Oliver Eidel ·
July 08, 2026
German Exit Tax: What To Do Before Your First Funding Round
I recently moved from Germany to Thailand. In the years leading up to the move, I had the questionable pleasure of researching solutions to Germany's exit tax.
I proceeded to read a few books and talk to 10+ tax advisors specialized in this topic. Paid calls, of course - everyone in this area seems to be happy to take your money, as we will see further below.
I ended up solving my exit tax situation. I also went ahead and mapped out all available solutions and published them here for free to democratize this whole thing a bit. You know, um, freedom of movement and so on? I thought it'd be good to help help other founders leave Germany, too, after our politicians seem to have re-created a new "Berlin Wall of Exit Tax" here.
And no, not everyone leaving Germany is an evil tax evader. Life is not about optimizing taxes! Many people move due to their partners, family, better weather, or simply in search of a new adventure in another country.
All my written-up exit tax solutions are here if you're interested.
But what I'd like to write about here is the #1 question which people have asked me in the meantime:
How to set up a company in Germany without getting locked into the country?
So, pausing here for a short moment, it's completely insane that even asking this sort of question has become normal nowadays. But, then again, German politics are working hard on recreating a real-life version of "Atlas Shrugged" in the country, so here we are.
A quick collection of facts and observations:
I proceeded to read a few books and talk to 10+ tax advisors specialized in this topic. Paid calls, of course - everyone in this area seems to be happy to take your money, as we will see further below.
I ended up solving my exit tax situation. I also went ahead and mapped out all available solutions and published them here for free to democratize this whole thing a bit. You know, um, freedom of movement and so on? I thought it'd be good to help help other founders leave Germany, too, after our politicians seem to have re-created a new "Berlin Wall of Exit Tax" here.
And no, not everyone leaving Germany is an evil tax evader. Life is not about optimizing taxes! Many people move due to their partners, family, better weather, or simply in search of a new adventure in another country.
All my written-up exit tax solutions are here if you're interested.
But what I'd like to write about here is the #1 question which people have asked me in the meantime:
How to set up a company in Germany without getting locked into the country?
So, pausing here for a short moment, it's completely insane that even asking this sort of question has become normal nowadays. But, then again, German politics are working hard on recreating a real-life version of "Atlas Shrugged" in the country, so here we are.
A quick collection of facts and observations:
- The German exit tax applies to you if you've been a German resident for a certain number of years and you own >1% in a limited-liability company (foreign companies included!).
- Historically, the German exit tax has been made more restrictive with every change, most recently in 2022. Until then, there was a small "escape hatch" of moving to another EU country and only paying the exit tax when you actually sold your company, which was somewhat reasonable. This is no longer possible, so the exit tax always applies as soon as you leave Germany.
- The company valuation and therefore exit tax calculation can be very high, especially for VC-funded startups. This leads to the real problem that founders, who might not even be paying themselves a salary, are faced with an insurmountable exit tax sum which effectively forces them to stay in the country.
Okay. So you're about to raise funding for your startup, you're in Germany, and you're thinking about the exit tax. Let's think this through.
An example situation first!
Example #1: VC Founder Dude Who Can't Leave
A Founder Dude has founded a company in Germany (a GmbH). No real revenue yet as he's just prototyping things. But now he gets VC investment at, let's say, a post-money valuation of €2M.
One year later, the Founder Dude wants to move to the US to work on the US expansion of his startup. It turns out that the exit tax is ~€600k (30% of €2M). The Founder Dude hasn't paid himself any salary so far, so he doesn't have the cash to pay for this.
The Founder Dude is forced to stay in Germany.
As an adjacent side note, this shows that the German exit tax was actually targeted towards "wealthy German owners of stable profitable family businesses who move to Switzerland for one year to sell their business without paying capital gains tax". For these people, arguably, the current exit tax is a somewhat workable solution (albeit with a flavor of craziness).
Still, for these people, paying 30% tax on their business valuation is possible because the business is usually profitable and stable, and the founders are often wealthy (as in liquid wealth).
For startups with VC investment, this is absolutely not the case:
- Founders are usually not wealthy: Most of their net worth is tied up in their startup and therefore illiquid; their actual liquid wealth might be low or negative (no salary etc.).
- Investment-driven startups are usually not profitable: Founders usually are not paying themselves a salary in the beginning, so there's no realistic way they can pay the tax.
- Investment-driven startups are usually not stable: After raising millions in year 1, the startup might be worth €0 in year 5.
The last point is worth highlighting. The German exit tax is based on your company's valuation at the time of your departure from Germany. This by itself presents an opportunity for crazy things to happen.
Example #2: VC Founder Dude Who Goes Bankrupt
This is a variation of Example #1:
A Founder Dude has founded a company in Germany (a GmbH), gotten VC investment at €2M post-money valuation, and decides to move to the US while agreeing to pay the €600k German exit tax.
One year later, the company fails and goes bankrupt, it is now worth €0.
The Founder Dude still owes the German tax office €600k, because the exit tax is based on the company valuation at the time of his departure from Germany.
As you can see, for startups, the German exit tax calculation at the time of departure is highly problematic for investment-funded startups, where valuations often swing significantly over time - in both directions.
So those are the typical problems. What about solutions?
Solution #1: Move Away
The first, obvious and easy solution is to just move away from German beforehand. But the implementation of this is often actually a bit tricky.
Best case, you move away before you found your company. This is the 100% clean solution, and it carries near-zero risk for things going sideway (at least regarding the exit tax), because you're simply not covered by the German exit tax if you don't own >1% in a limited-liability company.
But, aside from this clean solution, founders might be in various less-clean situations. The most common one is that you've already founded your company and you have an acceptance letter / LOI from an investor (e.g. YCombinator acceptance letter). So money hasn't been paid in, but you will likely receive investment money soon.
In this case, you could (should?) leave Germany before your investment arrives, because shorty later, the investment will inflate your company valuation and German exit tax sum tremendously.
But the bigger and more tricky question is this one: When does your company valuation go up? When the money is paid in? Or before that, when you got the acceptance letter? Or even earlier, when you built the prototype of your product which landed you your investment in the first place?
And indeed, these questions might be posed by the German tax office. So moving away before the money arrives might not save you from discussions with the tax office.
In a YouTube video which recently went semi-viral, a German founder who paid €30M in exit tax recounts his experience with the tax office where they tried to argue that the company valuation of the recent investment round was too low, because the company was sold one year after his move for a higher sum. So, at the very least, there's some anecdotal evidence that the tax office likes to try their chances in arguing for higher valuations.
In summary, if you don't manage to move away early enough (where the definition of "early enough" is very murky, as we've seen above), you might be locked in Germany for a while.
And in that case, you have to move on to the mediocre solutions below.
Best case, you move away before you found your company. This is the 100% clean solution, and it carries near-zero risk for things going sideway (at least regarding the exit tax), because you're simply not covered by the German exit tax if you don't own >1% in a limited-liability company.
But, aside from this clean solution, founders might be in various less-clean situations. The most common one is that you've already founded your company and you have an acceptance letter / LOI from an investor (e.g. YCombinator acceptance letter). So money hasn't been paid in, but you will likely receive investment money soon.
In this case, you could (should?) leave Germany before your investment arrives, because shorty later, the investment will inflate your company valuation and German exit tax sum tremendously.
But the bigger and more tricky question is this one: When does your company valuation go up? When the money is paid in? Or before that, when you got the acceptance letter? Or even earlier, when you built the prototype of your product which landed you your investment in the first place?
And indeed, these questions might be posed by the German tax office. So moving away before the money arrives might not save you from discussions with the tax office.
In a YouTube video which recently went semi-viral, a German founder who paid €30M in exit tax recounts his experience with the tax office where they tried to argue that the company valuation of the recent investment round was too low, because the company was sold one year after his move for a higher sum. So, at the very least, there's some anecdotal evidence that the tax office likes to try their chances in arguing for higher valuations.
In summary, if you don't manage to move away early enough (where the definition of "early enough" is very murky, as we've seen above), you might be locked in Germany for a while.
And in that case, you have to move on to the mediocre solutions below.
Solution #2: Apply For a Deferral
Two useful things to know:
- If you move back to Germany within a certain number of years, you get the exit tax back.
- If you plan to move back to Germany, you can apply for a deferral of the exit tax payment.
So this means that you leave Germany, apply for a deferral of your exit tax payment, and come back within a certain number of years. You "only" pay the interest on the deferral (and, no surprises here, the interest rate is high).
It's a viable mediocre solution.
This of course assumes that you indeed come back to Germany as otherwise you're screwed and have to pay the exit tax plus interest in full.
Solution #3: Fancy Setups
If you've already received funding and your company paper valuation is high, the only remaining solution I found during my research was to go for one of the mediocre "fancy setups", as I call them.
All of these involve restructuring your shareholdings in a way in which they are no longer covered by the German exit tax. All of these are legal, and they each come with their own benefits and drawbacks (mostly drawbacks, really):
All of these involve restructuring your shareholdings in a way in which they are no longer covered by the German exit tax. All of these are legal, and they each come with their own benefits and drawbacks (mostly drawbacks, really):
-
Found a GmbH & Co. KG instead of a GmbH.
(or: move your existing GmbH into a GmbH & Co. KG holding company)
Benefit: No exit tax.
Drawback: Requires German managing director (not you), any future company sale will be taxed in Germany, which including any increase in value after your departure (!), any future dividends will be taxed in Germany. -
Found a German trust which owns your GmbH.
Benefit: No exit tax.
Drawback: Trusts are complicated. You need a German manager of your trust. A trust pays inheritance tax on all its holdings every 30 years. Yearly fixed costs. -
Found a Liechtenstein trust which owns your GmbH.
Benefit: No exit tax (but moving an existing GmbH there might actually incur exit tax - it's complicated), no capital gains tax, no inheritance tax (benefit of Liechtenstein).
Drawback: Trusts are complicated. You need a Liechtenstein manager of your trust. High yearly fixed costs of €10-30k. This sort of setup might draw some scrutiny from the tax office. You likely have to pay a German tax advisor €10-90k to handle the setup and communication with the tax office, especially when the tax office starts asking questions.
The obvious question is "hey, why not structure my shareholdings like this before I found my company and raise investment?"
And the obvious answer is "yeah right, how does it feel to set up a Liechtenstein trust costing you 10-30k€ / year minimum just to try out your nifty SaaS idea where you don't even know if one person will pay you 49€ / month?"
So it really boils down to whether you want to commit to all of these fixed costs associated with the mediocre fancy solutions. And, of course, there's the inherent "life complexity" incurred by all of these. Ask me how I know, I went for the GmbH & Co. KG solution and now own 3 companies in Germany (I am not rich enough to delegate my entire day-to-day company (and life) management to a salaried person, unfortunately).
So all these mediocre fancy solutions are, well, mediocre. What they have in common is that you get to "pick your poison" of which middlemen to enrich: A random bunch of dudes in Liechtenstein? One of the few German tax advisors who knows how to set up German trusts? One of the few German notaries who knows how to incorporate a GmbH & Co. KG? Etc.
So yeah. If you're about to raise capital and might want to leave Germany in the future, the simplest solution is to leave before you raise. Otherwise you might be locked in for a while.
By the way: Are you also dealing with the German exit tax? Send me a message here, or message me on LinkedIn - I'm always interested to talk to people like you and happy to share my experiences :)
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