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Comment by hnhg | Hacker News Reader

There is also a brutal and inflexible exit tax. Should you decide to leave Germany, even temporarily, you will be faced with a tax of ~30% of the current valuation of your worldwide shareholdings (in companies in which you have >1% ownership). I commented on this in more detail in another post a while back:

https://news.ycombinator.com/item?id=39786934#39788110

In the author's case, because he is using a holding company, his exit tax burden will be doubled!

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From the article you linked in that comment[1], it seems like this exit tax only applied to companies where you own 1% or more? and it's structured as the capital gains tax, but due now, so on the current value minus your cost basis.

The US has an exit tax if you renounce citizenship, and it's assessed on your entire net worth. If the article you linked is accurate, this german tax seems much more reasonable.

EDIT: actually, I reviewed, and I think it's broadly similar --- treat all assets as if sold at market value on the date of exit. Thus, any deferred taxes from unrealized capital gains need to be paid when you exit the taxing jurisdiction. Although, again, if the linked article is correct, it only happens to assets where you own >= 1% of the company when exiting Germany, and all capital assets if you qualify in the US.

[1] https://www.winheller.com/en/tax-law-tax-advisory/internatio...

how are you comparing renouncing citizenship with temporarily leaving the country

I'm comparing 'exit taxes'. But also if you leave Germany, you're no longer subject to German income tax, and you have to both leave the US and renounce citizenship to become no longer subject to US income tax.

I updated my comment to improve its clarity. I can see how it was unclear to you.

I think the wording was unclear as that's what I thought too, that "leaving" meant for good, and maybe there was a way back - hence the temporary part.

A tax on simply exiting the country is a very foreign concept to Americans I would assume.

Hah! Americans have to file US tax whether they live in the US or not.

Only for higher income individuals. We get a Foreign Tax Credit for taxes already paid where we live/work.

Looks like the limit last year was $120k. Only 17% of Americans make more than $100k/year. Only ~5million Americans living abroad, or 1.5% of the population.

I'm sure those numbers are correlated, but I'll bet its under a few hundred thousand of people who are burdened with the tax. Even then, the benefits also are pretty nice.

No, all Americans who make money abroad have to file taxes. Yes, there is the Credit and the Exclusion, which will often reduce your burden to often zero but still requires all the paperwork.

Try owning a stake in a foreign company (CFC) though, that's a nightmare with often unavoidable significant taxes.

As someone who is burdened with several thousands in filing costs every year (not tax, I mean the cost of paying an accountant to deal with the filing, which is required for all US citizens), because I have a non-US business, please fill me in on the benefits.

Also more and more non-US banks won't take US citizens as customers because they don't want to deal with the US's FATCA requirements.

No other developed country has these sorts of requirements for non-resident citizens.

Most are burdened not so much by the tax itself , but by the complex and costly tax report that should be filed every year.

isn't comparing it to an even worse jurisdiction like US a bit unfair? why not compare it to other EU countries or even Asia. I'm not a US citizen but being taxed on my global income would be a pretty strong reason to renounce my citizenship.

For what it's worth Japan also has a nasty exit tax.

> strong reason

But not allowed!

"If the Department of Homeland Security determines that the renunciation is motivated by tax avoidance purposes, the individual will be found inadmissible to the United States under Section 212(a)(10)(E) of the Immigration and Nationality Act"

This rule has been changed in 2006, see the wikipedia entry. Also the double tax rule allows you to tax the win in the target country and not Germany.

It was also changed in 2021, and subsequent rulings that affect it earlier this year. The Wikipedia article is out of touch with more recent developments.

There may be something new now:

https://winheller.com/blog/en/no-more-immediate-german-exit-...

The issue is with the requirement of a security. Winheller do phrase it carefully as "in their view" a security is not required, but that would have to be agreed with the tax authorities in advance and there are different opinions on how likely this is without a firm legal ruling from the law courts.

(What I find concerning is the attitude of the German tax authorities in their continual attempts to strengthen and increase the scope of this law. They are always trying to broaden it leaving it to individuals and the courts to push back on them.)

I believe that the exit tax is usually never actually collected due to double taxation agreements between countries.

Source: https://de.wikipedia.org/wiki/Wegzugsbesteuerung#Derzeitige_...

That is an understandable but incorrect conclusion. That should be the case, especially with freedom of movement within the EU, but the German tax authorities are essentially violating those agreements (which will inevitably get challenged in the law courts, but that will take some years). As I said elsewhere, please consult an experienced tax advisor for your particular circumstances as you cannot just figure this out for yourself, unfortunately.

Do you have any sources? So I can do further research.

If this reply [0] to a comment of yours is true, then you’re allowed to „temporarily“ leave Germany for 7-12 years before being affected by this.

[0] https://news.ycombinator.com/item?id=39790138

I answered later in the thread: "Unfortunately, so far that deferral will most likely come with the requirement for a security, typically cash. That is the prevailing view of tax specialists right now, but will depend on each individual's experience with their local tax authorities."

Sadly, you cannot just leave and think it would be automatically deferred. You must apply for the deferral before you leave and the local tax authorities can ask for a security in cash for the entire amount owed. It is absolutely kafkaesque.

As with many German corporate tax matters, if you think you are affected by this, you should really speak with a tax advisor who has strong experience working with people in your particular situation. You cannot just read the rules and figure it out.

What would prevent anyone making off with the money owed if they didn‘t require that?

It depends where you go. I believe (but could be mistaken) that there are agreements between countries, especially within the EU, that enable them to go after you. I am also not sure what the statute of limitations is regarding tax-related crimes. But it could be a valid strategy, I guess!

This is the new modern version of the Berlin wall; trying to hold hostage the productive tax payers because you can't create or attract new ones. It didn't work for the Soviet Union and it's not going to work for Germany.

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