Exit Tax: Leave Germany Before Your Business Gets Big
17 days ago
- #Entrepreneurship
- #Germany
- #Exit Tax
- Germany's exit tax applies to business owners holding more than 1% in any limited liability company, including foreign companies.
- The exit tax is calculated as (Average earnings of past 3 years) * ~3.5, leading to significant financial burdens for profitable business owners.
- Four groups affected differently: employees (no tax), unprofitable business owners (possibly zero tax), profitable business owners (high tax), and large business owners (can afford tax avoidance strategies).
- Startup founders may face high exit taxes based on investment valuations, even if the company isn't profitable.
- Profitable small business owners can face exit taxes up to €700k, making it difficult to leave Germany without substantial savings.
- Germany's exit tax creates a 'Berlin Wall' for entrepreneurs, discouraging them from relocating for personal or business reasons.
- Advice: Leave Germany before your business becomes profitable or raises investment to avoid high exit taxes.