If you just want to move out of the country you can also just keep the ownership of the company within the country. You do this by putting your shares into a holding that stays in Germany even when you move out. That holding needs to be managed within Germany, so you need to assign a friend or be in Germany twice a year to sign off on having done the management within Germany.
You do need a bit more expensive tax advisor, but it's not that difficult. There's a description here: https://www.juhn.com/fachwissen/internationales-steuerrecht/... (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.
It’s because of a fundamental difference between how capital gains tax and income tax are collected.
Capital gains are deferred - so as years pass you’re 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.
I’m 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 “liquidity squeeze“ for the tax payer.
I don’t see a simple solution - maybe other than getting rid of capital gains taxes completely and collecting more consumption taxes, for example, but I’m sure this would just open up a range of other tax evading loopholes.
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.
Source -> https://www.ato.gov.au/individuals-and-families/coming-to-au...
If you cease to be an Australian resident while overseas, we deem some of your assets – generally those not taxable Australian property – 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 – including any period when you're not an Australian resident – when we calculate a capital gain or loss for CGT purposes.
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.
It’s okay to name him here you know. [redacted] can’t get you on HN
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 — https://www.irs.gov/forms-pubs/about-form-8858
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.
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.
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?
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
_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: https://www.taxfairnessabroad.org/blog/americans-abroad-by-t...
But there could be a whole lot of complexity around stuff like ETFs and mutual funds and whether they were recognized by both countries.
This means, if you start a not-yet-publicly-listed company, get investment at a high valuation (on paper), you must pay wealth tax as if you had that money liquid in your own name. But you don’t have it liquid, it’s yet just a valuation of 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.
Not everyone's top priority is building a big ol' dragon pile of gold.
Balancing taxes for fairness and innovation is quite tricky...
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.
Hoarding wealth isn't a problem if no wealth creation happens in the first place.
- 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)
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.
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.
Ironically some of the biggest european companies are related to luxury items.
Why take all that risk, for no additional reward?
If the business fails, is the gov’t going to keep paying them like a hairdresser or whatever?
An incentive for entrepreneurs?
It can help kickstart a stagnant economy.
The economy is stagnant for a reason. At some point, the juice isn’t worth the squeeze.
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.
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.
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..
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.
That's really your dream?
We're MUCH better in our European democracies. And they work better BECAUSE we have less inequalities, and BECAUSE people who made money have to pay their fair share of taxes so it benefits everyone, rather than just corrupting the politicians in order to build their "DOGE" bullshit
My wet dream for Europe.
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.
Why do you think that might be? Perhaps the Germans could make their IPOs more business friendly, so they have no reason to flee.
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.
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.
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.
So when you get money out of this, you pay your fair share of taxes, like everyone.
Germany has Europe’s 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 it’s fair.
cherry on top: Germany has been in recession for… 3 years now?
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.
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?
https://www.greenbacktaxservices.com/knowledge-center/exit-t...
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?
- 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 Außensteuergesetz (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 €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, €90k) which bumps you into the marginal tax rate for any additional income on top of that.
[1] https://www.gesetze-im-internet.de/astg/__6.html
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) Veräußerungsgewinn im Sinne des Absatzes 1 ist der Betrag, um den der Veräußerungspreis nach Abzug der Veräußerungskosten 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 "…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:
"…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 würde…"
So, finding a reasonable method that a buyer would use to determine the values of the shares is explicitly pointed out.
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 €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.
https://de.wikipedia.org/wiki/Wegzugsbesteuerung
Essentially, it assumes you sell your assets at market value and taxes the difference to your expenses for it.
> 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.
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.
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.
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.
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.
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.
> I can't speak for all jurisdiction but on one that I worked in, this is not legal.
which jurisdiction doesn’t allow you to shut down your own company?
> 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.
In the US we do have issues with businesses, but it's not like the Bosch, Thyssen, or Tschira family are any less unethical.
The level of hierarchy I've noticed in German firms and founders is insane to say the least. I'd love to do some quantitative research into this, but I haven't been in academia or policy for years now.
By your own admission, this person earned almost a million euros in the past 3 years.
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.
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 don’t 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 don’t impose exit taxes.
Which is why so many European millionaires are doing their best to live in these countries
So selling them presumably doesn't help.
This sort of law is stretching things to the point of utter bad faith.
Which proves again that regulatory environment is downstream from culture: In a country like Germany, with Europe’s lowest share of entrepreneurs/workforce, there is very little political emphasis on creating comfortable environments for the out-group.
Most Germans can’t 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 haven’t 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)
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.
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?
Wasn’t this only a thing while the UK was in the EU, because the EU expressly allowed it?
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.
https://www.greenbacktaxservices.com/knowledge-center/exit-t...
So should greencard holders flee the US before they become too rich
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
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.
It seems that capitalists should never be encouraged. They lack any sense of morality.
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 there’s nothing that they do to “encourage us”. I’m just stubborn.
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.
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.
Same thing in the U.S. but I think the first $800 or so is exempt.
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
https://www.canada.ca/en/revenue-agency/services/tax/interna...
Departure tax for corporations:
https://www.canada.ca/en/revenue-agency/services/tax/interna...
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
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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.
Someone growing up in a society is strongly an outcome of that society.
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..
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 :)
Without the contributions of millions of others on a daily basis you’d have nothing.
Milton Friedman describes how a pencil is made with the self-coordinated efforts of millions of people around the globe: https://www.youtube.com/watch?v=67tHtpac5ws
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.
Precisely how is this different from mixed economies, like the US or Germany?
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.
In other words, it's not an additional claim. It's simply an enforcement mechanism for the money you already hypothetically owe.
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.
"Free" healthcare though. It's a bargain!
The worst healthcare is in reality American healthcare. We pay through the nose for the privilege of getting terrible results.
Is it expensive? Yes. Does it work? Absolutely.
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.
What happened in the late 1960s? The advent of "free" healthcare!
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.
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!
Remember that in Germany you don't pay for University degrees. High education isn't just for a wealthy minority.
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.
Also, the "you can't leave because you owe society" argument, while not necessarily wrong, is strongly associated with the abuses of Communism.
i’d 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.
I am sure they could achieve the same goals of fair tax but learn some game theory before doing so.
Excuse me, why I need state permission for building business?
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- 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)
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.
For more information, you can check whether the ink complies with DIN ISO 12757-2 and/or read up on "Dokumentenechtheit" [1]
[1] https://de.wikipedia.org/wiki/Dokumentenechtheit (It hasn't been translated to other languages yet.)
Certainly an interesting man. I highly recommend checking some of his work (ie. The Metamorphosis).
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.
I would attribute that term to the workers who work 1.3 billion hours overtime, most of them unpaid
https://dailywrap.net/en-gb/unprecedented-unpaid-overtime-re...
And then the company owner whine when they habe to pay their share?
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 you’ve 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.