> 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?

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olieidel 6 days ago | parent | next [-]

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 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

[2] https://www.gesetze-im-internet.de/bewg/__11.html

[3] https://www.gesetze-im-internet.de/bewg/__203.html

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eqvinox 6 days ago | parent [-]

> - 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].

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.

	▲	olieidel 6 days ago \| parent [-]
		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 €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.

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jansan 6 days ago | parent | prev | next [-]

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.

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olieidel 6 days ago | parent [-]

Exactly. And they, by default, use a very high multiple (13.75) for calculating the value of your shares.

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bluecalm 6 days ago | parent [-]

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.

	▲	realityking 5 days ago \| parent [-]
		If you’re a one person shop you rarely run a limited liability corporation. If you just run your business an individual without a corporate structure this tax is not applicable to you.

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1R053 6 days ago | parent | prev [-]

While that number seems to be not a general value, the "Wegzugsbesteuerung" still is significant.

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.

	▲	eqvinox 6 days ago \| parent [-]
		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?