I am surprised to see Germany so high. Germany is a hostile place to start a company, especially if you are not German, not least because there is the issue of a very harsh and inflexible exit tax. Should you decide to leave Germany, even temporarily, you will be faced with a tax of around 30% of the current valuation of your worldwide holdings in companies. The rules for this became even harsher in 2021. I have obviously simplified everything for the sake of clarity but currently lawyers in Germany are advising people there to leave Germany before starting a company.
I am in the process of trying to understand how businesses work and I have been comparing the realities of starting and running companies in various european countries. Most of the information that I can find is very surface level so thanks for sharing anything that people should be aware of.
A community/forum/subreddit focused on this does not seem to exist. I guess professionals are too busy.
I was also surprised to not see much discourse over Section 174 recently.
But getting back to the point, europe needs to decide if it wants to be relevant or not in the future. As an italian currently living in my country, I can say that doing business here looks like insanity, it's not hyperbole, the environment is as anti-business and innovation as it can be.
HN used to have that but most YC founders migrated to Bookface where there is better moderation and less off topic or toxic conversations (just take a look at this entire comment section)
Also Section 174, while annoying, isn't the end of the world for most founders, and there is bipartisan support for a repeal of it.
> understand how businesses work
You can only learn by doing. Start your own company or land a BizOps related role, but honestly, it's probably easier to make the classic Italy-to-London move
It's probably generally a bad idea to start a company in a country you intend to leave permanently. What's the point of having a company in Germany if you're not in Germany yourself?
Most companies in Germany are probably started by people who intend to stay, or are subsidiaries of international conglomerates, or have not gained enough in value to cause a significant tax burden, so the edge cases affected by the exit tax are unlikely to move the needle on business-friendliness indices like this one. (Especially in comparison to other countries with similar laws.)
You might have a sick relative and want to temporarily spend some time with them. Or you might need to relocate to lead expansion to another market. Or move to the sun after retirement but still keep ownership of some shares to pass on to your children. There are a range of unplanned scenarios that can lead to that. For many, it is not worth the risk.
If you leave for less than 7 years (less than 12 if you file for permission), you're not covered by the exit tax. That should cover anything truly temporary at least.
> bad idea to start a company in a country you intend to leave permanently
Agree if the intention is there from the beginning. Disagree that the inflexibility doesn’t have a cost. Even if you fully intend to stay in Germany, are you 100% sure that’s the best decision for your business? If the answer is no, the law incentivises moving preemptively.
I wasn't trying to say that there is no cost, I was pointing out that the cost is not large enough to affect the ranking on this index. With an index composed of many different factors, you can always focus on one aspect that is particularly positive or negative, but that doesn't mean the overall ranking is wrong just because it also takes other factors into account.
The EIU gives Germany an overall score of 8.35. How much higher should it be if the exit tax were abolished? How much higher if it's not abolished, but deferred until the capital gains are realized?
Germany is hostile to everyone who wants to start a business. You have to check with different agencies/offices and just work it through. A lot of time consuming. Finanzamt, Rentenversicherung, Krankenkasse, Berufsgenossenschaft, Gewerbeamt, everyone has its own rules.
I wonder why the EU hasn't clamped down on it? Surely it is incompatible with the Internal Market (unless by "leaving Germany" you meant "leaving the EU").
Because nobody has sued the German tax office and taken it up to the EU courts yet. From my understanding and anecdotes from my tax advisor, most of these cases get settled by the tax office before going to court to avoid creating a precedent.
The tax office just lost a case at the highest German court against an entrepreneur who moved to Switzerland, which will force them to accept an unlimited interest-free deferral in most cases. See https://winheller.com/blog/keine-sofortige-wegzugsbesteuerun... (in German)
Unfortunately, so far that deferral will most likely come with the requirement for a security, typically cash. That is the prevailing view of tax specialists right now, but will depend on each individual's experience with their local tax authorities.
It's essentially an advance payment of capital gains tax before you have realized those gains (fictionally treating it as a sale from yourself in Germany to yourself abroad). If you just sold off the company outright, you'd have to pay the same tax, but then you'd also definitely have the money to do so.
It was initially introduced by the Nazis and mainly used to seize assets from jews before they were rounded up for the holocaust. So today, smart entrepreneurs do what smart jews did in the 1930s - leave Germany (and the EU), before it's too late. See https://en.wikipedia.org/wiki/Reich_Flight_Tax
That link says that law was introduced by the Weimar Republic, who was debasing the Reichsmark and thus had a need to prevent capital flight, not the Nazis.
The Nazis seemed like they ramped it up rather than introducing it.
Most of the information on this is in German but people should be aware of this before considering Germany as a place to start a company. You can read more here: https://de.wikipedia.org/wiki/Wegzugsbesteuerung or here (English): https://www.winheller.com/en/tax-law-tax-advisory/internatio...