| ▲ | nolverostae 6 days ago |
| I was someone who almost got hit by this tax. You don't need any offshore shenanigans to get around it. If you just want to move out of the country you can also just keep the ownership of the company within the country. You do this by putting your shares into a holding that stays in Germany even when you move out. That holding needs to be managed within Germany, so you need to assign a friend or be in Germany twice a year to sign off on having done the management within Germany. You do need a bit more expensive tax advisor, but it's not that difficult. There's a description here: https://www.juhn.com/fachwissen/internationales-steuerrecht/... (3.1.) Of course, if you want to move the company out of the country, you'll need to pay taxes on any value increase the company had. As others have described this is pretty reasonable though - you get taxed exactly as if gains were realized. This is tax you would have had to pay some time in the future anyways, except by moving to a tax-evasion country. The only unreasonable part of the law is how they can assume your valuation based on earnings, but that only applies if you can't provide a valuation based on German standards. |
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| ▲ | jillesvangurp 6 days ago | parent | next [-] |
| Exactly, you need to get proper advice on how to structure your business in Germany. Basically, putting your shares in holding companies is both common and not dodgy. Corporate taxes are more friendly than personal income taxes. You can do constructions with salaries, dividend, etc. Doing this is standard practice if you are founding a company. You need to plan for your startup to be actually successful and being on the receiving end of a big exit. You can't just wing it and hope for the best. Germany has a large amount of wealthy small investors, business owners, family owned businesses, etc. And many of those might retire in places like Spain, Italy, etc. There are ways. You just need to understand the system. That's not to say that Germany is not a huge PITA when it comes to managing all these constructions, dealing with the bureaucracy, and the maze of silly government agencies that refuse to share even the most basic information with each other so you are stuck in ground hog day providing the same information over and over again (who are you, where do you live, what is your company registration, etc.). But once you know the how this backwards and dysfunctional system works, you can get it to work for you. Because painful as it is, the system does work more or less as advertised. But you do need to familiarize yourself. BTW. this is a topic where LLMs can be helpful. You can skip a lot of the traditional advisers and other middle men, if you are a bit smart on that front. Using an accountant is actually worth the money for liability reasons. So don't skimp on that. But otherwise, knowing what you are getting into in terms of bureaucratic process can save a lot of time. |
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| ▲ | jacquesm 6 days ago | parent | next [-] | | > this is a topic where LLMs can be helpful. That's probably the very last spot where you want to use an LLM, especially not in Germany. One single mistake can cost you a fortune, and you won't be able to spot the mistake because you're not an expert. LLMs could be used to prime you for conversations with an expert (but be prepared to be corrected on points of law and fact) but they are no substitute. Corporate law is a legal minefield, tread with utmost care. The whole proposition is in a way bizarre: if you have this problem you almost certainly can afford proper guidance and if you need to resort to an LLM for that guidance you almost certainly don't need such complex constructs in the first place! | | |
| ▲ | graemep 6 days ago | parent | next [-] | | I would say not with tax law anywhere. It is very complex and has all sorts of interactions between things - e.g. double tax treaties. That said, a lot more people would probably use complex constructs if they were not so expensive to set up because of the advice needed. I just do not think LLMs help. | | |
| ▲ | StopDisinfo910 5 days ago | parent [-] | | RAG are quite good with tax codes. That’s not particularly surprising you have documents telling you exactly what can be done and what is hard is knowing everything inside and putting everything together. That’s pretty much exactly in the sweet spot for LLM queries. |
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| ▲ | throw9349494 6 days ago | parent | prev | next [-] | | Crazy theory: most posts here are from German Tax office. They give a "free" advice, and send a fat tax penalty 5 years latter! Suprise: you never left! | | |
| ▲ | jacquesm 6 days ago | parent | next [-] | | If the German tax office is actually using HN for such schemes I'd have to give them more credit for using technology effectively than I currently do. It would be funny if they did though. | |
| ▲ | eqvinox 5 days ago | parent | prev [-] | | If you move back to Germany within 7 years, you actually don't have to pay the tax, so this would be a pretty poor use of their time :P | | |
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| ▲ | lenerdenator 6 days ago | parent | prev | next [-] | | Who's the German equivalent of the American Certified Public Accountant? Those shouldn't be prohibitively expensive; even small businesses in the US can typically afford one. Just go ask them. | | |
| ▲ | reaperducer 6 days ago | parent [-] | | Those shouldn't be prohibitively expensive; even small businesses in the US can typically afford one. Having an accountant is one of the hallmarks of a legitimate business. If you're doing it on your own without a professional to watch out for you, and advise you, and take care of the details so you can do more important things, it isn't a company, it's a hobby. | | |
| ▲ | bluGill 6 days ago | parent | next [-] | | Even hobbies are sometimes better done with an accountant. if you sell your garden surplus at a farmers market for example. They are not expensive if you only need a little help and can save a lot of trouble. | |
| ▲ | lenerdenator 6 days ago | parent | prev [-] | | "That's just moving fast and breaking things and disrupting industries." - someone in SV right now reading this, probably. |
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| ▲ | jillesvangurp 6 days ago | parent | prev [-] | | I'm not saying use it blindly. But it helps going into discussions with experts, advisers, etc. with some preparation and knowledge. Worst case you are wrong and they'll correct you and best case you pre-empt some actual problems. And it's not like advisers, accountants, etc. don't make mistakes, overlook stuff, or sometimes work against your interests. It helps being a bit hands on. And LLMs make that a lot easier. Also LLMs are great for picking apart complex bureaucratic procedures, figuring out what next needs to be done, what the meaning is of some 10 page pile of crap the tax office dumped in your mail box, etc. Especially if you are not a native German speaker. You can ask your critical questions, get it to explain stuff you don't understand, etc. In the end, you are responsible for your actions. Limited liability in Germany isn't that limited. So, spending some time on figuring out whether you are doing it right is hard work. LLMs help. But yeah, don't vibe run your private finances and sources of income. | | |
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| ▲ | mschuster91 6 days ago | parent | prev [-] | | > That's not to say that Germany is not a huge PITA when it comes to managing all these constructions, dealing with the bureaucracy, and the maze of silly government agencies that refuse to share even the most basic information with each other so you are stuck in ground hog day providing the same information over and over again (who are you, where do you live, what is your company registration, etc.). That's where you hire a professional accountant. Which you should be doing anyway at the point where you raise any sort of external funding that's not family members. I don't get why people are always complaining about German taxes. As long as you're small, you can just wing it. And when you pass the threshold, professionals are cheap. | | |
| ▲ | jillesvangurp 6 days ago | parent [-] | | I'm not complaining about the taxes but the bureaucracy. And the taxes definitely require an accountant here because of the complexity of the tax law and all the intentional loopholes in there for people that can afford an accountant. Accountant lobbies are fierce in this country and they like being necessary. So a lot of sane things that other countries are doing to keep things simple haven't really happened here. I never lived in the US but from what I know of it, it's actually one of the countries that is worse on this front. So, if you move here from there, it might be an upgrade. Anyway, I call the German attitude to this topic Stockholm syndrome. The thing is, I've lived in four countries in the EU so I know how things can be different, more efficient, etc. When I say Germany is a PITA, that is relative to the Netherlands, Sweden, and Finland and based on my experience with those countries. Which isn't even that recent. Those countries were miles ahead of how things are in Germany today decades ago. And I wouldn't exactly refer to Finland and Sweden as tax havens. Taxes are quite high here. Fun fact: when I moved to Germany from Finland, it was an internal transfer for Nokia. My salary was compensated up because of the higher tax and insurance cost in Germany. From Finland! Of course, the cost of living is quite a bit lower here. So this was a nice thing for me. But it's not a cheap country. |
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| ▲ | pc86 6 days ago | parent | prev | next [-] |
| No reasonable person on the planet can look at that table showing a €700k exit tax on a company making €200k/yr profit and think "yeah that sounds fair." |
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| ▲ | GavinMcG 6 days ago | parent | next [-] | | The article admits that the 700k figure “assumes the worst-case scenario that you take the high valuation of the financial authorities (factor 13.75) as base valuation for your exit tax. Instead, you could also find someone to assess the real value of your company, which is likely lower…” A reasonable person could absolutely think it’s fair to impose a very high exit tax on someone who doesn’t want their books examined even when it would save them money. | | |
| ▲ | looping__lui 5 days ago | parent [-] | | If you ever had to deal with German tax authorities - assume the actual worst case scenario. |
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| ▲ | fxtentacle 6 days ago | parent | prev | next [-] | | That’s the penalty tax if you refuse to file the paperwork. So it’s literally the worst case. Plus the article is wrong about not being allowed to move out of Germany. You still can, without paying the tax, you just need to keep a shell UG/GmbH alive inside Germany. | |
| ▲ | diggan 6 days ago | parent | prev | next [-] | | That's because reasonable people don't just look at two numbers and go "That's crazy", there is context and nuance to be understood, so give reading the entire blog post through instead of just skimming tables, and come back and tell us why it's unfair. | | |
| ▲ | pc86 6 days ago | parent [-] | | It's a math problem - you don't need a ton of context to understand it (although I did read the entire article). This is simply the German government being petulant and punishing successful people for moving a company somewhere that understands how to create proper incentive structures for businesses to grow. If you as an individual make €100k a year in salary, saved €20k every year, and the German government wanted to charge you €70k just to move out of Germany it'd be grounds for rebellion. | | |
| ▲ | diggan 6 days ago | parent [-] | | > petulant and punishing successful people What reason could they possibly have for "punishing successful people"? You seem to still miss almost the entire context, and automatically apply some bad faith arguments because of what, you feel like paying taxes is unfair? | | |
| ▲ | pc86 6 days ago | parent [-] | | Paying taxes is good, lawful, even patriotic. Also good and lawful is moving a company somewhere where you'll pay less in taxes and can grow faster and hire more people (and is at worst patriotically neutral). An exit tax is a country saying "oh no that's bad, so instead of looking at our tax structure and seeing why you're leaving and trying to address that, we're going to charge you >3 years of profit as a punishment." It's simply saying that if our taxes are too high for you we're going to charge you even more to try to stop you from leaving. You can think it's a good thing if you don't understand economics but it's hard to frame it as anything other than Germany punishing corporations for leaving. | | |
| ▲ | diggan 6 days ago | parent [-] | | > Also good and lawful is moving a company somewhere where you'll pay less in taxes Agree, to an extent. You (the company) should still pay taxes on profits made within the country, before they can move out the company from the country, anything else would be unfair. > It's simply saying that if our taxes are too high for you we're going to charge you even more to try to stop you from leaving You can move company for any reason. If you're moving the company because the taxes are high, it sounds perfectly reasonable that you'd pay taxes before moving the company, otherwise it becomes a tax hole. And I don't think they're adding these taxes to stop them from moving, if that was the goal then they would just make it outright illegal. Instead they're trying to make sure you can't avoid paying taxes you should have paid. > anything other than Germany punishing corporations for leaving. Almost right, they're trying to stop companies from leaving the country without first paying their fair share of taxes. Once that's done, they're free to move wherever. Sounds reasonable to me, although I don't agree with the exact rates either. | | |
| ▲ | pc86 5 days ago | parent [-] | | > You (the company) should still pay taxes on profits made within the country This is not what exit taxes are. They are punitive taxes above and beyond what you've already paid on revenue earned within the country. > If you're moving the company because the taxes are high, it sounds perfectly reasonable that you'd pay taxes before moving the company, otherwise it becomes a tax hole. Again, it seems like you don't actually understand what exit taxes are. If you earn money in Germany, you're going to pay taxes on that no matter what. Even if you leave, and the exit tax is zero, you still have to pay the income tax on that revenue. |
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| ▲ | axus 5 days ago | parent | prev [-] | | I wouldn't say its fair, but it's good for Germany. In the US, I don't like American companies moving to other countries. | | |
| ▲ | CamperBob2 5 days ago | parent [-] | | Of course it isn't good for Germany. It causes new businesses to be started and operated somewhere else. |
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| ▲ | jacquesm 6 days ago | parent | prev | next [-] |
| In Switzerland, I would trust the mechanisms put in place for dealing with 'Treuhandlers' (trustees) to deal with this situation correctly. In Germany I would absolutely not if the stakes got high enough. |
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| ▲ | pembrook 6 days ago | parent | prev | next [-] |
| Ah great, not so bad then! So you just need to: - Form a German holding company to manage the business - Deal with any conflicting taxation/regulatory issues when operating a german holding company from your new country of residence (in some countries this is not trivial) - Visit Germany twice per year and potentially more to deal with German authorities that require things be done on paper and in person (hope you didn't move too far away and hopefully you don't have small children!) - Hire an abnormally expensive tax advisor, hope he is good - Sell a large portion of the company to fund a giant exit tax bill (!!!!). For many companies this is likely a 1-2 year minimum process, and that's IF they can find a buyer. Not as many PE funds in Europe. Good luck on valuation when the buyer knows you're in this situation. - Hope the government gives you a reasonable valuation on your company, and hope their decision is similar to that of your buyer (and the timelines for both line up), which I'm sure is a super easy and not at all complicated process. Fun! I can't possibly see what people are complaining about. One of the weirdest things about Europe is the irrational nationalism that arises when you tie a language, ethnic-identity, government and country into one thing. Anecdotal, but it feels like this leads to more of an inability to reflect on and criticize things. Americans have far thicker skin when it comes to criticizing themselves. Can you not see how this incentivizes entrepreneurs to leave or start their companies outside Germany (not sure if you're aware the EU exists). Is this really how you think things should work in a non-authoritarian regime with democratic freedom of movement? Snark aside, this chart makes total sense to me now: https://i.redd.it/fxks3skmvt4e1.png |
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| ▲ | avar 6 days ago | parent | next [-] | | Let's be fair here, the GP is comparing this to the complexity of other bureaucracy in Germany. In that context this does sound easy, e.g. here's how you form a GmbH: https://major-grooves.medium.com/just-how-complicated-could-... > Snark aside, this chart makes total sense
> to me now: https://i.redd.it/fxks3skmvt4e1.png
Not that we're doing all that great here in Europe, but this list is somewhat an artifact of strong US financial markets, and skews against European innovation.E.g. Booking.com isn't there because it's now ... an American company on paper, but it was started in Europe, has most of its operations there, and (last I checked) Europe was its most important market. But because the US stock market and US capital dominates globally, companies like that tend to be sold to a US company, and become American on paper. But that financial arrangement doesn't really reflect the overall state of European innovation. Similarly, there's countless European startups that would have probably had a NASDAQ listing if they'd been US-based, but were instead sold to some of the larger European incumbents in their sector. The overall amount of innovation delivered to consumers etc. might be the same, so that's more of an artifact of how capital flows in the US v.s. the EU generally. | | |
| ▲ | pembrook 5 days ago | parent [-] | | The overall amount of innovation is absolutely not the same, you can easily compare productivity growth in both regions to see the EU is also lagging there. Also, the chart does include companies that are European headquartered (like Spotify) unless I’m mistaken. Even if it didn’t though, don’t you think it’s a problem that a group of 600 million people cant form an attractive enough capital market such that its companies wouldn’t need to go abroad to a group of 300 million people to go public? This is the weak complacency I’m talking about, as someone living in Europe it’s maddening. | | |
| ▲ | avar 4 days ago | parent [-] | | I have no idea how you managed to read "this list is somewhat an artifact of" and "skews against" as a claim that the two would be "the same" if not for what I was pointing out. |
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| ▲ | pc86 6 days ago | parent | prev | next [-] | | Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life. Provided you can even get a full-time job since they seem to treat keeping your job as a civil right. | | |
| ▲ | distances 4 days ago | parent [-] | | > Germany seems like a great country to be an employee as long as you're happy with making a fraction of what you'd make in any other country and have no designs of doing anything more with your professional life Are you trying to just incite reactions? This is a very unfair take. German salaries are among the highest in Europe, sixth highest according to Wikipedia, and for many Europeans and non-Europeans it still is a land of opportunity. Certainly a better place to be a professional than almost "any other country", as you put it. https://en.wikipedia.org/wiki/List_of_European_countries_by_... |
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| ▲ | BobaFloutist 6 days ago | parent | prev | next [-] | | How on earth are Tesla, Uber, and T-Mobile not "high-tech"? | | |
| ▲ | chmod775 5 days ago | parent [-] | | They're not exactly building leading-edge stuff, though they sometimes buy from companies that do. Out of those you could only make an argument for Tesla, because at least they were pushing the envelope for a short while in the past (though more from a business standpoint), rather than merely operating within the possibilities of existing technologies others created. Generally a high-tech company will have significant research (not development) spending, which T-Mobile and Uber don't. But that chart is awful either way. | | |
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| ▲ | looping__lui 5 days ago | parent | prev [-] | | I would never again found a company in Germany - not because of the super high tax or these arbitrary rules like you need to pay insane amounts to the Chamber of Industry and Commerce (IHK) or the GEZ for radios you don’t have; but: dealing with the bureaucracy and the tax authorities is just insane. Like you are required to pay a registered tax accountant do your books then they have “screenings” where you PAY him again to check his work and explain it to the IRS - only to find you missed paying 13.09 EUR of social security for the artist guild. Spent 5k in tax advisory fees and countless working days dealing with the questions over 13 EUR. |
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| ▲ | philwelch 6 days ago | parent | prev | next [-] |
| At some point wouldn’t it just be simpler to set up your company in the first place in some other EU country with less onerous laws? |
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| ▲ | ExoticPearTree 6 days ago | parent [-] | | If you know this in advance, sure. But I guess the author of the article found out about this the hard way. On the other hand, no one expects to pay "an exit tax from a country". |
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| ▲ | throw9349494 6 days ago | parent | prev | next [-] |
| > be in Germany twice a year to sign off on having done the management within Germany. Pretty stupid. You are signing paper that claims you never left Germany!!! You are opening up yourself to personal German tax residency, with all pleasures it brings. Payable 10 years back! And do not believe that 185 days bs. Correctly losing tax residency in state like Germany, Denmark, Norway or Australia is very difficult. You can not keep any assets like company or house there! Edit: why downvotes? Many states only require 90 days or less to become tax resident. Australia is fine with a house. Norway will tax your income for 3 years after leaving! Claiming you manage holding company within Germany, is a huge red flag!!! |
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| ▲ | nolverostae 6 days ago | parent | next [-] | | > You are signing paper that claims you never left Germany!!! No you aren't. You are signing a paper that says a managerial decision about the shares of the company happened in Germany. Where you live does not matter. You just have to do a board meeting, and be physically present in Germany during the meeting. In fact, you likely want to keep any proof of your travel from a different country, which makes it obvious to the authorities that you don't spend all your time there. There's multiple variants though, this is just one of them. You can also pay someone to manage the shares (and of course contractually bind them to not do anything without permission). Edit: Also, to be clear, you don't need to manage the company from Germany. You only need to manage the holding company from Germany, where the only managerial decision is related to the shares themselves. | | |
| ▲ | Xylakant 6 days ago | parent | next [-] | | If your company bylaws are set up properly, you can do board meetings via video calls just fine. Very few acts require actual presence in the country. What is required is that you can, at any time, enter Germany to perform those acts - which shouldn’t be a problem if you are German Citizen. | |
| ▲ | pc86 6 days ago | parent | prev | next [-] | | Someone should tell the German government about the internet. Who cares where you physically are? | |
| ▲ | throw9349494 6 days ago | parent | prev [-] | | Do you own and manage company in germany? If yes you are tax resident, if not you pay exit tax. Winwin. This what ifs do not really work in tax laws. The question is, if your current current structure and tax law interpretation will hold in 8 years. After germany had new election, new socialist goverment changed and it is trying to milk everyone. Some flight ticket from lufthanza are not going to save you! |
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| ▲ | ivankra 6 days ago | parent | prev [-] | | > You can not keep any assets like company or house there! Alternatively, simply keep both the house and company in Germany. No exit tax since, thanks to that house, you haven't technically exited, right? | | |
| ▲ | csomar 6 days ago | parent [-] | | You could technically do that but then you’d have to keep paying taxes to Germany on your income in the other country. And the other country will consider you a resident too and will want a chunk of that… | | |
| ▲ | ivankra 5 days ago | parent | next [-] | | Welcome to americans' reality! It's actually more humane than the way US treats its overseas citizens - no onerous PFIC/FATCA, and you have an option to divorce the tax system while still keeping your passport. Double taxation should be taken care of by tax treaties. Usually you'd pay the maximum of the two tax rates in total, with your current residence country getting first dibs. | |
| ▲ | throw9349494 6 days ago | parent | prev [-] | | Double win! |
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| ▲ | 6 days ago | parent | prev | next [-] |
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| ▲ | triknomeister 6 days ago | parent | prev | next [-] |
| Or simply open a business in Luxembourg. Done. |
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| ▲ | Detrytus 6 days ago | parent | prev | next [-] |
| > Of course, if you want to move the company out of the country, you'll need to pay taxes on any value increase the company had. As others have described this is pretty reasonable though - you get taxed exactly as if gains were realized. There's nothing reasonable about it, it's just an extortion. Your gains might never materialize, but your country does not care, they are just punishing you for leaving. |
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| ▲ | fxtentacle 6 days ago | parent | prev | next [-] |
| Nowadays, you can do all of the tax sign-offs purely online with Elster. |
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| ▲ | ExpertAdvisor01 6 days ago | parent | prev [-] |
| It is not so easy as you describe. |
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| ▲ | nolverostae 6 days ago | parent [-] | | You definitely need advice from professionals, yes. All included, I'd expect it to cost 5k€-30k€, but not more. | | |
| ▲ | BillyTheKing 6 days ago | parent [-] | | how did you do it? My co-founder is in a similar situation, and his tax-lawyer said the only way was via a trust - they also have a German holding. Do you have to declare that somewhere? or how does this work? Thanks! | | |
| ▲ | nolverostae 6 days ago | parent | next [-] | | I can't give more specific information about my situation, but I would recommend contacting one of the companies that has a public article on the "Wegzugssteuer", for example the one I linked in the first comment. That way you know you get someone that actually knows how to deal with this. My first tax advisor barely even knew about the Außensteuergesetz and almost got me into larger trouble because of that. I'd guess since this law only affects a tiny portion of the population you really need someone that specializes in it. If they specialize in it they'll have done this many times before and you can just use their pre-made constructs. Then the main issue is avoiding getting squeezed by them. | |
| ▲ | ExpertAdvisor01 6 days ago | parent | prev [-] | | Trusts dont exist in Germany .
Did you mean a foundation e.g family foundation ? |
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