Countries without exit tax

[Don]

There are some ways you can potentially avoid exit tax.⁠

To avoid exit taxation, the following measures are conceivable, for example in Germany:

• Effective domicile⁤ and residence management maintains unlimited tax liability in Germany. For tax purposes, therefore, there is⁣ no departure at all - no departure taxation without a departure.
  
• An upstream gratuitous share⁢ transfer to natural persons prior to the departure may also be considered if, in any︀ case, such a transfer is planned for the short- or medium-term.
  
• Anyone who sells their︁ shares before departing must pay tax on the capital gain. However, exit taxation is then︂ of naturally ruled out.
  
• In addition, an upstream gratuitous transfer of shares to a family︃ foundation which serves to provide for the founder and/or his family is conceivable. Because the︄ taxpayer does not hold shares in "their" foundation, § 6 of the Foreign Transaction Tax︅ Act (AStG) is meaningless.
  
• Furthermore, a conversion of the investment company into a partnership (e.g.︆ a GmbH & Co. KG or a dormant partnership) can be considered. However, numerous special︇ features have to be taken into account here. For example, care must be taken to︈ ensure that no alternative disjunction taxation is initiated in the event of a move abroad.︉
  
• Other solutions
  

 

[baio12]

What does this criteria accomplish?

That is same thing? Exit tax is just capital gain⁤ tax when you exit. Country with no exit tax is if they don't tax capital⁣ gain if you sell after you stop to be resident.

 

[Don]

Exit tax can actually mean⁠ different things.
For example in Estonia or Cyprus "exit tax" is regarded as the Income⁤ tax that is charged on the difference between the market value and the book value⁣ of assets taken out of Estonia/Cyprus at the time of exit if a resident company⁢ transfers these assets to a permanent establishment in another country provided certain conditions are met.︀

But in Germany, when the exit tax is triggered, the taxpayer is taxed as if︁ he had sold his investment, while he hasn't.

 

[baio12]

How they establish market value and who is responsible to do it?⁣

What are the conditions for Estonia and Cyprus?

 

[Don]

This is specific to the jurisdiction.
Basically that assets become non-taxable in the country as‍ a result of taking them out from there. Exit tax might not be triggered if⁠ the move is temporary

 

[JohnLocke]

I would like to see an example, if nothing else a theoretical example, that clearly‌ shows one can establish a company, grow it to a million-dollar business, and then just‍ move it out of a country without being taxed on the company.

It is unclear⁠ to me if the UBO (Ultimate Beneficial Owner) remains in the country from which the⁤ company is moved, or if he moves along. In both cases, I can't imagine one⁣ can avoid paying an exit tax! - But I hope we can see some examples.⁢

 

[jafo]

I second John Locke's motion! 😉

 

[Wellington]

Defined as resident companies - not sure how⁠ that works if the directors are overseas operating a UK ltd that has no footprint⁤ in the UK

Come to think of it most digital Ponzis had a habit︀ of having a UK LTD but operating from say Dubai or where ever - you︁ never see HMRC go after them.

 

[daniels27]

The law is about companies that cease to be paying taxes (i.e. transiting from⁠ resident to non-resident). Hence, if your company is not tax resident in the UK, they⁤ are currently not paying taxes in the UK and thus there also is no exit⁣ tax on hidden reserves. You only need to pay exit tax once and if your⁢ company never was subject to tax, there also cannot be any hidden reserve or goodwill︀ that previously was not "hidden" from taxation.

It is like with FBA sellers IRS is also not chasing them. Why? Because there is︃ nothing to get.

 

[baio12]

I also hope there is example because⁠ countries that were taxing a company expect to get tax when you leave. They will⁤ not let another country get the tax of value you gained in their country.

 

[Don]

Requires some creative thinking⁠

 

[baio12]

Those option aren't avoiding exit tax.‌ It is either paying the tax before exiting or converting to other structure in same‍ country or expecting you to come back so there is no real exit.

 

[Xshore]

Shouldn't this be possible in Singapore? They have some exit⁢ tax on certain pension type accounts, but not on the company and company shares as︀ far as I know. The company can move out of SG and cease to be︁ a SG tax resident if managed from another country. There must be many other low︂ tax countries where this is possible also.

 

[daniels27]

Yes, and they even offset your exit tax⁣ you paid elsewhere as tax credit when the gains are realised.

Hong Kong is another⁢ example where there is no exit tax. Guernsey, Jersey, Isle of Man are imo also︀ not subject to any such tax.

I think the main question is how much the︁ government taxes/valuates goodwill in such as case. Of course they will most likely come after︂ hidden reserves etc. Also, you may be more likely to have a tax audit to︃ check for any other sort of reserve, undervalued stock, etc. This is because your profit︄ is calculated on the companies assets at the end of the year - at the︅ beginning of the year. While it balances out over the years (paying less in 2023︆ will make you pay exactly the same more in 2024), there is no following year︇ to pay more this time. Hence, they will check in more detail.

 

[uplana]

So we have:

• Hong Kong
  
• Singapore
  
• Bahamas
  
• Bahrain
  
• Czech Republic
  
• Seychelles
  
• Belize
  
• Guernsey
  
• Jersey
  

Are these all countries we can come up with?

 

[daniels27]

I am pretty confident about Isle of Man, Kuwait, Qatar, etc. Also, most of the Caribbean's‌ will fall under this. Then, probably most African, Central Asian, Caucasian countries will probably not‍ have clear exit tax laws and worth looking into.

Just be warned, that if you⁠ cannot find a real law, it does not mean that they cannot and will not⁤ tax your hidden reserves, I am quite confident that most countries will. Also, they may⁣ introduce such law at any time in the near future. But in general zero tax⁢ countries are the choice number one.

 

[Xshore]

In the countries that has a corporate exit tax (or similar regime), I assume this‌ is still only relevant for some types of companies? If for example you have a‍ simple ecommerce drop shipping company that doesn't own any physical assets, what would be the⁠ capital gains that the company is taxed on? Maybe a domain name could be viewed⁤ as having increased in value and taxed. In that case maybe it could work if⁣ you personally own the domain name and lease it to the company, as you wouldn't⁢ be personally taxed on the domain appreciation (in some countries).

 

[daniels27]

They typically tax:

• goodwill, in your case it is the brand name, returning customer value,︁ shop reputation, etc. basically what you would ask somebody else to pay when you want︂ to sell
  
• hidden reserves (can be on stock but also for upcoming taxes which won't︃ materialise, etc.
  
• any equity etc. that you own and have not yet sold will typically︄ be treated as sold at that time (for capital gains) -- this won't apply to︅ most setups
  

 

[JohnLocke]

And I agree with you, but I think it's difficult for anyone to establish‍ a legitimate business, for example, in the Seychelles if they have German, French, or Swedish⁠ customers. We're talking about real customers who are used to shopping in national stores, both⁤ online and offline.

Most consumers today check where they are shopping! And business customers do⁣ the same. Therefore, I can't see how one would establish anything serious if they set⁢ up their company in one of the countries mentioned here.

 

[jafo]

Do you mean the B2C business?

Yes, but my experience has been that this is only for new products⁠ with new, unknown vendors.
By providing something others can't.

I have plenty of clients established in Free⁣ Zones worldwide with all kinds of exotic structures, especially in Latin America. They do an⁢ immense amount of business, and many of them earn eight figures per year.

Imagine you︀ went to VitaFoods Europe in Geneva two weeks ago.
Source:





You met suppliers or potential︁ customers with whom you could buy an innovative product or sell them millions of euros︂ of your product annually. Would you turn them down if they were in Seychelles? 🙄

I certainly wouldn't! I wouldn't turn them down even if they were in a Western-hated country.︃ I don't hate them! Hell, if the business is big enough, I am willing to︄ move next door to them. smi(&%

PS. Vitafoods Geneva was awesome! Next year, it will be︅ Barcelona. 😉