Low tax burden life plan suggestion for freelancer

[dziter]

Your only other option is to either move to a different country or to pretend that things are different from how they really are.

I totally agree with what you said. I have a truly respect for Poland and was just hoping it could be different from my origin country. I mean I could improve my taxation ..

1. LLC (salary and dividends are taxed the same in Poland)

I would like to have LLC for liability but there are some big cons in Poland:
- Difficult to close the LLC in case of (ok let's forget it)
- I need a second shareholder with 5% to save some ZUS (ok let's put someone from family, even if I don't like)
- BIG taxes

You have a turnover of 37 000 PLN/month (8400€) and finally in your pocket after personal taxes, you finish with 12 348 PLN (2806€).
It's a "loss" of 67%. It's unbelievable. I mean, nothing is optimised and I am sure it's possible to do something else?

2. LLC + B2B Contract (soletrader)

- Unlimited liability because of the soletrader part
- Needs to maintain 2 structures

All included (company + personal level), it's 10 000 PLN (2300€) taxes per month.
So it's 27% taxation. So basically, I have the same with one structure in France with everything in dividends (SASU IR).

This is the best solution but I still think it's not a good one and not the best possible.

Your only other option is to either move to a different country or to pretend that things are different from how they really are.

Yes, I understood that. I don't want to pretend another reality. I want to get some knowledges and do things legally.

If I am totally OK with that, which countries do you really recommend in my case?

Thank you in advance for your time.

 

[JustAnotherNomad]

Again, if you want to stay in Poland, there is (most likely) no way for you to save taxes by registering a company in France, the UK, Cyprus, Malta, whatever.
However, registering a company in such a country (Estonia would be another option, and possibly a good one) might help you avoid Polish limitations, such as minimum share capital, difficult closing of the Polish company etc. Because you can register a LLC in another country (even in France!), but have it taxed just like a Polish LLC. A good Polish accountant should know all that stuff.
For tax purposes, however, it is highly unlikely it would make a difference. For that reason, it also doesn’t make sense to recommend a country if saving taxes is what you want.
If you want everything to be 100% correct and legal, then only a Polish accountant can help you, but the savings will be small. The Polish accountant should already have experience with such setups, for example a non-resident UK Ltd.
You will probably have more success with your question in a Facebook group for expats or small business owners in Poland than in this forum. I doubt there will be many people on this board who have experience with the Polish tax code.

I think your first calculation isn’t quite right. Don’t you finish with PLN 17,651? That’s just 52.2% in taxes and quite normal for a high-tax country. With such an income, you must be considered really rich in Poland.

You could also look into Xolo Go. I’m not a fan, but maybe it would work for a specific case like yours: They take a 5% cut for letting you invoice your clients through their Estonian LLC and thus moving the liability to them. But I doubt it would be helpful, most likely you would still have to pay the same taxes and social security contributions anyway.

 

[dziter]

Your only other option is to either move to a different country or to pretend that things are different from how they really are.

If I am totally OK with that, which countries do you really recommend in my case?

Exactly. Like I said previously, I am totally OK with that. We really consider to move in another country.
That's why I would like to know which countries are the best one (on paper at least) in my case as a freelancer? Countries in EU or near EU (not something like Panama or Dubaï).

These days, I am giving a quick look to Malta and Cyprus.
I heard about Bulgaria but I don't see myself living there.
I saw a lot about Georgia too.
Before I was really interested about Montenegro but I think there are more cons than the previous one.

What else? What's the best in your opinion to live too?

You will probably have more success with your question in a Facebook group for expats or small business owners in Poland than in this forum. I doubt there will be many people on this board who have experience with the Polish tax code.

For Polish things may be, and even I doubt many people are asking this kind of questions there.. But let's not focus about Poland, let's think somewhere else. What are my choices?

I am really looking for "trending countries" or "good choices" depending of my situation and I am really open minded about suggestions.


Thank you in advance for your answer.

 

[JustAnotherNomad]

Oh sorry, then I misunderstood. I thought you wanted to stay in Poland.

If you are ready to move, there are many options of course. What is important to you? Will you be traveling a lot or will you be staying in one place for most of the year? What climate do you prefer? Do you want to stay close to Europe or are you willing to go somewhere else?
You might even want to consider opening a new thread for that question because it’s no longer related to Poland.

 

[dziter]

f you are ready to move, there are many options of course. What is important to you? Will you be traveling a lot or will you be staying in one place for most of the year? What climate do you prefer? Do you want to stay close to Europe or are you willing to go somewhere else?
You might even want to consider opening a new thread for that question because it’s no longer related to Poland.

To answer to your questions and be able to continue this discussion, I opened a new thread as you suggested me here (I started with your relevant questions):
https://www.offshorecorptalk.com/threads/good-low-tax-place-to-live-relocate.29744/
I would really be happy to have your opinion on this question.

Thank you in advance.

 

[fshore]

So 2400€ on personal level + this previous calculation on company level. Perfect.

From 100k€ turnover, to sum up:

Company: 2400 + 11 225€ = 13625€

-> Finally:
Salary : 10 200€
Dividends tax free : 100k - 13625 - 10 200 = 76 175€

-

Personal: 2400

= 73 775€

So turnover to money in pocket (without company maintenance fees), it's around 26%. Am I right?

I don't understand how you think or calculate here. You seem to think that the salary is not for yourself..? And you included the social twice.

Again, here is what you pay in taxes and social contributions on 100k:
2400€ social insurance
11225€ corporate tax
= 13625€

The corporate tax will in practice be less than this because you would deduct the company expenses and other business costs from the pre-tax profit.

 

[dziter]

I don't understand how you think or calculate here. You seem to think that the salary is not for yourself..? And you included the social twice.

Thank you for explanation. I was little bit confused with an answer from cypriot accountant:

As I will have a salary from my own company, I thought it was :
200€ on corporate level (employer) and 200€ on personal level (employee). So it's around 200€ for both, in total?

I checked on Deloitte, the current rates seem to be:

I will be happy to have a detailed answer how to calculate NET amount in pocket from a salary let's say 1600€/month (19 500/year without income tax) and especially the contributions part (this 200€ for 850€ on the previous example).

Thank you in advance.

 

[Nomad]

@dziter Cyprus Tax Calculator · 2019 | 2020 · Quantia Advisors

 

[KJK]

If you are ready to move, there are many options of course. What is important to you? Will you be traveling a lot or will you be staying in one place for most of the year? What climate do you prefer? Do you want to stay close to Europe or are you willing to go somewhere else?
You might even want to consider opening a new thread for that question because it’s no longer related to Poland.

Completely agreed. Though no need for a new thread, the topic title is correct I think - doesn't need to be related to a specific country.

The real problem is OP doesn't really know what he wants and overplans.
JustAnotherNomad already replied like four times here, stating the obvious and the topic always gets stuck in this loop.
All these numbers and screenshots with tax brackets and health insurance and ZUS, coming up with new and new ideas, unable to make an outcome from them.

Okay OP, so you moved from FR to PL, that is understandable. Now what?
Are you unhappy in PL? Travel a bit, spend some time in the countries mentioned, then make a decision.

In the end, the difference money-wise may be much smaller than you may think and the difference life-wise may be much bigger than you may think. However, we are not life counselors or life coaches to tell you what you really want.

 

[dziter]

The real problem is OP doesn't really know what he wants and overplans.
JustAnotherNomad already replied like four times here, stating the obvious and the topic always gets stuck in this loop.
All these numbers and screenshots with tax brackets and health insurance and ZUS, coming up with new and new ideas, unable to make an outcome from them.

Okay OP, so you moved from FR to PL, that is understandable. Now what?
Are you unhappy in PL? Travel a bit, spend some time in the countries mentioned, then make a decision.

I don’t think the thread is stuck in the loop. The goal of a forum is to exchange with members, have discussion and be able to grab some knowledges thanks to people sharing information. At least, it’s my point of view of what I am looking for here. For specific question, I opened another thread in General as you probably saw. And I am really grateful of people answering to me.

I am not familiar with IBC etc that’s why I am interested and try to understand important points which can make a big difference on this kind of turnover.

My business is 100% online. I am open to live in many countries, I am just looking for information about them to be able to take a decision. And yes, I will travel in these countries a bit this month to make my own point of view of living there.

In the end, the difference money-wise may be much smaller than you may think and the difference life-wise may be much bigger than you may think. However, we are not life counselors or life coaches to tell you what you really want.

I understand that the difference money-wise can be small for many of you. But for me, saving annual year of rent in taxes is already enough to consider moving and increase savings for future. It’s just to be tax resident somewhere, it doesn’t mean I can’t live somewhere else few months per year or travel.
I didn’t expect to find life counselors or life coaches, just information and maximum of details possible about some solution/countries people can have in mind. Just understand and be aware about things matter.

 

[Marzio]

we are not life counselors or life coaches to tell you what you really want.

LOL

 

[anotherone]

I have created a set up for a German woman but it was when NHR was 0% tax. At that time it was like this:

She moved to portugal

I helped her to incorporate an Estonian company
So, we use what we call the 80/20 (google 80/20 estonia company)
we declare 80% of income tax as salary. So, it was 0% on estonian side, 0% tax on portuguese side + estonian social contribution (but I dont remember)
20% of income as board member dividend. So, it is 25% tax on estonian side, 0% tax on portuguese on portugese side
We withdrew the salary thanks to an EMI bank not to show in the bank statement the name of the recipient.

Now, it is 10% on Portuguese side:
It should be recalculated, taking account that she pays the social benefit of Estonia for the salary

Salary is 0% because it is not considered as profit distribution. For now on, it worked... I never heard about a freelancer facing a problem.

You may wonder but wait...
the employee is the same as the director. Could the salary be requalified as dividends, distributed profit?
No, it can't be because the employee works for the company. A dividend is another kind of money, it is a profit that exchanged against no work.

 

[dziter]

Hi,

Thanks for your answer @anotherone.

We withdrew the salary thanks to an EMI bank not to show in the bank statement the name of the recipient.

Because Estonia to bank account, her name will be on bank statement? Why it's a problem if it's her company?
So I guess it's something like: Estonia -> Transferwise -> Bank account ?

Now, it is 10% on Portuguese side:
It should be recalculated, taking account that she pays the social benefit of Estonia for the salary

It's 10% for pension, retired people. But for working people, foreign source income, it's still 0% right?

If we pay social contributions in Estonia, we don't have to pay in Portugal?
Because it's 0% taxation on foreign source income but if I understood, the social contributions are high that's why sometimes thisNHR status could not be so interesting, right?

Interesting for the 0% tax salary, thanks for explanation.

 

[JustAnotherNomad]

That is complete BS. There was never a 0% tax on salaries.
I have consulted with Portuguese tax lawyers and there was never any way for this to work in a tax-efficient way with an Estonian company. You have had her commit tax fraud, great.

 

[anotherone]

About the NHR in portugal as per 2020, let's clarify, the tax is 10% on foreign income (foreign dividends, foreign salary) and a 20% flat tax on domestic income.

 

[JustAnotherNomad]

I haven’t looked into it for a while, so I can’t say with absolute certainty, BUT:
As far as I know, there was NEVER an exemption for foreign salaries. NEVER. Only foreign dividends (=passive income). And foreign dividends are still tax-free. The 10% tax is only for foreign pensions.
I’m pretty sure you’re wrong. I spoke to a Portuguese tax lawyer a few years ago and he explicitly told me that it doesn’t work with Estonia. He had a client with a company in Estonia.

 

[anotherone]

I have found the wikipedia page about NHR, They mention 0% tax. I am lost myself:
https://en.wikipedia.org/wiki/Non-Habitual_Resident

 

[JustAnotherNomad]

Hmmm, that is REALLY strange. Sorry about my comment. But I really don’t understand this because I paid for consultation from a tax lawyer and he said it’s not possible. Most countries don’t withhold taxes on salaries, so in that case this would work with many countries, not only Estonia.

 

[fshore]

I think 0% on salaries would be if it's foreign sourced, if the work is done outside Portugal. But if you work in Portugal for a foreign employer then the salary is not foreign source.

 

[jackfrost]

Foreign sourced is primarily concerning where your physical butt sits when you do the work. It does NOT matter if you do remote work for someone overseas. Your body location is what matters. If you do work while in Portugal for a foreign client that is still national sourced income and fully income taxed. Your offshore with the strict CFC laws is going to be a CFC and will be taxed locally too. In general PT has many provisions for making the classic Malta / Cyprus setup NOT work in PT. It really is about pure passive income (real passive dividends with you only having a minority controlling share and really just receiving dividends without too much of actual involvement), pentions etc.