Exit tax: Tax office examines VC investment valuation
🇩🇪 Auf deutsch:
Wegzugsteuer: Finanzamt schaut sich VC-Investmentbewertung an
An interesting data point I've heard from several founders: It seems tax offices also like to look at company valuations in the last Venture Capital (VC) investment round for startups.
This is maximally disadvantageous, as these valuations are partly absurdly high and realistically no startup is truly "liquidly" tradable at such a valuation.
Quick example: A startup that is unprofitable but was valued at €4 million in the last investment round. One of the founders wants to move away from Germany and holds 25% of the company.
This is maximally disadvantageous, as these valuations are partly absurdly high and realistically no startup is truly "liquidly" tradable at such a valuation.
Quick example: A startup that is unprofitable but was valued at €4 million in the last investment round. One of the founders wants to move away from Germany and holds 25% of the company.
- Valuation using the simplified capitalized earnings method: Factor 13.75 * €0 profit = €0. The valuation would likely be limited to the asset value (hardware, office items, possibly software, etc.). Here, the valuation would realistically turn out very low, especially since one could still deduct a customary managing director's salary (guide here).
The problem is that tax offices apparently do not accept this valuation precisely for startups, even though this common method is accepted for all other companies. - Valuation based on the last investment round: Valuation of €4 million * 25% founder's share = €1 million. On that, just under 30% exit tax (simplified capitalized earnings method) = approx. €300k exit tax.
And this apparently happens in reality.
This situation is highly problematic for startup founders planning an upcoming investment round, as at the time of the investment and thus high company valuation, these founders likely can no longer leave Germany.
So if flexibility is important here, one would have to advise these founders to move away from Germany before the investment round. However, most likely do not have this on their radar.
It is particularly problematic for these founders because they:
- Usually have few liquid funds and do not pay themselves a salary - the high exit tax must therefore potentially be paid from a loan or a 7-year installment plan agreed with the tax office.
- Often also have no budget for more complex structures, precisely because they do not pay themselves a salary - thus possible solutions like the KG-Holding and Liechtenstein Foundation are often ruled out.
In summary, I can only say that I am glad not to have founded a VC-funded startup, as I have gained the impression that one really has the absolute worst starting position regarding the German exit tax.
Compared to a profitable company, it looks like this:
- You have no cash flow to finance a structure (e.g. KG-Holding).
- You can hardly "calculate down" the valuation of the company (article here), since the valuation through the investment round is usually already absurdly high.
- You cannot trivially sell the shares, as you have all sorts of entanglements with your investors. For example, if you owned 100% of a boring, profitable GmbH, you could "spontaneously" sell it, provided you could find a buyer. But as soon as you have investors on board, this is no longer so easily possible and you are practically stuck with your shares.
Realistically, in my research, I ultimately found only the KG-Holding as a possible solution for the situation, and even this comes with some running costs - for instance, one must maintain a permanent establishment in Germany (office?) and employ a managing director on site (salary?), etc.; an open question here could still be whether it would be possible to optimize costs here with a "minimalist" setup, then it might become interesting.
For all other founders of startups with VC investments, the following probably applies: Leave Germany beforehand, otherwise you are stuck in Germany for the next few years until you have either sold your company, it has gone bankrupt, or you have enough money to afford one of the structures.
By the way: Join our Telegram community to exchange ideas with other people who have solved the German exit tax for themselves!
Dr. Oliver Eidel
Ich bin Oliver und bin Unternehmer aus Deutschland - mein bekanntestes Unternehmen ist OpenRegulatory, welches eine Compliance-Software für Medizinprodukte-Hersteller anbietet.
Seit 2025 musste ich mich mit der deutschen Wegzugsteuer auseinandersetzen, da ich nach Thailand auswandern möchte. Auf dieser Webseite teile ich meine Erkenntnisse, die ich mir relativ mühsam durch (teure) Gespräche mit Steuerberatern erarbeiten musste. Hoffentlich spare ich dir dadurch Zeit und Steuerberatergebühren! :)
Seit 2025 musste ich mich mit der deutschen Wegzugsteuer auseinandersetzen, da ich nach Thailand auswandern möchte. Auf dieser Webseite teile ich meine Erkenntnisse, die ich mir relativ mühsam durch (teure) Gespräche mit Steuerberatern erarbeiten musste. Hoffentlich spare ich dir dadurch Zeit und Steuerberatergebühren! :)