šŸ” What European tax residency is most favourable for a remote worker / freelancer?

Tax and legal
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Hello Everyone,

Iā€™m looking for advice on where to establish residency for myself, and how to legally tax optimize for my circumstances. Iā€™m willing to relocate myself and get a residency / spend time wherever a suitable location can be found. Iā€™m ultimately looking to invest as much as possible of my earnings, so cheap is good, but a nice location on top of that wouldnā€™t be bad either :wink:

I work remotely for a Scandinavian company, but get paid as a contractor charging a bit under 10.000EUR / mo + VAT, so Iā€™m free to plan things as I like. Iā€™m however constrained to stay in a time zone where I can be available during regular European working hours, but could potentially be fine with something outside the EU/Schengen as long as itā€™s not too sketchy.

What Iā€™ve looked into so far:

Poland: Seems like a great place given that B2B contracting work can, with the right scheme as I understand it, be taxed at just a 19% flat rate with fixed, low social security cost, so you even get access to health care. Iā€™m also seeing good opportunity to invest in real-estate here.

The low cost of living is excellent, and itā€™s somewhat neutral culturally for me as a Scandinavian. Things also seems fairly straight-forward to set up and hand off to a Polish accountant since itā€™s a popular model also for locals.

A small disadvantage is that this scheme does not allow tax deductions, but I do web dev so I donā€™t have too many of those anyway.

Estonia: Iā€™m intrigued by setting up a company via e-residency here until I settle on an optimal tax situation, taking advantage of their tax on distribution rules.

Does anyone know if I can simply pay myself a salary elsewhere in Europe and not be subject to corporate tax in Estonia, or will I always be liable for at least the 20%? According to Salaries for e-Residents, The Ultimate Guide thereā€™s no longer any hassle with board-member salaries for sole proprietors, which seems like a nice development.

Malta: Does anyone have experience with living in Malta. How much taxation can you expect to avoid? How should I set things up legally in order to take advantage of the territorial taxation in Malta?

Bulgaria: Also seems interesting. I know very little about it, and would have to hand things off to a local professional accountant. Does anyone have any numbers on how much you could expect to take home, and what the best legal structures are in Bulgaria?

Do you have any other recommendations? Iā€™m not too experienced with running my own business yet, so as many details as possible + concrete/tested setups are super appreciated, I prefer to not get too creative :smiley:

Regards & thanks for any advice,
Philip

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Poland is going very well and investing in local properties sounds very good and not difficult. Taxes are not high but it is not a low taxation country. If you can copy with the culture and language, it sounds a good option.

Probably Malta is the best option since remittance-based taxation. A 100% legal solution is to have a Maltese company with a Cypriot holding company, corporate tax will be 5% (you pay 35% but you got back 30% after few months). Otherwise if you have a company abroad you will pay money you will take in Malta, usually 15% of taxes, but it depends on how much you will take in. However, if you company abroad is controller 100% by you, in theory the company should pay corporate tax in Malta.

I know there is a Portuguese non-dom programme, you could stay in Portugal without paying taxes.

An Estonian company has to pay 20%, but if you reinvest the profits, you pay 0%.

Cyprus, IOM, Gibraltar, you pay 0% of corporate tax, if you do not live in the country where the company is incorporated. However, you sitll have the problem that if you are the only person in significant control, you are supposed to pay the corporate tax where you live, but it depends on the country you live.

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yes Malta seems to be the best option. I have the same information from friends living there. A Maltese company with a holding company in Scotland.
Corporate tax will be 5% (you pay 35% and Malta give you back 30% ).
You canā€™t send the money back to Malta or you will have to pay taxes. But usually people living there use a credit card from a bank in Gibraltar.

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@angeldavid @Riccardo_Tacconi Thank you for the info. Do either of you have a recommendation on how to get in touch with someone who would know how to set things up in Malta?

Iā€™ve had some concerns about the new EU directives that forces member countries to set up stricter CFC regulation (as described in e.g. TaxAlert: Implementation of the Anti-Tax Avoidance Directive into Maltese tax law) but it does seem like this may only apply to companies with profits a over EUR750.000, so this may not be a problem for me, but Iā€™d definitely want some good professional advice if I were to go this route.

Philip

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I was talking with
Sebastian Sauerborn sesauer@stmatthew.co.uk

You can say you come from me. he should remember me.

St Matthew Chartered Certified Accountants
Becket House
36 Old Jewry
London EC2R 8DD
http://www.steuerkanzlei.co.uk (English and German)

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Hey!

Iā€™m residend myself in Bulgaria and I work for an accounting firm in Sofia (Adversaria).

The best legal structure in Bulgaria is to have a LTD where you pay 10% on the profits + 5% on the dividends, thatā€™s it.
For your personal taxes (you donā€™t need to pay those on the company dividends) are more or less 25%.

I could be biased, but I think that is really interesting for a digital nomad to be resident in Bulgaria and overall to have a company here. The taxation is very good and the burocracy is very smooth.

I hope that helped, have a nice weekend!

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I can recommend Estonia and Poland. Now from August 2019 every young person ( up to 26 years old ) - if case of living in Poland ( polish tax residency ) - does not pay social security, healfth care and taxes up to 85,000 zł = ~ 20 000 EUR per year ( employment).

He can run the Sp. z o.o. (ā€œLTDā€ company) and be employed in your company.

ESTONIA:

e-residency card + company + legal address in Estonia
but remember - salary ( grounds of employment ) should be taxed in general rule
in the place, where the work is performed - not in Estonia.

Otherwise -director;'s fee are fully taxed in ESTONIA - social security ( if you do not present A1 certificate ) and Income Tax.

The best method is not paying salary and directorā€™s fee - acummulate profits - reinvestments and ā€¦

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Czech Republic is a good low-tax option to operate a Sole Trader, as they only apply 15% income flat tax, no matter how much you make. I think itā€™s within the EU countries, the lowest tax rate for individuals. Of course, there are lower taxes in some countries if you operate with a company + dividends scheme, but the overhead of registering, operating and maintaining a company is considerably higher than merely operating a Sole Trader individual.

Hungary is not bad also.

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You can also take a look at this site that compares different freelance taxes across countries with life cost per city.

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Excellent site.
One questionā€¦ Iā€™ve checked Spain, for instanceā€¦ Over 4000 euros monthly income, it says you have to pay 1132 for pension, monthly!! is that right? anyone knows?

Thanks!

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Hi Alipang,

Itā€™s been a while you asked this question. I am just seeing it and thought to give you a different option to consider along with all the other good options above.

Consider territorial tax countries. This way, all your earnings form outside the country is tax free legally. Most of these countries are not on the same time zone as the EU but to your advantage, many of them are ahead meaning you start later in the day and the cost of living is way much cheaper than living in the EU. Without going into much details, I offer you Georgia, Armenia, Thailand and Cambodia.

With the money saved from your lifestyle in any of these countries added to your tax savings, you should fast track your financial freedom.

Hope I have given you and others interested in the same thing some good ideas to think of.

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In Russia, a private entrepreneur pays a 6% tax if the profit does not exceed $ 2 million dol US per year. For life, you can choose the city of Kaliningrad, almost a European city. Medicine is free; paid is not very expensive. Difficulty in obtaining a residence permit, but a small problemā€¦

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Kaliningrad sounds interestingā€¦
If you have capital to invest ($250,000 for real estate, or $ 500,000 for investment funds) to gain Citizenship by Investmentā€¦then Turkey is a very clean solutionā€¦ 0% tax liability for non-resident citizens, and no residency requirement for Citizenship by Investment. The currency risk is manageable simply because properties in the right locations all have ā€˜dollarisedā€™ valuations, and investment funds can be selected to benefit in a weak Lira environment, the financial markets are sophisticated and there are plenty of tools to manage the risks effectively. So once having the passport, it is (was?) an easy luxury to be spending time in neighboring Cyprus, Greece, Bulgaria, etc etc especially since there is an abundance of holiday property in these locations that can be rented very very cheaply in the off season.
The information given above on Bulgaria is not correctā€¦ the tax rate is not 25%, it is 10% for corporate and personalā€¦ yes of course there are social security tax top ups to pay but that does not to equate to 25% etcā€¦ and the best form of comapny is not LTDā€¦ that form gets you high rates of maintenance fees from accountants etcā€¦ the best form is the equivalent of a UK LLP, I think its called an EOD or EOODā€¦ and if you have an LLP in the UK for example, then yourself and that LLP becomes partners in the EOD for pass through tax liability ā€¦ no corporate dividend accounting requiredā€¦ there are also forms of proprietorship, and special registrations for freelancersā€¦ all in all, it is a really good tax regime, (if you steer clear of high charging accountants and misleading advice) and a very low cost of living, with great internet infrastructure, a high standard of living for basic things like quality of food and drink, natural environment, housing availability, social life, and easy transport access to the Mediterranean, Greece, Istanbul, etc Im referring to South West Bulgaria and NOT the Black Sea coast- (to be avoided). and getting residency for UK and EU citizens is very fast easy and cheapā€¦
So if you have capital, then you can settle your tax rate at 0 % in Turkey for lifeā€¦ and live between the Greek islands and where-ever elseā€¦ if no capital, then Bulgaria at 10% and live likewiseā€¦ if you pm or email me I am happy to help but usually with some delayed responseā€¦ alternatively I am happy to recommend servcie providers to do various thingsā€¦

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My experience of Malta, Cyprus, Bahamas, Gibralter, and other 'tax advantaged locations including UAE is that the tax rates may be low but the fees paid to professional advisers are big so that if you are earning less than $30-40,000 the net tax savings are consumed by advisers fees to stay in compliance where-as if you simply use a UK LLP and pay tax after allowances and expenses you are prrobably better offā€¦

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Not sure what we can do about this now but Schengen is closed amid COVID-19 outbreak. I think it could be that Schengen is overā€¦ so EU will work on a new agreement after COVID19 completely disappear.

France is looking to close its border for at least one full year. and I think the majority of other countries around the world will do the same.

Well, if you work as a web dev, I think you can set up a company in Panama or Caribbean.
They charge 0% tax on foreign incomesā€¦ so as long as your company is not making money from Panama or Caribbean countries, youā€™ll be paying 0% tax.
Iā€™m not sure which country will let you avoid residency-based tax. Maybe you can buy a permanent residency from other country which wonā€™t charge you foreign income tax and residency-based tax?

Then you can avoid paying any tax to anyone. :grinning:

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As you said, if you have to stay in your country, you are blocked. There are many jurisdictions that have corporate tax at 0%, but you are still supposed to pay corporate tax in your country because your company is seen as a local company.

The other question is if your customers will want to deal with a company in Belize or Panama since they have a poor reputation. Panama is in the EU non-cooperative list, Belize seems that it was removed in 2018.

https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/

They other factor is if the shareholders and director a public, a UK LLP or LTD are completely public, including all filings. Delaware, Nevada , Belize are not.

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Reinventing Schengen is nonsense. Some of the photos in the link you left greatly illustrate how some borders are just not meant to be there and the lockdowns of country borders just go along with the internal lockdowns that some countries are enforcing. Curfews are introduced or print-at-home documents that citizens need to fill out before venturing out.
Any permanent border closure will affect everyone and it defies the purpose of the EU. Iā€™m sure once the the coast is clear people will be the ones asking for the free movement again.

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Well, if youā€™re a CEO / service provider of your own small business, I think it doesnā€™t matter where your company is located at. or you can work as a freelancer contractor. As long as youā€™re not residing in Panama or Caribbean, Itā€™ll be alright.

So, I think you can try to find a country which wonā€™t charge you foreign income tax.

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Say you live in France, you are the only owner of a company, then for France (but it applies to most of other countries) says that the company is controlled from France, so the company has to pay the corporation tax (companyā€™s tax) in France. Personal taxes is another thing, are paid where you are resident.

There are many people thinking: I find a jurisdiction where companies do not pay any tax, so I can avoid to pay the corporation tax. Thatā€™s wrong. I think, if you live in the principality of Monaco you can do that, and may be in other few places, but Monaco is a place for millionaires.

It will be alright if nobody will find out. It will be probably fine since governments are looking for people making millions of tax evasion, looking for small tax evasion is more expensive than the money they can recover, especially with offshore companies, since they have to start to talk to another countryā€™s tax man. However, this does not make it legal, itā€™s tax evasion in most of the countries.

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I wasnā€™t talking about moving to any part of EU. EU wonā€™t be helpful for avoiding taxes.

So here are two steps:

  1. Set up your company at a country which its government donā€™t charge foreign income tax i.e. Panama, Caribbean

  2. Move to other third world country where they donā€™t charge tax based on your companyā€™s income at Panama. This can be anywhere in third worldā€¦

but youā€™ll need to do some research. Since you can work remotely with your clients, it really doesnā€™t matter where you go to. You just need to find a country which its government wonā€™t care about your paper company in Panama. Then youā€™ll be all set. Youā€™ll need a permanent residency in that countryā€¦

and I recommend using offshore bank accounts in countries like Georgia. So your Panamanian paper company will send its income to your offshore bank account in Georgia. And youā€™ll be living at places like Cambodia.

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