Notes and Hacks on Germany's Exit Tax
19 days ago
- #Germany
- #Taxation
- #Exit Tax
- Germany's exit tax applies to individuals holding more than 1% in a corporation, self-employed individuals running businesses, and those privately holding ETFs worth over €500k (starting 2025).
- Exit tax does not apply to employees, freelancers (Freiberufler), or individuals with ETF holdings below €500k per position.
- For corporations, exit tax is calculated based on a 13.75x multiple of average earnings over the past 3 years, resulting in a ~28.5% tax rate.
- VC-funded startups may face exit tax based on inflated VC valuations, not actual profitability.
- Strategies to mitigate exit tax include obtaining a lower business valuation, converting GmbH to GmbH & Co. KG, setting up German or Liechtenstein family trusts, and using cooperatives or clubs.
- Exit tax on ETFs applies to holdings with a purchase value of €500k or more per ETF, encouraging diversification to stay below the threshold.
- The exit tax has negative implications for German founders and the economy, discouraging entrepreneurship and VC funding.