germany, you've already had some
salary income (say, â¬90k) which bumps you into the marginal tax
rate for any additional income on top of that. [1] [2]
URI [1]: https://www.gesetze-im-internet.de/astg/__6.html
URI [2]: https://www.gesetze-im-internet.de/bewg/__11.html
URI [3]: https://www.gesetze-im-internet.de/bewg/__203.html
eqvinox wrote 16 hours 55 min ago:
> - First off, your assumption is wrong that only the increase in
value gets taxed. No, the entire value of your holding gets taxed,
see § 6 Abs. 1 Satz 1 AuÃensteuergesetz (AStG) [1].
You're misreading that law. It says moving away is equivalent to
selling shares and that §17 EStG is applicable. Which in turn
says:
(2) VeräuÃerungsgewinn im Sinne des Absatzes 1 ist der Betrag, um
den der VeräuÃerungspreis nach Abzug der VeräuÃerungskosten die
Anschaffungskosten übersteigt.
> - The factor 13.75 originates from the calculation method called
"vereinfachtes Ertragswertverfahren" (~ simplified earnings-based
method), which itself is defined in Bewertungsgesetz (BewG), § 11
Wertpapiere und Anteile [2]
§199 BewG says "â¦kann das vereinfachte Ertragswertverfahren (§
200) angewendet werden, wenn dieses nicht zu offensichtlich
unzutreffenden Ergebnissen führt."
Key phrase there being "kann". It doesn't have to. You can
probably sue against it getting applied, if they're really
insisting on it. And note §11 BewG says:
"â¦so ist er unter Berücksichtigung der Ertragsaussichten der
Kapitalgesellschaft oder einer anderen anerkannten, auch im
gewöhnlichen Geschäftsverkehr für nichtsteuerliche Zwecke
üblichen Methode zu ermitteln; dabei ist die Methode anzuwenden,
die ein Erwerber der Bemessung des Kaufpreises zu Grunde legen
würdeâ¦"
So, finding a reasonable method that a buyer would use to determine
the values of the shares is explicitly pointed out.
olieidel wrote 16 hours 49 min ago:
Good points!
1. Yeah, valid - I was assuming the default case of "you founded
your company in Germany and are moving away at some stage". In
that case, you could deduct the initial share capital (often
â¬25k) from the valuation, as that was your "purchase price". In
most cases, that doesn't lead to a significantly different
outcome.
But yeah, if you actually bought shares of an existing company at
a certain (higher) price, than of course the "taxable delta"
might change your calculation.
In that respect, I was wrong as I assumed everything would get
taxed. This is only roughly the case when you founded the company
yourself in Germany, as mentioned above. Thanks for the
correction!
2. True! As mentioned in my post, you can also pay someone to
assess the value of your shares, which would most likely result
in a valuation lower than 13.75x. You will have the additional
costs of getting that assessment though, and you'll have to
convince the authorities that your assessment is closer to the
truth than the default valuation which is based on 13.75x.
1R053 wrote 17 hours 12 min ago:
While that number seems to be not a general value, the
"Wegzugsbesteuerung" still is significant. [1] Essentially, it
assumes you sell your assets at market value and taxes the difference
to your expenses for it.
URI [1]: https://de.wikipedia.org/wiki/Wegzugsbesteuerung
eqvinox wrote 16 hours 52 min ago:
That's what I was trying to say ("What is being taxed is the shares
you're holding, as if you're selling them,") ⦠did I word that
poorly/confusingly?
jansan wrote 17 hours 16 min ago:
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.
olieidel wrote 17 hours 8 min ago:
Exactly. And they, by default, use a very high multiple (13.75) for
calculating the value of your shares.
bluecalm wrote 53 min ago:
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.
lifestyleguru wrote 17 hours 29 min ago:
also buy fax machine, dozen ring binders, and paper shredder before you
start that business
olieidel wrote 16 hours 53 min ago:
Also:
- A printer (the most important equipment of any German startup
founder)
- Envelopes for letters
- A stamp with your company name (some companies and agencies you
deal with require you to stamp things, because a stamp obviously
proves, beyond any doubt, that you are acting on behalf of your
company, because obviously no one would be able to create a similar
stamp with your company's name on it, right)
- A virtual office address at a coworking space (because you're
receiving physical mail, and also there are weird tax reasons not to
register your company at your home address)
- A mail-scanning service (because you don't want to walk to the
coworking space every few days to pick up your physical mail)
- A mail-forwarding service (so that the mail gets forwarded from
your virtual office address, which now has exactly no purpose at all,
to your mail-scanning service)
bluecalm wrote 2 hours 56 min ago:
A good one! I remember I needed a stamp when I started a business
in Poland as well!
I've never used it and never was asked to so I guess the
regulations no longer apply.
Poland is pretty good at digitalizing bureaucracy as well. You can
do most things online including talking to the tax office and
solving problems with your tax declarations.
Taxes are reasonable but
I am still bitter about cap gain tax as it's a form of a wealth tax
for someone that invest in equities - at some point moving to more
tax friendly jurisdiction saves enough that you can fund your
comfortable life and save 100% of your income.
I also think tax burden is going to increase significantly there in
coming years.
em-bee wrote 9 hours 52 min ago:
for comparison in china stamps completely replace the signature.
but then, digital signatures that are not cryptograpically signed
are no better.
djoldman wrote 15 hours 32 min ago:
Given that this kind of thing seems to be widely reported, are
there any significant efforts to reduce the friction all this
causes?
olieidel wrote 15 hours 9 min ago:
Pretty much all political parties loudly announce that they'll
reduce bureaucracy, but, judging by the outcomes, not much has
happened so far.
That being said, it's probably overly simplistic to blame
political parties for this - there's a lot of e.g.
county/state-level bureaucracy in Germany which gets in the way
of making any sort of constructive changes. It's a bit like
blaming the CEO of a bloated company for not making it "agile" in
a short period of time. Sure, leadership is important, but the
reality is, it's.. complicated.
isoprophlex wrote 17 hours 22 min ago:
And the right color pen. God forbid you fill in an official form in
the wrong color pen.
lifestyleguru wrote 17 hours 13 min ago:
I would think it's a joke but once literally had an office clerk in
Germany scratching with fingernail my signature to check whether
it's by pen and in the right color.
knallfrosch wrote 15 hours 26 min ago:
Signatures that can be erased easily aren't a great fit for a
legally binding document.
For more information, you can check whether the ink complies with
DIN ISO 12757-2 and/or read up on "Dokumentenechtheit" [1] [1]
(It hasn't been translated to other languages yet.)
URI [1]: https://de.wikipedia.org/wiki/Dokumentenechtheit
petre wrote 17 hours 6 min ago:
There's a reason why Kafka wrote his novels in German.
woodson wrote 15 hours 20 min ago:
Because he was German Bohemian? ( [1] )
URI [1]: https://en.wikipedia.org/wiki/Sudeten_Germans#Austria-...
_zoltan_ wrote 10 hours 17 min ago:
no, because bureaucrazy in Germany is rampart.
throwawayoldie wrote 10 hours 0 min ago:
He didn't live in Germany.
imp0cat wrote 5 hours 26 min ago:
He actually lived in Berlin for a few years before he
died. But you're right, he spent most of his life in
Prague. However, his native language was German.
Certainly an interesting man. I highly recommend checking
some of his work (ie. The Metamorphosis).
akersten wrote 17 hours 34 min ago:
Is there a look back period? What stops me from selling my business to
my buddy the day I leave and then buying it back the day after?
csomar wrote 8 hours 4 min ago:
Your taxes should work out the same (or worse). Exit tax is akin to
you selling all your properties at the point of exit.
Scarblac wrote 8 hours 21 min ago:
The idea is that leaving the country is taxed as if you sold your
shares.
So selling them presumably doesn't help.
wolfgangK wrote 6 hours 48 min ago:
The idea is presumably that you would "sell" at an artificially low
price.
1718627440 wrote 5 hours 22 min ago:
Which is illegal if you do it for tax evasion.
olieidel wrote 16 hours 57 min ago:
Yup, this is possible. It would have to be at some fair market value,
and you'd (obviously) have to tax that in Germany. And depending on
how much you trust your buddy, you might or might not have to draft
up some complicated legal framework that you indeed have the right to
buy back your company at some stage :)
jansan wrote 17 hours 14 min ago:
Nothing. But you will have to pay taxes on the money you get from
your buddy. If he is paying too little, you may get into additional
trouble.
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