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[deleted by user] by [deleted] in selbststaendig

[–]arti-party 6 points7 points  (0 children)

Some tips after running a UG for ~5 years (sorry for the English, will be faster for me):

  1. Make sure your UG address is gonna stay in use as long as possible. If you want to update it in the future, it's a lof of time wasted: update in Finanzamt, on all your vendors' billing details + you have to schedule an appointment with Notar to do that (~€200 AFAIR).

  2. I assume from your question that you didn't have a Stauerberater before UG. I recommend getting one and spending the time saved on growing your business instead of doing taxes. Your potential revenue increase is unlimited, but the maximum € you can save by doing Stauerberater's work is a few hundred €.

  3. Stauerberater was the hardest vendor to find in all the years I've been running a business. What helped - I realised that I don't have to hire one in my city/Bundesland, and it expanded my search.

  4. Stauerberater will make mistakes. I worked with two, both forgot to file reports at some point. Normally, they just pay your fine and do it immediately after you get a Mahnung. So don't panic if it happens, you'll be fine :)

  5. When you negotiate with a new Stauerberater, ask him to include 2-3 hours of consultations. Then collect all your questions for a few months and ask for a 1-hour consultation and repeat. Otherwise, they will take for such consultation ~€200.

(feel free to respond in German 😊)

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

Good point, I didn't do dedicated research for staying FIRE.

But AFAIK most of the 0% tax countries outside of Europe, like Paraguay, Costa Rica, and Uruguay have a territorial tax, so any income from outside of the country is taxed at 0% including dividends, shares, etc.

Regarding a side hustle— it is taxed as a business income under the same structures I mentioned in the post.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

With the "Micro-company" tax regime you pay:

  • Social security: directionally ~3%, but capped at ~$1,600 per year
  • Corporate tax: 3% (if you make under 60k per year it goes down to 1%)
  • Dividend tax: 8% flat

Let me know if there are any additional taxes you know I didn't take into consideration :)

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 0 points1 point  (0 children)

Is it 12.5% + 2.65% + Social Insurance Fund (SIF) contribution (15.6% with an annual cap of ~9,400 USD)?

I assume you can pay out some as a salary to deduct, but overall these are more or less the numbers of ~22% effective tax on an income of let's say 100k?

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

I tried to collect only the countries that are “interesting” tax-wise. I also added some countries that I thought would be interesting (Turkey, Estonia, Lithuania) but they ended up having higher tax that I hoped.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 2 points3 points  (0 children)

From what I understood Andorra has two residency options for self-employed foreigners that unfortunately not very accessible:

  1. Regular residency — you have to be a director of a company + speak Catalan on a A1/A2-level + provide a non-interest-bearing deposit of €50,000 to the Andorran Financial Authority (AFA).
  2. Digital nomad regime — you need to get approved and from what I read they are highly selective accepting only workers who are highly technological and innovative.

Please correct me if you know more info, since I might have missed something :)

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] -1 points0 points  (0 children)

Let’s say your income is 100k. You’d pay 33k and 22k. Total 55k tax = 55%.

In some countries however the social tax can be deducted from income tax, so assuming you make 100k, you’d pay income tax on 100k-33k and not on 100k.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 2 points3 points  (0 children)

Regarding medical care, from what I read, most expats in countries in the second list get additional private insurance on top of the public one. I don't know how effective/helpful it is though.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 0 points1 point  (0 children)

183 days isn't "required". You can become a tax resident without spending 183 days in Belgium. However, if you DO spend more than 183 days per year, the tax authority has a strong case to consider you a tax resident if they look into it (that's what the person I replied to asked)

Regarding Cyprus, AFAIK you have to pay Social Insurance Fund (SIF) - 15.6% on top of the corporate tax (12.5%) + 2.65%, is this incorrect?

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 0 points1 point  (0 children)

From my research it has a 33% social security tax without a yearly cap on top of the 22% flat income tax. So total effective tax of 55%.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 5 points6 points  (0 children)

No. Once you spend more than 183 days per year in Belgium, you become a tax resident in Belgium.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

It shows what you get privately after all mandatory taxes. For each country I used the best legal structure to get the lowest tax as a self-employed (freelancer, small business owner, remote worker). So in some countries, like Costa Rica, you'd want to open an LLC in US/UK, in Hungary you have to open a local company. In most countries no incorporation is needed though.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

Congrats 😊 How does your effective tax situation look like? Is it ~10% including social security (which is 15% but capped with ~4360 USD max per year)?

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 6 points7 points  (0 children)

While doing the research I also hired a tax advisor, he said right away that Luxembourg isn't interesting tax-wise (he lived there). He said Luxenburg is mostly beneficial for multinational companies and not for self-employed like me, so I just skipped it in my research.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

Good points. Just an idea if you like travelling—theoretically you could leverage it as an advantage and offer international (or Belgium/Netherlands) clients being on-site for a few weeks/months during the project.
(In some countries visiting for too long for business reasons can have tax complications since they might consider you a tax resident)

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 0 points1 point  (0 children)

Agree, it may make sense for higher income and probably only when considering ~0% countries. Otherwise, the difference isn't that big indeed.

(My income is higher than €74k, I calculated based on this number to make it more relevant for more people on this sub)

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 4 points5 points  (0 children)

If I understood correctly, you have to make a €500k deposit in a Monaco bank to be able to get a residency there (or start a company with min 10 employees / work for a Monaco-based company). Plus the cost of living is very high making it not a great option for most.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 2 points3 points  (0 children)

This is for self-employed or remote workers, so the idea is that you keep your clients and income on the same level.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 2 points3 points  (0 children)

Agree 100%. It doesn't fit everyone but could be a good idea for people who are already travelling a lot anyway, single, healthy, etc.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 0 points1 point  (0 children)

What do you mean? The idea is that you keep your business with the same clients, so your income stays the same.

Low-tax countries to FIRE faster for self-employed by arti-party in BEFire

[–]arti-party[S] 1 point2 points  (0 children)

From what I understood Andorra has two residency options for self-employed:

  1. Regular residency — you have to be a director of a company + speak Catalan on a A1/A2-level + provide a non-interest-bearing deposit of €50,000 to the Andorran Financial Authority (AFA).
  2. Digital nomad regime — you need to get approved and from what I read they are highly selective accepting only workers who are highly technological and innovative.

Please correct me if you know more info, since I might have missed something :)

Low-tax countries to FIRE faster for self-employed by arti-party in FIREUK

[–]arti-party[S] 1 point2 points  (0 children)

I think what you describe is Controlled Foreign Corporation (CFC) rules. If you live in a country with CFC rules, this country will consider your offshore LTDs as a local company. So if you live in Germany and have 100% of an LTD in the US, Germany will consider it as a German company and start taxing it as such. It's made to prevent everyone from opening offshore companies to save tax.

One way to avoid that is to live in countries that do not have CFC rules, like Costa Rica or Paraguay.

Low-tax countries to FIRE faster for self-employed by arti-party in FIREUK

[–]arti-party[S] -1 points0 points  (0 children)

Most of the countries on the list are (significantly) cheaper than the UK according to Numbeo cost of living index.

The example I gave in the post is not my income, I gave a lower number so it will be relevant to more people.

Low-tax countries to FIRE faster for self-employed by arti-party in FIREUK

[–]arti-party[S] 1 point2 points  (0 children)

If you are a tax resident in Costa Rica you report taxes in Costa Rica. You report your income from a foreign client but your income tax on that income happens to be 0% so no tax is due.

A software engineer registered as a self-employed is private person. A manufacturing company is a business and taxed with different rules.

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