I was going to say that I'm not sure the article is quite right. While the UK does have BADR for up to £1m, it applies to individuals, not businesses. So if I sell the shares in my company or liquidate my company, I can use it. But if the business does an asset sale, there's another step: the company selling the assets. And that company has to pay its own taxes first.

If my British company sold its assets for £1m, it needs to pay 25% Corporation Tax on that. Then I could liquidate the company with its £750k remaining cash and pay 10% on that (for now, it's going up to 14% in April). This results in a total 32.5% tax, not 10%. Above £1m, it'll be even more as there's no more BADR (so roughly 40% tax total on the £1m+ chunk).

"You can have the shares for €4m or the assets for €5m". Both sides have agency in a negotiation.

AIUI the .de rules are intended for a somewhat different situation, perhaps more common. The article describes a situation where almost all of the exit is profit. I'm happy for you if you're in that situation, but I'd guess that most people have costs. In that case .de lets you set costs from past years against the exit, and I've heard (hearsay alert!) that .de gives you more flexibility than most countries.

All that said: if you have high income and no costs, German taxes are hard on you, it's true.

Sorry, missed that part about the seller GmbH still existing afterwards. But the next paragraph I linked goes into that as well: https://www.rosepartner.de/besteuerung-verkauf-gmbh-kauf.htm...

Seller GmbH sells their assets, profits are taxed accordingly. Only when taking that profit our the individual is taxed but as I mentioned above the Teileinkünfteverfahren, only 60% being taxed.

Okay, so they don't want to buy the obligations. Why should the German state encourage and subsidize that behaviour?

I spent some time trying to learn about investing as an average person, and from what I understood, the entire knowledge could be summarized into "pick your favorite global index fund and hold"

I had assumed that if I were a German citizen, I'd probably pay the same amount in taxes on that dividend. Would I actually pay less?

Is that true if it's in a Roth?

> You just need to file for a refund.

FORGET ABOUT IT. You'd have to send traditional letters back and forth between your local tax office and the tax office of the dividend origin country. Usually the foreign tax office demands their form be rubber stamped by your local tax office. Obviously your local tax office will not rubber stamp a form by foreign tax office in a foreign language, but they don't care.

Tricky, maybe, because it was bought in a Roth IRA - which is not taxed. And therefore, I think, not eligible for tax refunds. I probably should have bought it in a normal trading account.

I didn't know that, but it sounds like a terrible policy.

>Porsche, Siemens, Krupp, Thyssen, Bosch were all startups back in the day, just in hardware

Yeah and they all got big and wealthy by exploiting laws, loopholes, state subsidies and even slave labor back in their days. Let's not pretend the German industrialists from 100 years ago who started those businesses were some patron saints and beacons of legality and morality.

I was working for a big German scrap metal business a while back and during the Christmas party the CEO got so drunk he started bitching how much better it was in the past when he could engage in corruption and tax fraud to grow the business without being caught compared to today when this isn't possible anymore.

None of those companies you listed could have gotten remotely as wealthy in the legal and regulatory environment of today.

Yeah the Lichtenstein based charities and trusts are very afraid of your inheritance tax.

> The 8.5% thing you talk about is not really that great

I would be inclined to disagree — it is absolutely wonderful for solo entrepreneurs. You might say "it only makes sense for small one person companies", but that's exactly what my business is and intends to be.

You can easily run a SaaS business with 90%/80%/75% margins (gross/operating/net), which I think is really hard to beat anywhere in the world.

For people who want to stop working for "the man", become in control of their lives and earn money from a SaaS business, this is great.

CD Projekt Red?

You're paying the same amount as if you had been employed and earned as much as you're selling your company assets for. If that costs you millions, you're still having millions left.

Yes, which is why this only matters when the person in questions works in the company.

In the Swedish system there's a rule whereby you accumulate something based on wages paid, and where you can thus avoid part of the sale counting towards income, provided that you've paid people so much in salaries that your work can be seen as a small part.

What I'm sort of arguing for though, is to tax work less, so as to encourage it.

But often there's a special rule when you work in the company in question, in which case you have to pay income tax on a certain fraction of dividends, with something similar for the sale of the company.

> You very quickly get into tax evasion, whether you know this or not

I don't understand where you got tax evasion from my comment? US LLC's are pass through entities by default. All income from the LLC directly flows to the GmbH which pays the normal tax rate in Germany.

When the time comes to sell, transfer of the LLC is a share deal which avoids the downsides of the asset deal which TFA describes.

> but that doesn't solve the tax problem

It solves the tax problem that TFA is talking about i.e. it makes selling the SaaS a share deal instead of an asset deal.

If you mean taxes in Germany are generally too high, that is an entirely separate discussion.

Fun fact: Before Trump's tax cuts, the US corporate income tax rate was higher than in Germany.

I guess my comment was not clear without the context from TFA. I was specifically talking about the dual company structure i.e. the GmbH owns the LLC.

> no onerous American reporting requirements

I'm sorry but US LLC reporting requirements are not onerous in any sense. Hell, some states like Arizona have no annual reporting requirements at all.

It is definitely a weird cultural thing. I can speculate a bit.

It might have some roots in social well fare. But I've also lived in Sweden and Finland which have a very different attitude towards building tech companies. Especially Finland is quite successful at doing startups and scaleups. Especially considering its small population. And of course both countries have a strong social well fare culture. And Germany is actually fairly conservative on the spectrum. E.g. minimum wage did not even exist here until fairly recently. State pensions aren't that great, etc. I'm from the Netherlands originally, our social security is a lot better and more efficient. And so is our economy, infrastructure, healthcare system and all the other things that are clearly very broken and neglected in Germany. It's very visible when you cross the border. The state of the roads is very different on both sides of the border. That's true for most countries that border Germany.

Germans just seem very reluctant to change anything. There's a lot of hesitation doing anything. That's also why their infrastructure is such a mess. Big investments are risky. So they prefer not to. Their default attitude to almost anything is "no". Modernizing anything is frowned upon. So they still bank like it's the nineteen eighties, which is stupidly annoying. They stubbornly stick with a lot of paper based processes. And they employ a lot of pencil pushers, accountants, lawyers, etc. that actually rely economically on things not changing.

And of course they refuse to modernize rules that flat out barely make any sense. It's always been this way, it can't be that bad, etc. They are very proud of keeping their national debt low. But that also means they've been neglecting their infrastructure for decades. Which is now affecting them economically.

The way out would be massive investments. But that requires changes they are not comfortable making. So they are just dilly dallying and going around in circles.

With startup culture, their own rules are stopping foreigners from investing in their german companies. Too hard. too risky, etc. That's irrational. They should be welcoming that cash. Not putting up lots of obstacles. That money would go directly into their economy. But instead it's going elsewhere. Lots of German companies with their headquarters in Amsterdam, Dublin, London, etc.

> If the goal is not to have people create startups, there you have it.

That only makes sense if you think the only reason anyone ever founds a business is to sell it to someone else...

There are competing incentives: on one hand things like creating jobs and driving innovation, and on the other it's the incentive to avoid tax loopholes. I think most people in Europe (I hate generalizing "Europe" but let's say Nordics and Germany) at least would be more upset about the presence of a loophole that for example allowed people to funnel money through a company and lower (what should have been) income tax, than they'd be upset over how much tax policy incentivizes startup creation.

Wait, are you suggesting we do not get taxed for what we're selling? Because in the end selling a company is nothing but selling a type of goods.

Also: >Why would a person who founded a startup, and put countless unpaid hours into building it, then have to pay for the sale as if it were employee income?

Is the same as: Why would a person who created his career, and put countless of unpaid hours into building it, then have to pay for the sale of his knowledge and skill?

> Why would a person who founded a startup, and put countless unpaid hours into building it, then have to pay for the sale as if it were employee income? What would be the incentive for them to have done anything more than be someone else's employee?

I would expect the incentive is the massive payout (even after tax).

If a startup founder would be better off as an employee because they have to pay the same amount of tax then it sounds like it was a bad idea to begin with.

Getting your income through a corporation instead of as a salaried employee is not inherently more valuable for society. We don’t want more startups for the sake of having more startups!

> and put countless unpaid hours into building it

Oh, just don’t mention that to the authorities because they will make you pay for breaching their working hours act. How dare you have a dream and a drive. Get back in line.

Authorities in Germany don’t care. They are the Beamte, the have a special legal status, barely removable from their positions and with a guaranteed high pension. There are two classes of people in Germany: Beamte and everyone else.

imo quite dubious to see the state only as "facilitator/suppressor" of economic activity and not also as a share/rent seeking entity itself. state capitalism is resurgent within a constellation of rampant international economic competition (especially in tech). taxing / fining US domination in tech is a working business model.

> our system actively discourages these transactions

When a foreign company is building a factory, even with tax breaks it's fairly easy to see how it's an investment. I'm less convinced when it's about buying existing businesses, if they are profitable why would you want the profits to be in the control of a foreign entity?

Whether they are initially profitable or not, we've seen what happens in other fields and in particular the industry: after a couple years, the businesses are dismantled and sold for parts.

> by treating business sales like regular income.

But aren't they regular income?

Why should one form of income be taxed at a different rate than some other?

Tax rate too high? Sure, agree. Should all income be taxed at same levels? Yes to that too.

If you make very little money, then you don't pay much taxes. If you sell a company it's income. If that sale is a low amount, it's a small amount of taxes. If you sell it for millions, it's a lot of taxes.

If I buy a home at $1M and sell it for $3M, I'm taxed for the $2M profit. Same if I buy a company for $1M and sell it for $3M then I'm taxed for the $2M profit. Whether that tax is 1% or 50% can of course be a subject of debate, but that it's taxed at all is hardly controversial.

Not sure I'm following the debate here but are people suggesting that if I start a company and later sell it for $3M then those $3M should NOT be taxed the same as If had bought it for $1 and sold it for $3M? Why would that be?

Yep, this is the right take. Somehow entrepreneurs are perceived in the EU as tich freeloaders and not as job and innovation creators who tend to take a lot of risk and go through tremendous pressure while running their companies. I feel the influx of VC money skewed the vision of what it entails to start a company: it is true that the investment slightly "de-risks" founders (emphasis on double quotes!) but that's often an illusion - I don't think people who never ran a company understand the pressure of a founder's responsibility towards their employees, investors, etc... most of the generally very risk-averse Europeans will never grasp this