Subnostr

I've seen a little discussion on the tax on unrealised gains. It sounds like a horror show for sure but I can attest to the fact that it's MUCH worse when it actually happens to you.

Set up company with some friends, get my ideas coded into a piece of software. Launch, not quite success but eventually sell. Deal is part shares, part cash and the purchaser wanted us truly vested in. I went 60% cash / 40% shares. Shares are in a private company and cannot be sold.

When I came round to tax time, my accountant informs me I have to pay tax on the full amount (i.e unrealised gains) and it was in Spain so top rate 45%. Should take too much to figure out I wasted years of my life setting up a tech company only for the government to take everything off me. I still have those shares I suppose and one day, maybe I'll be able to sell them, who knows? At least am not in Spain any more cause guess what? If I could sell them, and I lived in Spain, I'd pay tax again on that.

If they tax unrealised gains, 1929 market crash will look like a sunday picnic. In the mean time, if you are an entrepeneur, make sure to take a little time to check all the fine details in local tax code or you might be working ONLY to pay the salary of some public sector thief!

#tax #economics

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Discussion

JT 1y ago

Unless I'm reading this incorrectly, you sold your ideas/property? That's literally a realized tax on capital gains, regardless of the time period.

JT 1y ago

In will wholeheartedly agree that regardless of when the asset is sold, receipt or inital purchase cannot and should not ever be a consideration.

That said, whatever you received in shares must have had value, so wouldn't it be earned income and not unrealized capital gains? Or does that work differently in Spain?

El Guiri 1y ago

If something cannot be sold, I personally don't see how you value. However main point is my pertners were only taxed on the cash portion. They were taxed on actual realised cash portion. Rather a massive difference from me giving pretty much everything to tax man and them going off and buying second houses. All good fun!

JT 1y ago

Private company shares or not, you received those assets as compensation for the services you rendered, which would have been considered earned income. Seems like that isn't well understood, but that's exactly how it works here in the US. Is that how it works there?

If your partners weren't taxed on those items, I don't know what to tell you, maybe you should've asked them.

El Guiri 1y ago

My partners were not in Spain. They were in UK so totally different. Personally I don't understand anything when it comes to taxes. In spain it just seems to be go work, give everything to someone else and be grateful for good food. They were in UK and paid entrepeneurs tax of only 10% and only on cash portion. I stopped caring when I started stacking sats and left europe.

JT 1y ago

Ex-Pats still have to pay taxes on their income and assets for Spanish employment and investments. Sounds like you were in a situation where some straight tax education was sorely needed so you did understand.

Sounds like your accountant squarely fucked you, IMO. Your cash would've been taxed, then the shares you acquired would've been considered earned income. So yeah yould pay tax on all of that and yes Spanish rates certainly look horrendous.

Glad you're on the stackin' train!

El Guiri 1y ago

I went to 3 accountants prior to all of this and none of them knew about these regulations. That included PWC. I don't know what one is supposed to do in Spain to be honest. I once heard my wife talking to the tax man there (she's spanish) asking what to write for a particularly obscurely written question after they put in the regs a few years ago that one gets fined per error on a return. The lady on the phone said she had no idea, got her boss and she had no idea. The tax office literally had no idea how to fill out tax forms

JT 1y ago

Government is finding out the right hand had no idea the left hand even existed.

Clear-cut 'Government Efficiency', I'm sorry you went through that stupid rodeo.

El Guiri 1y ago

It's all good. I put my ideas into a really cool and ground breaking piece of software. We never truly made it as we got beaten in the market by another company but I have put the packages head to head and still know I made the best software for what I do that available. Satisfaction there and when you've been stacking sats a while, the financial side is meh!

El Guiri 1y ago

There's another element here. One of incentive. My situation finally incentivised me to move to somewhere I had considering reloacting to but had been putting off. It also further incentivised me to start other businesses to try to recover the lost time. I now have another business which is, whilst not huge, very successful and provides lots of employment, as well as another couple that I've invested in and given a little help with. I am currently looking at trying to set up another whilst at the same time, trying to encourage some friends to look at the idea of pooling together to pay for some devs to try developing a new little idea for nostr. One can take a beating from thieving government and give up, I've seen that in some people in Spain who simply stopped trying to expand businesses due to the hellish environment there; or one can take the punch, get up and be more motivated. That's a personal choice

JT 1y ago

Something tonget you started.

El Guiri 1y ago

You are too kind sir. I will pass that on to devs. 🫡

El Guiri 1y ago

Sorry, was multi tasking which is never a good idea. I'll make it as hypothetical example of what happened to me. Say myself and the programmer I worked with got a million bucks each and took 50% cash/share split.

My tax was 48% of 1m = 480k and I got to take 20k. When I come round to sell the shares, am not sure (neither was my accountant) whether just the 20% capital gains or again as income it would have been sell for 500k (assuming no gains) and pay 100k or 240k tax. Total tax of 580k or 720k.

He paid 10% entrepeneurs tax so 50k and then would have had to pay capital gains at 20% on the sale of shares or 100k. Total tax 120k.

Whilst I understand it was a very strange situation that I had not known about as it's very obscure, it still shows how bad it can get. In this case, I lived in Spain which was party to a tax agreement made within europe on taxes on sales of companies registered in USA. Spain pulled out of the agreement a few months after signing and that's where it sits right now.

JT 1y ago

I think you were taken for a ride there honestly.

You'd have been taxed on the 500,000 cash at 45%, and then the 500,000 dollars or shares would've been the capital gains cost basis,, so you'd have paid that tax rate (saw 37% tossed around for >300,000). When you sell assets that is when realized tax comes into play.

It doesn't sound like this was an unpaid unrealized tax, really looks like earned income to me, and that you were double-taxed somewhere. That really sucks.