I am a bit lost right now and could do with some help.
I live in Spain and work partly online, mainly for German agencies who send me to France, Germany and Luxemburg.
Now, I opened an LLC in Georgia, hoping this would attract more potential clients rather than just working freelance.
I pay my taxes in Germany, 42%. I have never used my LLC.
Could anyone help me optimize a flag strategy? I read so many good ideas but I want everything to be 100% legal and clear.
Thank you in advance for your help!
Because you are dealing with Spain and Germany, I would recommend you hire a tax attorney in Spain to help you. This is because the tax system in Spain is complex and easy to run into problems if you don’t know the details.
With regards to the flag strategy, opening a Georgian LLC is a nice idea but you have to use it for the strategy to work. Also, living in Spain nullifies most of the advantages of the Georgian LLC. The best countries to live in are zero tax and territorial tax countries when using the flag theory.
It appears that you are being taxed in Germany (at source) as you are paid as a professional service provider and not as a business. Again this is where it is better to talk to a tax attorney not just to ensure that you are on the right side of the law but avoid having any embarrassing conversations with the German agencies who send work your way.
You may also want to talk to a Spanish lawyer about the double taxation treaty between Spain and Germany to ensure you are on good footing as you are currently a resident but earning and paying tax outside the country.
Thank you! That’s an excellent idea.
I was also thinking of opening a new bank account, since I will get paid in Euros and in Europe. From there, I can transfer it to my business account in Georgia and not pay all the transfer fees.
Do you have any ideas of where to open a bank account? If possible, online! Most important for me is that the agencies that pay me have a very simple procedure.
Thank you so much for your support, Akan.
Please, do not misunderstand me. I am fine with paying taxes when they are fair. I pay 42% taxes of my gross income, work 12 hours a day, 7 days a week, no holidays, no old pension fund and can hardly pay my bills. The agencies I work for have halved the money they used to pay me before covid-18.
If only, I paid less taxes, I could survive. So, yes, I am looking for a way to halve my taxes so that I can afford a month off per year. What legals ideas would you have?
Thank you in advance.
As Akan noted, it’s hard to avoid taxes if you live in a country that doesn’t have territorial taxation (or no taxation at all for its residents). If you can, move to one that does: Georgia, Panama, Hong Kong (where I live), Singapore, Malaysia… Also Japan, as long as you don’t become a permanent resident.
You can easily open accounts with N26 and Transferwise. You will get less stress than if you opened a regular bank account and will benefit when using their debit cards when traveling. You should look at opening both a personal and a business account as you should keep your personal and business funds separate.
The agencies would love paying to your N26 or Transferwise as it would be a local transfer for them.
You clearly have no issues with working hard, because you are open to relocating, consider living in countries like Georgia, Armenia, Turkey, Bulgaria, Serbia and if you can Malaysia/Thailand (so you can have as much fun as @enzomich is having while working). Doing this can help you reduce your cost of living without reducing the quality of life you desire and are used to.
The savings you make can be used to invest in a retirement plan. Take a look at higher interest rates being paid in Georgia and Armenia. Take a look at investing in index funds, mutual funds and real estate investment trusts (REITs). The idea is to use passive income to build your retirement fund. Read about the 50:20:30 rule and see how you can use it to help plan your business, savings, investment, retirement and emergency funds.
Look up Dave Ramsey, he has a lovely body of work called “financial peace university” that I highly encourage listening to.
Use your Georgian company to conduct your business. This may reduce or even eliminate your tax depending on where you live or how you plan your flag locations. You can use it to get residency in Georgia but travel/spend time in your flag countries. Since you work mainly online, look at the possibility of spending one to three months in each of the countries you would consider using in your flag plan. This gives you the holiday you have not been giving yourself for all these years while you are still working as you desire.
While I understand from personal experience working 12 hours a day for 7 days a week, please consider a work life balance. Throw in some activities for fun, fitness, hobbies/art. Make time to unwind and for friends/family. Reward yourself for working hard.
You are welcome Mario, glad what I wrote is helpful. As an EU-Citizen, you have visa free entry to Serbia. This immediately lets you add it to your flag plan. Now while being able to pop in and out is fine, you can easily get residency by buying property there. The most expensive town would be Belgrade and you can buy a flat in the city center for as low as 25,000 Euros. Maintaining this residency for 4 years lets you get permanent residency and later their passport.
Now all you have to do to maintain a tax non resident status is for you to stay no longer than 6 months a year. So for the benefit of other countries, you are legally a Serbian resident but you don’t live there long enough to pay any tax there.
Serbia taxes your world wide income and is a non CRS country. It can offer you a very affordable base at the door step to West Europe with abundant organic food, great and friendly people and very good quality of life and services at friendly prices.
You can rent out your flat on AirBnB when you are not in the country to earn some income just to generate local income and pay tax from there (not that you will need it). The property will gain in value over the years and if you feel like, you can sell it later on down the years at a nice profit.
Thank you so much for your information, Akan!
I really hope, this virus situation ends soon, so that I can travel and find a new residence and/or banking plan. Doing this by power of attorney seems to be costly and full of obstacles.
You’re welcome. While you are waiting, can I bring to your attention the possible investment opportunities you could consider that would enable you make money (online) and no longer need to go to or work in/with countries that require you to pay tax or have high tax rates.
Take a look at day trading (SnP 500 Index, Gold, Currencies). You already have the advantage of having a number of countries you can go to that are low cost and have good internet services. You can use the free time from our lack of travel to learn at no cost to you to see if it is something you would like and can cope with.
If you are interested, I can send you study material at no cost. If you decide you like it, I can guide you in getting a demo account to learn and practice with and only opening a real account after you have not only been profitable but maintained being profitable over time.