Exit Tax: Leave Germany before your business gets big

German business culture and bureaucracy

• Several comments describe German firms as extremely hierarchical and hostile to small, independent entrepreneurs, nudging them toward acquisition by incumbents.
• Bureaucracy is portrayed as heavy and paper-based: strict ink rules, stamps, fax machines, in‑person formalities, repeated identity checks, and slow digitization.
• Many say all parties promise to “reduce bureaucracy” but little changes; some argue Germany is structurally dependent on bureaucracy.

How the German exit tax works (Wegzugsbesteuerung)

• When a shareholder moves tax-residence abroad, Germany treats this as if they had sold their shares at market value and taxes the resulting capital gain.
• For closely held companies without a clear market price, authorities can use a “simplified earnings-based” valuation with a 13.75× earnings multiple; critics call this excessive for small/one‑person firms.
• Others point out the 13.75× method is optional: other valuation methods or expert appraisals can be used, and only the gain over acquisition cost should be taxed.
• Tax can typically be paid over several years; within the EU, there are deferral rules and recent court‑driven adjustments, but details are seen as complex and shifting.

Perceived fairness and purpose

• Supporters: exit tax is just enforcing existing capital gains tax on unrealized gains before they “escape” abroad; it prevents someone building value in Germany and then selling tax‑free in a low‑tax jurisdiction.
• Critics: it taxes illiquid, hypothetical value, can force founders to sell stakes just to pay, and effectively “handcuffs” them to Germany. The Berlin‑Wall/Reichsfluchtsteuer analogies are hotly debated, with some calling them offensive exaggerations.

Workarounds and who can avoid it

• Common mitigation: place operating company shares into a German holding company that stays resident while the founder moves; or keep ownership below thresholds.
• High‑net‑worth individuals can use complex cross‑border structures (trusts, foundations, low‑tax jurisdictions) and specialized advisors; commenters argue this makes the system regressive, hitting mid‑level founders harder than the very rich.

Impact on startups and mobility

• Many see this as one more reason not to found or scale a tech company in Germany (or even in the EU), given high taxes, rigid labor law, and bureaucracy.
• Others respond that Germany remains attractive for employees and small businesses, but acknowledge that startup ecosystems and capital markets lag the US.

Comparisons to other countries

• Similar “deemed disposal” exit taxes exist in Canada, Australia, Norway and via EU anti–tax‑avoidance directives; the US taxes citizens worldwide and imposes its own (narrower) expatriation tax.
• Opinions differ on whether Germany’s implementation is unusually harsh or just one variant of a broadly accepted anti‑avoidance tool.

Broader tax morality debate

• Thread repeatedly returns to “fair share”: some argue founders owe society for education, infrastructure, and rule of law; others counter that high, complex taxes and exit levies discourage value creation, worsen brain drain, and favor incumbents.