Isn't USA even worse? If you move as US citizen to EU, you would need to pay bot h local EU tax and USA tax right? (I am not a USA citizen, this is legit question)

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jwr 6 days ago | parent | next [-]

The US does not have an exit tax for businesses, but has an absolutely horrible tax system in which expats are treated badly.

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.

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hiAndrewQuinn 6 days ago | parent | next [-]

I can confirm this from experience. The instant your situation becomes more complicated than "I work one full time job and have no investments to my name whatsoever" you are in for a brutal time without an accountant by your side.

On the other hand, if you do have an accountant by your side, you potentially expose yourself to some of the most powerful labor arbitrage on the planet as a tech worker. Making $100k remotely from the US might sound like a bad deal until you live in a country where the average wage is $20,000. Like all things US tax wise, you are disproportionately rewarded for being clever and reading a lot.

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

US totally does: https://www.irs.gov/individuals/international-taxpayers/expa... - long-term (8y+) green card holders may need to pay up.

One big difference is that the clock only start ticking after you get green card, whereas with Germany any residence year counts. Oh, and citizens of course aren't affected - since US continues to tax them wherever, but Germany like almost all other countries practices residence-based taxation.

	▲	graemep 6 days ago \| parent [-]
		It is very close to being all other countries. AFAIK the only other country that taxes non resident citizens is Eritrea - and the US has said its unfair they do it!

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CalRobert 6 days ago | parent | prev [-]

Not to mention pfic rules making simple index investing impossible.

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jwr 5 days ago | parent [-]

Does that affect individuals investing in ETFs through a brokerage account? I thought you only needed to provide information on the total value of each brokerage account?

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CalRobert 5 days ago | parent [-]

Yes it does, basically all foreign etf’s are PFICs.

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jwr 5 days ago | parent [-]

Oh this is even more terrible than I thought :-/

This means lots of additional reporting work plus 49€ per ETF yearly for tax preparers.

US really hates expats.

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CalRobert 5 days ago | parent [-]

It's not just the filing, the tax burden is heavy and complicated. You need to opt for one of three regimes, etc.

https://accountinginsights.org/how-does-pfic-taxation-work-f...

I live in Europe and contemplated writing a tool to analyze ETF holdings and buy the stocks individually with the IBKR API, but it's an expensive and error-prone approach.

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jwr 5 days ago | parent [-]

There is also an amusing (?) catch-22: you could theoretically sign up with a US-based broker and buy through them, which would make you exempt from these requirements. But most US-based brokers and banks will not want you as a customer if you don't have a US address. And those that do (Charles Schwab International) will not sell you ETFs, because… you are "based" in the EU, which has information requirements for selling financial instruments, and US ETFs cannot be sold to consumers in the EU.

I can't believe how badly the US screws their expats, and nothing is done about this, it only gets worse over the years.

	▲	CalRobert 5 days ago \| parent [-]
		The shocked pikachu face at increases in people renouncing (despite them charging you $2300 for it) is really something.

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

US-EU transplant here. No, the United States does not have anything even vaguely similar like this. Seriously putting forward the idea of an exit tax on anyone who owns more than 1% of any LLC worldwide would in all likelihood be deeply politically unpopular. It goes against the very name and spirit of a limited liability company, for one. For two (real ballpark number here) about 1 in 10 Americans would actively be subject to a German style exit tax like this, concentrated among working adults.

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.

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mijoharas 6 days ago | parent | next [-]

> 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.

To be clear, this is if you move _your company_ out of Germany (which I don't think the article makes very clear). In those terms it seems to make a little more sense. As outlined in this comment.[0]

The double income taxation of their expats that America, Eritrea, and Myanmar do is a bit different, but I think they have double taxation agreements with most countries. So in actuality most Americans don't have to fully pay the double tax (depending on where they live, and how much they earn) though they still have to file and everything.

[0] https://news.ycombinator.com/item?id=44834878

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

> For two (real ballpark number here) about 1 in 10 Americans would actively be subject to a German style exit tax like this, concentrated among working adults.

I'm sure that a sizeable percentage of Americans own a significant amount of shares via 401k or whatever, but it feels surprising if 1 in 10 own more than 1% of a company, because all of those people holding shares as investments will be buying shares in companies with thousands or millions of other investors.

But maybe it's true - I just googled about the US has 340m people and 32.5m companies - so the majority of them must be small (population/number of companies). And while a lot of companies will be owned by the same people or just administrative divisions of a group of companies, most companies have multiple directors so maybe on average it does balance out to 1 in 10 owning a decent chunk of a company. It just feels like a surprising fact.

This site [1] has some interesting stats on size of businesses, although it's interesting that in 2019 these figures say there were less than 8m businesses, which disagrees with what google told me. Also says over half of US companies have 0-4 employees.

[1] https://paradoxesinc.com/resources/us-business-patterns/

	▲	hiAndrewQuinn 6 days ago \| parent [-]
		It's a surprising number, but a useful one for calibration. Most people assume that the number is closer to 1 in 100 or even 1 in 1000, but that's because they forget the vast, vast numbers of people who just quietly run their own operations in some form. You don't have to be Apple to make enough money to pay the bills on your own, or even reach the high net worth category. It's worth noting that the numbers don't vary that much between the US and the EU, which actually weakens my claim that such a tax would be politically unpopular if introduced. About 1 in 20 Germans seem themselves to own enough of a business to fall under their own exit tax, checking just now, but I'm not familiar enough with DACH business practices to know if setting up an actual honest-to-goodness LLC for a one man operation is as common there as it is in the United States.

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

> 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.

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?

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hiAndrewQuinn 6 days ago | parent | next [-]

From one perspective, yes, you can get around this by simply giving up dual citizenship.

From the perspective of one's whole life, once that US citizenship is gone, it's gone. You can't reinstate it like you can with many other nations. And losing first-class access to the world's greatest economy is a very heavy price to pay. It only makes sense if you are absolutely sure you, and by extension your children and their grandchildren and their grandgrandchildren (because they only get US citizenship at birth if you yourself are a US citizen at their birth), will never want to have anything to do with the US again.

Ultimately I decided against it. The idea that I have a country I can always move to and conservatively 3-5x my take home pay compared to even one of the best paying countries in Europe is one hell of a liberating feeling. Don't discount that kind of optionality lightly.

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fyrn_ 6 days ago | parent | prev [-]

You won't be double taxed, the US taxes the difference between your local income tax rate and the US federal tax rate. So if you live in London you're not paying any US tax because the UK income tax rate is higher. It helps stop rich people from "totally live in <tax haven>". If only we had that for companies..

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

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potatototoo99 6 days ago | parent | next [-]

Unless you move to a country without a tax treaty to prevent double taxation with the US.

	▲	hiAndrewQuinn 6 days ago \| parent [-]
		Not "unless". You have to actively review the tax treaty to see whether it actually gives you things superior to the US's own Foreign Earned Income Exemption. Those documents aren't the hardest things in the world to read, but they're not light reading either.

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roshin 6 days ago | parent | prev [-]

Another issue is if another country has some tax free benefits (like Roth IRA) America taxes the extra.

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throw9349494 6 days ago | parent | prev | next [-]

State of California has exit tax.

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digianarchist 6 days ago | parent | prev [-]

Exit tax applies to some Green Card holders too.

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

Not in most cases. According to this estimate, who comes from an organization that is against US citizens abroad having to file[0], 77% have AGI "well below" the cutoff where you would have to pay taxes. For those that are above that threshold, you can deduct the taxes you pay in your home country agains what you would have been charged in the US. For almost everyone in the EU, that is a higher rate than the US taxes, so you don't pay anything on that European income.

_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...

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laurencerowe 6 days ago | parent | prev [-]

Double taxation treaties negate this somewhat, but there are a bunch of edge cases.

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notTooFarGone 6 days ago | parent [-]

You have to file your taxes every year in the US either way. You can't even renounce your citizenship without paying a lump sum.

	▲	philjohn 6 days ago \| parent \| next [-]
		And because the tax years don't line up, it's more costly than filing just in the US, or just in the EU, plus if you moved with a company and were granted RSU's in the US, or keep property or assets in the US ... it's just a pain to calculate properly. Have friends who regularly spend 10x more than I do my accountant for my tax return because of this.
	▲	laurencerowe 6 days ago \| parent \| prev [-]
		It would be a bureaucratic pain but if I were to move back to Europe (having become a US citizen) I don’t expect I would end up paying any tax to the US after applying the foreign tax credit. But there could be a whole lot of complexity around stuff like ETFs and mutual funds and whether they were recognized by both countries.