Say you own a company which has a profit of 10.000 Euros on average the past 3 years. Before you can leave Germany you will have to pay taxes based on 137.500 Euros.
One important note: this 13.75x valuation is a worse case scenario if you fail to supply your own. There are many ways to reduce or avoid this tax.
It's awfully convenient that someone else went through it and started a website just for that topic. Funnily enough, his website was inspired by mine, and this guide was inspired by his post on exit taxation.
It's a far better resource on the topic: https://wegzugsteuer.info/
Indeed, the valuation for the purpose of exit tax is 13.75 * (avg. of yearly profits for the past 3 years); and that valuation is taxed at approximately 30%.
So, as an example, if you own 100% of a company which makes 200k€ yearly profits, your back-of-the-envelope exit tax is 200k€ * 13.75 * 0.3 = 825k€.
A few quick notes:
- If your startup is not profitable but has raised VC money (we're on the YC website after all), the tax office likes to take the VC valuation (!) instead of the valuation resulting from the 13.75 multiple. So, if the valuation in your last round was €10M, then that's your valuation for the purpose of exit tax (back of the envelope: You own 50%, €10M valuation: 0.5 * €10M * 0.3 = €1.5M exit tax; huge problem for early-stage founders who usually don't have liquidity).
- You can deduct a CEO salary from that (yearly) number if you haven't been paying yourself a salary yet - realistically, up to 150k€ / year. So if your profit is up to 150k€ / year, you can reduce it to near zero for the purpose of exit tax valuation.
- You can also supply your own company valuation, but it has to be done by a "Wirtschaftsprüfer" - this costs around 10k€ per company; if you have shares >1% in multiple companies, this means costs of n * 10k€. This is often prohibitive.
- There's a whole tax advisor industry around this exit tax topic, and it feels very shady. I've written up all my notes from (paid) tax advisor calls and shared them on my website for free (linked by in parent comment).
- There are various setups to "avoid" it (all outlined on the website). None of those setups is easy, and none of them is free. Still, if you're e.g. faced with a potential exit tax of 825k€ like in the example above, any setup which might cost less than that might be theoretically worthwhile.
- If you leave Germany and return within 11 years, you get the exit tax back - so if that's your plan, you could "just" take out a loan and it mainly becomes a liquidity problem.
- Historically, there has been a strong tendency for Germany to tighten its exit tax laws over time.
- Different people have (vastly) different opinions on how "good" or "fair" this tax is.
- Discussing the exit tax has become quite a common topic among German founders nowadays.
This is an incredible resource, it changed my view on at least one lawyer there to the positive side and confirmed my opinion of staatenlos
Yeah, they were alright - definitely a bit of a "we love to take a lot of your money" vibe, but they did have some actual knowledge.
Some of the other tax advisors in this area are way more shady - like, "do you have 30k€ in your bank account for our fixed-fee consulting" shady.
Still, I'd really love to have a more transparent and affordable choice here. Currently, to my knowledge, none exists.
Source: I use DB for longer international trips (Sweden-Netherlands and back) about 10-11 times per year.
The closest thing I've seen is guides for changing your name in various USA states from the trans community; some of the processes are quite arduous (NJ for example has about 15 steps, most of which are manual separate errands with separate waiting periods...)
The biggest problem is that the government often describes bureaucracy in terms of what they need from you, not how their services fit in your journey. It feels like we are serving the bureaucracy and not the other way around.
What got me to work on this was a related post on the German exit tax not too long ago: https://news.ycombinator.com/item?id=44828158
I don't gain anything from promoting my free, hyperlocal content here, but I love to talk about my work and the discussion here is unfailingly interesting.
The checklist somehow seems very German, including the advice that you don't have to turn in a resignation letter if you're fired. I know that sounds snarky, but the bureaucracy laid out is so vast it's actually warranted.
As a USAmerican though, I see it as more general—a statement about how modern, "1st-world" civilization has become so god-damned complicated.
I catch myself (especially since I have kids) realizing how difficult it is to navigate some aspect of modern life (for example, various payment methods—credit cards). A kind of mantra that always rises in my thoughts is, "No one would ever have designed the system to work like this."
Somehow, independent actors, independent reasons, likely the ability to make it this complex has indeed made it this complex.
It's no surprise then that just functioning in this modern society induces a level of background anxiety. Pretty much the opposite of "touching grass".
Also hilarious You telling anyone else not to interact with a post if it doesn’t relate to them.